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Chapter

Marketing- Ch 13.docx

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Department
Business
Course Code
BU352
Professor
Brent

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Chapter 13: Marketing Channels- Distribution Strategy Place
- All activities to get the right products to the right customer when the customer wants it
- Add value to customers by getting products to customers efficiently, quickly, and at low cost
Importance of Distribution
- Must reach the customer
- Fight for shelf space is fierce, expensive, listing fees
Distribution Channel: the institutions that transfer ownership of and move goods from the point of
production to the point of consumption
o All the institutions and marketing activities in the marketing process
o Make product available for consumers
o Wholesalers and retailers
Supply Chain Management: refers to a set of approaches and techniques firms use to efficiently and
effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation
intermediaries into a seamless value chain in which merchandise is produced and distributed in the right
quantities, to the right locations, and at the right time
o (suppliers and suppliers networks)
Wholesalers: the firms engaged in buying, taking title to, often storing, and physically handling goods in
large quantities, the reselling the goods to retailers or industrial business users
o Buy products from manufacturers and sell to retailers
Retailers: sell products directly to consumers
Logistics Management: the integration of two or more activities for the purpose of planning,
implementing, and controlling the efficient flow of raw materials, in process inventory, and finished
goods from the point of origin to the point of consumption
- Element of supply chain that is movement and control of physical products
- Cutomer service, demand forecasting, distribution communication, inventory control, materials
handling, order processing, packaging, returning goods, scrap disposal, warehousing, storage
- Distribution, supply chain management, and logistics management are all connected
Designing Distribution Channels
- Channels are made of various entities: buying, selling, or facilitating the exchange of buy or sell
- Distribution channels perform a variety of functions:
o Transactional Function
Buying
Taking risk of inventory that may become outdated
Promotion
Selling
o Logistical Function
Physical distribution
Storing of good

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o Facilitating Function
Gather information about customers or other channel members
Financing- extend credit and financial services to consumers
Intermediaries: reduce the number of marketplace contacts, resulting in efficient systems
Distribution Channel Structure
- When firm is starting out, it doesn’t really have the option of choosing the best distribution
channel, can’t really choose who it buys from or who it sells to
- New companies don’t have credit established, or old companies already have their clients and
products going somewhere already
1. Direct Distribution
- Manufacturers sell directly to consumers
- Ex. Dell’s strategy, banking and insurance
- Some companies are forced into direct distribution because they can’t get shelf space or afford
the listing fees demanded by retailers
o Listing fees: depend on your size, retailer size, how much the consumers want your
product, if consumers will try new products
2. Indirect Distribution
- One or more intermediaries work with manufacturers to sell goods to consumers
- May only be one intermediary
- Ex. car dealership.
- Manufacturer- retailer- consumer
- Manufacturer- wholesaler- retailer- consumer
Push strategy: manufacturer focuses on promoting its products on channel members to convince them
to carry its product
o Pushing the product through the distribution channels to the end consumers
Pull Strategy: promotional efforts are directed to consumers in order to build demand for products,
which may convince retailers to carry them
o Consumers hear about products and go to local retailers requesting them, pulling them
through the distribution channels
3. Multichannel Distribution
- Using a combination of both direct and indirect distribution channels
- Have different distribution channels for different consumer groups (including B2B)
- Ex. Sony selling through both its own branded shops directly and through retailers like Best Buy
indirectly
- Choosing different methods to distribute to different groups
When choosing which channels and retailers through whom to sell, manufactures should consider
where the end customer expects to find the product, and important retailer characteristics
o Customer Expectations
Retailers- important to know from which manufacturer do the customers want
to buy from
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Manufacturers- need to know where the market expects to find their products
and those of the competitors
Where do customers expect to buy the product?
o Channel Member Characteristics
The larger more sophisticated the channel member, the less likely it will use
intermediaries
Larger firms find by doing the distribution themselves, they can gain more
control, be more efficient, and save money
Distribution Intensity
Distribution Intensity: the number of channel members to use at each level of the supply chain
- Firms must determine the appropriate level of distribution intensity
- 3 levels of distribution intensity:
o Intensive (zellers, wal mart, loblaws, shoppers)
o Selective (sears, the bay)
o Exclusive (Cartier, Tiffany & Co)
Marketing Channel: the set of institutions that transfer the ownership of and move goods from the
point of production to the point of consumption; consists of all the institutions and marketing activities
in the marketing process
Intensive Distribution
- A strategy designed to get products into as many outlets as possible
- Ex. consumer packaged goods...Pepsi, P&G, Kraft, found in grocery stores
- Want product available everywhere
- The more exposure these products get, the more they sell
Exclusive Distribution
- Strategy of granting exclusive rights to sell to one or very few retail customers so no other
customers can sell a particular brand
- Exclusive distribution is done by exclusive geographic territories policy
- Exclusive geographic territories: territories granted to one or very few retail customers by a
manufacturer using an exclusive distribution strategy; no other customers can sell a particular
brand in these territories
- Benefits the manufacturer because assures that the most appropriate customers represent the
product, helps do an image
- By having limited supply to one customer ensures that enough inventory is offered
- Controlling sales territories, guarantees adequate supply, gives retailer incentive to push
product
Selective Distribution
- Lies between the intensive and exclusive distribution strategies
- uses a few selected customers in a territory
- helps seller maintain a particular image and control the flow of merchandise into any area
- usually shopping goods (consumers will take time comparing alternatives)
- retailers have strong incentive to sell the products, but not to the same extent as exclusive
distribution
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