Download - Introduction to Channels of Distribution
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Introduction to Channels of
DistributionDistribution
Workshop
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Learning Objectives
� Why study marketing Channels
� What a marketing Channel is
� Why manufacturers choose to use
intermediaries between themselves and end-
usersusers
� What marketing flows define the work of the
channel
� Who the members of marketing channels are
and the flows in which they can specialise
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Why Marketing Channels are
important?1. The channel is the gatekeeper
2. The channel is an important asset in the company’s
overall marketing and positioning strategy.
3. Channel experience impacts end-user’s perception of a
brand image.
4. Channel key strategic marketing asset
5. Useful to develop a framework for managing a channel to
operate more effectively.
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What is a Marketing Channel?
A marketing channel is a set of interdependent
organisations involved in the process of making a
product or service available for use or product or service available for use or
consumption.
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Primary Functions of Channel Members
� to be a stockist of your product
� to represent your brand in the market place�to gather marketing intelligence� to assume risk� to deliver product and offer post sales � to deliver product and offer post sales
support� to add value to the sale
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How Channel Members Add Value
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What recent channel issues have
Starbuck experienced with their
outlets?outlets?
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Distribution is Global
http://video.google.com.au/videosearch?q=starbucks+distribution&hl=en&emb=1&aq=-
1&oq=#q=starbucks+store+closures&hl=en&emb=1
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What challenges and opportunities
does Wrigley’s face in distributing
chewing gum in China?chewing gum in China?
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Wrigley’ s Chews through China•Distribution in China expanded
from 20 stores to 1.6 million
outlets (Shanghai accounts for
30,000)
•Outlets (Mum and Pop Shops)
• A single pack of gum sold for • A single pack of gum sold for
only 18 cents, its twenty
percent profit margin led to
hundreds, then thousands, then
tens of thousands of loyal
dealers.
•"I make 0.3 yuan [about 4
cents] from each pack," a
Chinese newspaper quoted one
satisfied storekeeper. "I don't
sell other brands anymore."
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How does Google earn it’s
revenue?revenue?
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Power of the Internet is Changing
Distribution
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Harley Davidson �1300 Harley Dealerships in 60 countries worldwide.
�Programs customised for individual dealers
�Treat customers as individuals
�“We’re a motorcycle company, and our distribution partners don’t like
to see our brand on sale”.
�“Harley-Davidson licensees meet�“Harley-Davidson licensees meet
twice a year at semi-annual dealer shows where dealers have exclusive access to preview and order licensed products.”
�The Harley Owners Group (H.O.G.), established in 1983, and the Buell
Riders Adventure Group (BRAG) are home to more than 900,000 members
Worldwide
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Primary Questions
1. Which distributor, or distributor combination, is best suited for to take a new product or service to market?market?
2. How should the distributor network be managed once it is up and running?
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Why do distribution channels
exist?exist?
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Two Main Reasons
1. Demand Side Factors
a. Facilitation of search
b. Adjustment of Assortment discrepancy1. Sorting (Alderson, 1957) - breaking down in separate stocks
2. Accumulation – bring similar stocks together2. Accumulation – bring similar stocks together
3. Allocation - smaller lots
4. Assorting - building assortment
2. Supply- Side Factors
a. Routinisation of Transactions
b. Reduction in number of contacts
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FIGURE 1.2: MARKETING FLOWS IN CHANNELS
Physical Physical Physical
Possession Possession Possession
Ownership Ownership Ownership
Promotion Promotion PromotionPromotion Promotion Promotion
Negotiation Negotiation Negotiation Consumers
Producers Wholesalers Retailers Industrial
Financing Financing Financing and
Household
Risking Risking Risking
Ordering Ordering Ordering
Payment Payment Payment
Commercial Channel Subsystem
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Key Members?
�Manufacturers
�Intermediaries
�End-users�End-users
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Consumer Marketing Channels
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Multi Channel Distribution System
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Table 1 The Need for a Multi-Channel Strategy Will Intensify
Increasing need for
multi-channel
strategy
Ch
an
nel
su
bst
itu
tab
ilit
y
High
Retail
Strategic
choice
Ch
an
nel
su
bst
itu
tab
ilit
y
Frequency of customer interactionsHigh
Low
Autos
PC’sP&C Insurance
Airlines
Retailing
bankingStrategic
opportunity
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Summary
• We defined concept of a marketing channel
• We looked at how channels work and what functions and activities are performed inside the channel
• Develop an analytical framework for channel design, modification and implementation
• Framework for analyzing channel flows covered in Figure 1.2
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You are welcome to contact Nigel Bairstow at B2B
Whiteboard your source of B2B Asia / Pacific
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