13 distribution

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2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens

Chapter 13

DistributionChannels


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Adversarial power relationships

work only if you never have to see orwork with the other party again.

-Peter Drucker



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Chapter Objectives Describe the nature of distribution channels,

and tell why marketing intermediaries areused

Understand the different marketingintermediaries available to the hospitalityindustry and the benefits each of theseintermediaries offers

Know how to use the Internet as a distributionchannel



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Chapter Objectives

Discuss channel behavior and organization,explaining corporate, contractual, and verticalmarketing systems, including franchising

Illustrate the channel management decisionsof selecting, motivating, and evaluatingchannel members

Identify factors to consider when choosing abusiness location



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Distribution Channels

A distribution channel is a set ofindependent organizations involved in the

process of making a product or serviceavailable to the consumer or business user

Used to move the customer towards the

product



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Why Use Marketing

Intermediaries? Selling through wholesalers and

retailers usually is much more efficient

and cost effective than direct sales



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Distribution Channel Functions

Information:gathering and distributingmarketing research and intelligence

information about the marketingenvironment

Promotion:developing and spreadingpersuasive communications about anoffer



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Contact:finding and communicatingwith prospective buyers

Matching:shaping and fitting the offer tothe buyers needs, including such

activities as manufacturing, grading,assembling, and packaging



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Negotiation:agreeing on price and otherterms of the offer so that ownership or

possession can be transferred

Physical distribution:transporting andstoring goods



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Financing:acquiring and using funds tocover the costs of channel work

Risk taking:assuming financial riskssuch as the inability to sell inventory at

full margin



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Number of Channel Levels

Channel level can be described asdistribution channels

Direct marketing channel

Retailer

Wholesaler



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Customer Marketing ChannelsCustomer Marketing Channels



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Marketing Intermediaries

Travel Agents

Tour Wholesalers

Specialists Hotel Reps

Concierges

National, State,

and Local

Agencies

Consortia andReservation

Systems

Global DistributionSystems

Internet



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Travel Agents Tour Wholesalers

ConciergesSpecialists:

Brokers & Junket Reps

Internet Hotel Representatives

Consortia & ReservationsSystems

Global DistributionSystems

National, State,and Local Tour Agencies

Marketing Intermediaries



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Channel Behavior

Channel members are dependent uponone another and must work together forthe channel to operate successfully

Members should understand and accepttheir roles, coordinate their goals and

activities, and cooperate to attain overallchannel goals



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Channel Conflict

Horizontal conflict is conflict betweenfirms at the same level of the channel

i.e. retailer to retailer

Vertical conflict, which is morecommon, refers to conflicts between

different levels of the same channel i.e. retailer to wholesaler



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Channel Organization

A vertical marketing system (VMS)consists of producers, wholesalers, andretailers acting as a unified system

One channel member either owns theothers, has contracts with them, or

wields so much power that they allcooperate



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Conventional vs. VerticalMarketing Channels



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Vertical Marketing Systems

Corporate VMS combines successive stagesof production and distribution under single

ownership

Administered VMS coordinates successivestages of production and distribution through

the size and power of the parties

Contractual VMS consists of independent

firms at different levels of production anddistribution who join through contracts to

obtain economies or sales impact



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Franchising

Granting the right to engage in offering,selling, or distributing goods or servicesunder a marketing format which is designed

by the franchisor

The franchisor permits the franchisee to useits trademark, name, and advertising

Higher survival rates



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Disadvantages Franchiser

Distribution system other systems can add conflict,

Little Caesars going into K-marts cases conflict with

other Little Caesars in the area.

Consistency

Changing operation Pizza Hut adding delivery

Advertising expenditures



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Franchisee Disadvantages

Value of brand name determined by

franchiser

Introduction of new products determinedby franchiser

Your reliability tied to the rest of the

system



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A Franchise is Only as

Strong as

Brand Name

Competitive Advantage

system

Market demand for

the product



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Channel Organization

Alliances are developed to allow twoorganizations to benefit from each othersstrengths

Horizontal marketing systems are two or

more companies at one level that join tofollow a new marketing opportunity

Multichannel marketing occurs when asingle firm sets up two or more marketing

channels to reach one or more customersegments



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Selecting Channel Members

Customer Needs

Attracting Channel Members

Evaluating Major Channel Alternatives

Economic Feasibility of the ChannelMember

Control Criteria



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Business Location

1. Understand the marketing strategy and

target market of the company

2. Conduct a regional analysis, which involvesthe selection of geographic market areas

3. Select an area within that region

4. Choose individual sites



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Best Practices

Expedia

Orbitz

Priceline

Travelocity

Trip



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Key Terms

Administrative VMS

Agent

Alliances

Broker



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Key Terms

Channel conflict

Channel level

Contractual VMS

Corporate VMS



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Key Terms

Direct marketing channel

Franchise organization

Horizontal conflict

Horizontal marketing systems (HMS)



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2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River NJ 07458 Kotler Bowen and Makens

Key Terms

Multichannel marketing

Retailer

Vertical conflict

Vertical marketing system (VMS)

Wholesaler

2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River NJ 07458 Kotler Bowen and Makens

13 distribution

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