lecture # 11 distribution
DESCRIPTION
this marketing lecture with current situation.TRANSCRIPT
DISTRIBUTION
Newport institute communication & economics Karachi
Channels of distribution
• A set of institutions which perform all the activities utilized to move a product and its title from production to consumption.
• All the organizations through which a product must pass between its point of production and consumption
Lecture # 11 - Distribution
Functions of a distribution channel
• To provide a link between production & consumption
• Promotion – to communicate an offer• Contact – to find and communicate with
prospective buyers• Matching – adjusting the offer to fit buyer’s needs• Negotiation – reaching an agreement• Physical distribution – transporting & storing• Risk taking – assuming some of the commercial
risks
Lecture # 11 - Distribution
Mqrketing-Channel Terminologies• Broker - An intermediary whose job is to bring together buyers and
sellers, and who does not carry inventory, get involved in financing, or assume risk
• Facilitator - An intermediary who assists in the distribution process but neither takes title to goods nor negotiates purchases or sales
• Manufacturer’s Representative - A company that represents and sells the goods of several manufacturers. Hired by companies instead of or in addition to an internal sales force
• Merchant - An intermediary who buys, takes title to, and resells merchandise
• Retailer - A business enterprise that sells goods or services directly to the final consumer for his or her personal, non-business use
• (Sales) Agent - An intermediary who searches for customers and negotiates on a producer’s behalf but does not take title to the goods
• Wholesaler (Distributor) - A business enterprise that sells goods or services to those who buy for resale or business use
Lecture # 11 - Distribution
Channel strategy decisions
• Channel length – direct or indirect• Choice of intermediary• Multiple or single channels• How to move the goods through
the channel?• Control over the channel
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Channel length or structure
• Choice of direct (short) or indirect (long) channels
- Direct channel – producer &
consumer interact directly without the
involvement of an intermediary
- Indirect channel – Involves intermediaries
between producer & consumer
• Channel length refers to the no. of intermediaries involved
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Why intermediaries ?
• Geography – Consumers maybe too dispersed
• Consolidation of small orders into large ones
• Lack of retailing know-how• Segmentation – different segments of the
market being reached by different distribution
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Long/Indirect Short/Direct
Manufacturer Manufacturer Manufacturer Manufacturer
Agent Wholesaler Retailer Consumer
Wholesaler Retailer Consumer
Retailer Consumer
Consumer
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Short or Long ?
• Short distribution channel:- Higher distribution costs- Gives producer greater control over
marketing of products
• Long distribution channels:- Reduced costs- Reduces the producers control over
marketing of products
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Factors affecting choice of distribution channel
• Nature of the product:- Perishable/fragile- Technical/complex- Customized- Type of product e.g. Convenience, shopping
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Factors affecting choice of distribution channel
• Market- Geographically spread market?- The extent of competition
• Company- Size- Nature- Does it have established network?
• Legal issues - Are there any limitations on sale?
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Short channels are used for…
• Industrial products• Expensive and complex goods• Customized products• Services• Products sold in geographically concentrated
market• Products bought infrequently by smaller no. of
consumers
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Long channels are used for…
• Consumer goods• Inexpensive and simple goods• Standardized products• Goods sold in dispersed markets• Goods sold frequently and to many consumers
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Decision 2: Choice of intermediaries
• Intermediaries must be chosen carefully • Choice of intermediary should be related
to the product & other aspects of marketing mix
• Intermediaries to offer appropriate customer services for expensive & technically complex goods
• Choice of intermediary (particularly retail outlet) affects product’s image
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Criteria for selection of intermediaries
• Operational criteria:- Knowledge of market- Appropriate premises &
equipment- Customer convenience - Product knowledge- Payment system- Sales force structure
• Strategic criteria:- Plans for growth &
expansion- Capacity- Quality assurance
procedures- Willingness as a
partner- Level of loyalty & co-
operation- Innovativeness
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Decision 3: Single or multiple channels
• Single channel: Reliance upon a single channel of distribution & a single set of channel members to distribute the product
• Multiple channels: Distributing the product via a variety of channels, some direct and some indirect.
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Multi channel strategies
• Advantages:- Different markets can be targeted more
accurately
- Spreads risk
- Greater control of the market
• Disadvantages:- Intermediaries might feel threatened- Promotion more difficul
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Decision 4: How to move goods through the channels
• A problem facing the distributor is how to encourage intermediaries to stock the product and actively promote it
• Two strategies commonly used either separately or in unison:- Push strategy
- Pull strategy
Lecture # 11 - Distribution
Moving goods through the channel
• Pushing:- Involves sales
promotion directed at channel members
- Emphasis on Sales promotion particularly, trade promotion
• Pulling:- Emphasis on
advertising to persuade the user to buy the product
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Decision 5: The degree of market exposure
• Determination of required market coverage • Three broad strategies can be applied:
- Intensive distribution- Selective distribution- Exclusive distribution
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Intensive distribution• Saturation coverage – covering all/maximum no.
of available outlets• Target outlets in as many geographical area as
possible• Limited support for the dealer• Used for:
- Inexpensive fast moving consumer convenience goods
- Goods purchased on impulse
- Goods purchased by high no. of purchasers
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Selective distribution
• Limited no. of outlets
• Medium no. of consumers
• Medium level of control over distributors
• Retailers may require specialist knowledge
• Used for:- Shopping goods - Medium priced goods- Goods purchased occasionally
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Exclusive distribution
• A single outlet is targeted in a geographic area
• Stringent control of the dealer
• Used for
- Specialized/niche products- High priced products- High involvement & planned purchase
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Market coverageIntensive Selective Exclusive
No. of outlets Maximum Many Few
Outlets/region Many Few One
Price Low Medium High
Type of product Convenience Shopping Speciality
No. of potential buyers
High Medium Low
Purchase frequency
Often Occassionally
Seldom
Planning reqd. of buyer
Low Medium High
Example Sweets Car Rolex
Lecture # 11 - Distribution