distribution channels
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Distribution Channels
Prabu Doss.K
Marketing Channels
Independent Organizations involved in the
process of making products/services
available for use or consumption
Channel Development
• Small firms existing
intermediaries
• Large firms new markets,
different channels
• Successful firms Hybrid channelsHybrid channels
ICICI Bank, Higginbotham's
Role of Channels
ManufactureManufacturer 4r 4
ManufactureManufacturer 1r 1
ManufactureManufacturer 3r 3
ManufactureManufacturer 2r 2
Fab MallFab MallNilgirisNilgirisFood Food BazaarBazaar
Food Food WorldWorld
Role of ChannelsManufactur’ Manufactur’
11
Food BazaarFood Bazaar NilgirisNilgiris
Manufactur’ Manufactur’ 22
Fab MallFab Mall
WholesalerWholesaler
Manufactur’ Manufactur’ 44
Manufactur’ Manufactur’ 33
Food WorldFood World
Firm’s need to find a balance
PushOR
Pull
strategy
strategy
Functions of the Channels
– Producers lack financial resources necessary for
direct marketing
– Direct marketing is not feasible for many offerings
– Using channels frees money for investment in main
business
– Intermediaries are more efficient
Channel Functions…
– Forward flow functions:
• Develop / disseminate communication
• Store and move the physical products
• Oversee transfer of ownership
– Backward flow functions:
• Place orders with manufacturers
• Facilitate payment of bills
Channel Levels- Consumer Mkts
OnidaOnida
MetroMetro
Kirana Kirana storestore
ConsumerConsumer
Newspaper Newspaper MartMart
Local Local AgencyAgency
ConsumerConsumer
National National DistributorDistributor
Parker Parker PensPens
National National GeographicGeographic
AvonAvon
ConsumerConsumer
ViveksViveks
ConsumerConsumer
Channel Levels- Business Mkts
Manufactur’Manufactur’ Mark AndyMark Andy Mark AndyMark Andy Mark AndyMark Andy
Manufacturer’ Manufacturer’ sales branchsales branch
Manufacturer’ Manufacturer’ RepRep
CustomerCustomerCustomerCustomerCustomerCustomer CustomerCustomer
HeidelbergHeidelberg
Channel Design Decisions
Analyze Consumer needs
Establish Channel Objectives
Identify Alternatives
Evaluate Alternatives
Channels produce 5 service outputs
Lot size
Waiting and delivery time
Spatial Convenience
Product Variety
Service Backup
Establishing Channel Objectives & Constraints
Vary according to product characteristics
Strength and weakness of diff intermediaries
Design should adapt to larger environment
Identifying Channel Alternatives
• Types of intermediaries
• No of intermediaries needed
• Terms and Responsibilities
Exclu
sive/S
elect
ive/In
tensiv
e
Evaluating Channel Alternatives
Economic
Control & Adaptive
Channel Management Decisions
•Selecting Channel Members
•Training Channel Members
•Motivating Channel Members
•Evaluating Channel Members
•Modifying Channel Arrangements
Channel Integration
Multichannel Marketing System
Vertical Marketing System
• Producer, Wholesaler, Retailer act as a
unified system
– Corporate VMS production & distribution under single ownership
– Administered VMS production & distribution thru’ size/power
of one member
– Contractual VMS independent firms integrating their programs
on contractual basis
Horizontal Marketing System
Unrelated companies put
together their resources to
exploit emerging opportunity
Multichannel Marketing System
When a firm uses two or more
channels to reach customer
segments
Channel Conflict
….when one channel member’s
action prevent the channel
member from achieving its goal
Channel Conflict
Multichannel Conflict
Channel Conflicts
• Vertical Conflict- diff levels- same channels
• Horizontal Conflict- same level- within
channels, between members
• Multichannel Conflict- two or more
channels selling to same market
Causes of Conflicts….
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries dependence on
Manufacturers
Resolving Conflict
•Co-optation
•Diplomacy
•Mediation
•Arbitration
An exasperated mother, whose son was always getting
into mischief, finally asked him, 'How do you expect
to get into Heaven?' The boy thought it over and
said, 'Well, I'll run in and out and in and out and
keep slamming the door until St. Peter says, 'For
Heaven's sake, Jimmy, come in or stay out!'
We were celebrating the 100th anniversary of our
church, and several former pastors and the
bishop were in attendance. At one point, our
Pastor had the children gather at the altar for a
talk about the importance of the day. He began
by asking, "Does anyone know what the bishop
does?" There was silence. Finally, one little boy
answered gravely, "He's the one you can move
diagonally."
On the first day of school, about mid-morning, the
kindergarten teacher said, "If anyone has to go to
the bathroom, hold up two fingers." A little voice
from the back of the room asked, "How will that
help?"