chapter 11 (distribution)
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Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
CHAPTER 11DISTRIBUTION
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
LEARNING OBJECTIVES
• Various functions performed by distribution channel intermediaries
• Types of distribution channels: Consumer, Industrial and Service channels
• Three components of the channel strategy: How to select channels, decide distribution intensity and degree of integration
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Channel management: Issues regarding intermediary selection, training, motivation, evaluation and conflict management
• Hybrid distribution channels to maximize effectiveness and efficiency
• Decisions regarding physical distribution
Learning Objectives (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
FUNCTIONS OF CHANNEL INTERMEDIARIES
• Reconciling the needs of producers and customers
• Improve efficiency by reducing the number of transactions and creating bulk for transportation
• Improved accessibility
• Providing specialist services
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
TYPES OF DISTRIBUTION CHANNELS
• Consumer channels
Manufacturer to consumer
Manufacturer to retailer to consumer
Manufacturer to wholesaler to retailer to consumer
Manufacturer to agent to wholesaler to retailer to consumers
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Industrial channels
Manufacturer to industrial customers
Manufacturer to agent to industrial customer
Manufacturer to distributor to industrial customer
Manufacturer to agent to distributor to industrial customers
Types of Distribution Channels (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Service channels
Service provider to consumer or industrial customer
Service provider to agent to consumer or industrial customer
Service provider via internet to consumer or industrial customer
Types of Distribution Channels (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
CHANNEL STRATEGY
• Channel selection
Marketing factors
Buyers’ expectations
Willingness of channel intermediaries
Profit margins demanded by wholesalers and retailers
Location and geographic concentration of customers
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
Manufacturer factors
Financial and managerial resources
Mix of products
Independent channel intermediaries versus manufacturer control
Product factors
Competitive factors
Channel Strategy (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Distribution intensity
Intensive distribution
Selective distribution
Exclusive distribution
Channel Strategy (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Channel integration
Conventional marketing channels
Conventional marketing channels
Channel Ownership
Channel Strategy (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
CHANNEL MANAGEMENT
• Selection
Identifying Sources
Developing selection criteria
• Motivation
• Training
• Evaluation
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Managing conflict
Sources of channel conflict
Differences in goals
Differences in desired product lines
Multiple distribution channels
Inadequacies in performances of channel members and
manufacturer
Channel Management (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
Avoiding and resolving conflict
Developing a partnership approach
Training in conflict handling
Market portioning
Improved performance
Channel ownership
Coercion
Channel Management (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
HYBRID DISTRIBUTION SYSTEM
• Avoid chaos and maximize efficiency
• Which channel is supposed to serve which customers?
• Which channel does what tasks of the sales function, and for which customers?
• Which channel gets compensated for which customers and for what tasks?
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Each time a channel is added, the existing relationships, responsibilities, and compensation structures among various channel members are altered
• Customers’ reactions to these new relationships and responsibilities are very important
• Confusions and conflicts among various channels should be addressed
Hybrid Distribution System (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
PHYSICAL DISTRIBUTION
• Focuses on an efficient movement of goods from manufacturers to intermediaries and the consumer
• Provide intermediaries and customers with the right products, in the right quantities, in the right locations, at the right time
• Effective physical distribution saves cost and improves customer service levels
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
• Concerns the balance between cost reduction and meeting customer service requirements
• Analyze the market in terms of customer service needs and price sensitivity
• There may be possible conflicts between elements of physical distribution itself
Physical Distribution (Contd.)
Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006
Elements of the physical distribution system
• Customer service
• Order processing
• Inventory control
• Warehousing
• Transportation mode
• Materials handling
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