Objectives

• Work Performed by Marketing Channels• Channel-Design Decisions• Channel-Management Decisions• Channel Dynamics• Wholesale and retail

How a Distributor Reduces theNumber of Channel Transactions

= = CustomerCustomer= = ManufacturerManufacturer

A. Number of contacts A. Number of contacts without a distributorwithout a distributor

M x C = 3 X 3 = 9M x C = 3 X 3 = 9

11

3322

445566

778899

How a Distributor Reduces theNumber of Channel Transactions

= Distributor= Customer= Manufacturer

B. Number of contacts with a distributorM x C = 3 + 3 = 6

Store

1

2

3

4

5

6

Distribution channel function

Customers’ Desired Service Levels

• Lot size• Waiting time• Spatial convenience• Product variety• Service backup

Channel Management DecisionsChannel Management Decisions

SelectingSelecting

FE

ED

BA

CK

MotivatingMotivating

TrainingTraining

EvaluatingEvaluating

Types of Vertical Marketing SystemsTypes of Vertical Marketing Systems

CorporateCommon Ownership at Different

Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Conventional Distribution Channel vs. Conventional Distribution Channel vs. Vertical Marketing SystemsVertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

Causes of Channel Conflict

• Incompatibility• Difference in Perception• Dependence

Legal & Ethical Issues in Channel Legal & Ethical Issues in Channel RelationsRelations

Legal & Ethical Issues in Channel Legal & Ethical Issues in Channel RelationsRelations

Exclusive DealingExclusive Dealing Exclusive TerritoriesExclusive Territories Tying AgreementsTying Agreements Dealers’ RightsDealers’ Rights

Four Levels of Retail Service

• Self-service• Self-selection• Limited-service• Full-service

Classification Of Retailer TypesClassification Of Retailer Types

Specialty StoresSpecialty Stores

Department StoresDepartment Stores

SupermarketsSupermarkets

Convenience StoresConvenience Stores

Off-Price RetailerOff-Price Retailer

SuperstoresSuperstores

Catalog ShowroomCatalog Showroom

Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items

Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items

Wide Variety of Food, Laundry, & Household ProductsWide Variety of Food, Laundry, & Household Products

Limited Line of High-Turnover Convenience GoodsLimited Line of High-Turnover Convenience Goods

Inexpensive, Overruns, Irregulars, and Leftover GoodsInexpensive, Overruns, Irregulars, and Leftover Goods

Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services

Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services

Broad Selection, Fast Turnover, Discount PricesBroad Selection, Fast Turnover, Discount Prices

Narrow Product Line, Deep AssortmentNarrow Product Line, Deep Assortment

Store Type Length and Breadth of Product Assortment

Discount StoresDiscount Stores Broad Product Line, Low Margin, High VolumeBroad Product Line, Low Margin, High Volume

Types of NonStore RetailingTypes of NonStore RetailingTypes of NonStore RetailingTypes of NonStore Retailing

Direct SellingDirect Selling

Direct MarketingDirect Marketing

Buying ServicesBuying Services

NonStore Retailing Accounts for More Than 12% of All Consumer Purchases, and is trending up.

Automatic VendingAutomatic Vending

Low PriceLow StatusLow Margin

Mid PriceMid StatusMid Margin

High PriceHigh StatusHigh Margin

Wheel of RetailingWheel of RetailingWheel of RetailingWheel of Retailing

WholesalerFunctions

ManagementServices & Advice

ManagementServices & Advice

Selling andPromoting

Selling andPromoting

MarketInformation

MarketInformation

Buying andAssortment Building

Buying andAssortment Building

Risk BearingRisk Bearing Bulk BreakingBulk Breaking

TransportingTransporting

FinancingFinancing WarehousingWarehousing

Why use wholesaler?

• Provide a Targeted Level of Customer Service at the Least Cost.

• Maximize Profits, Not Sales.Higher Distribution Costs/ Higher Customer Service Levels

Lower Distribution Costs/ Lower Customer Service Levels

Goals of the logistic system

InventoryWhen to orderHow much to orderJust-in-time

InventoryWhen to orderHow much to orderJust-in-time

CostsMinimize Costs ofAttaining LogisticsObjectives

CostsMinimize Costs ofAttaining LogisticsObjectives

WarehousingStorageDistribution

WarehousingStorageDistribution

Order ProcessingSubmittedProcessedShipped

Order ProcessingSubmittedProcessedShipped

Logistics

FunctionsTransportation Water, Truck, Rail, Pipeline & Air

Logistics Systems

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient for short-hauls of high value goods

TruckFlexible in routing & time schedules, efficient for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value goods, slowest form

WaterLow cost for shipping bulky, low-value goods, slowest form

PipelineShip petroleum, natural gas, and chemicalsfrom sources to markets

PipelineShip petroleum, natural gas, and chemicalsfrom sources to markets

Transportation Modes

1. Speed.

2. Dependability.

3. Capability.

4. Availability.

Checklist for Choosing

Transportation Modes