Distribution Channels and Logistics Management
Issues Concerning Distribution Channels
What is the Nature Of Distribution Channels?
How do Channel Firms Interact and Organize to do the Work of the Channel?
What Problems do Companies Face in De
signing and Managing Their Channels?
What Role Does Physical Distribution Play in Attracting and Satisfying Customers?
What is a Distribution Channel?
A set of interdependent organizations (intermediaries) involved in the process of making a product or
rvice available for use or consumption by the consumer or business user.
Marketing Channel decisions are among the most important decisions that management faces and will
directly affect every other marketing decision.
Why are Marketing Intermediaries Use
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Offer the firm more than it can achieve on it’s own through the intermediaries:
How a Marketing Intermediary
Reduces the Number of Channel Transactions
Distribution Channel Functions
These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to
Provide Satisfactory Assortments of Goods and Services to Targe
Number of Channel Levels
Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its
Ownership Closer to the Final Buyer.
The channel will be most effective when:
all members cooperate to attain overall channel goals and satisfy the target market.
When this doesn’t happen, conflict occurs:
occurs among firms at the same level of the channel,
i.e retailer to retailer.
occurs between different levels of the same channel, i.e. wholesaler to retailer.
Conventional Marketing Channel Vs. a Vertical Marketing System
Types of Vertical Marketing Systems
Involves single ownership of two or more levels of a channel
one channel member acquires control of one or more other members, usually by
Total vertical integration
one organization controls all marketin
g channel functions.
Manufacturer purchases distributor or retailer
Wholesaler or retailer purchases channel members above them.
Involve independent p
roduction and distribution companies entering into formal contracts to perform designated
Characterized by a higher degree of interorganizational planning and management usually resulting from the
existence of a s
trong channel leader.
Innovations in Marketing Systems
Horizontal Marketing System
Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity.
Hybrid Marketing System
A Single Firm Sets Up Two or More Marketing Chan
nels to Reach One or More Customer Segments.
Changing Channel Organization
A Major Trend is Toward
Which Means that Product and Service Producers are Bypassing
Intermediaries and Going Directly to Final Buyers or That New Types of Cha
nnel Intermediaries are Emerging to
Displace Traditional Ones.
Impact of the Internet
Channel Design Decisions
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Identifying Major Alternatives
Evaluating the Major A
Designing International Distribution Channels
Channel Management Decisions
Selecting Channel Members
Motivating Channel Members
Evaluating Channel Members
Retailing and Wholesaling
What is Retailing?
Includes all the activities Involved in Selling Goods or Services Directly to Final Consumers for Their
Retailing can be done in stores (_________________) or out of a store
(_______________________) such as:
Classification of Retailing
Service and Full
Length and Breadth of the Product Assortment
Pricing Structure that is used by the Retailer
pendent, Corporate, or Contractual Ownership Organization
Classification of Retailing:
Amount of Service
Classification of Retailing:
Classification of Retailing:
Classification of Re
Higher Prices and Offer Higher
Quality Goods and Superior Customer Service
Regular Prices and Offer Normal
Quality Goods and Average Customer Service
Low Prices and Offer Lower
Quality Goods and Little Customer Service
sification of Retailing:
Retailer Marketing Decisions
Retail Store Positioning
Retailer Marketing Mix
Product and service assortment
Product Assortment and Services Decisions
Key tool of non
price competition for setting
one store apart from another
Retailer’s Price, Promotion, & Place Decisions
The Future of Retailing
New Retail Forms and Shortening Retail Lifecycle
Increasing Intertype Competition
Rise of the Megaretailer
Growing Importance of Retail Technology
Global Expansion of Major Retailers
Retail Stores as “communities” or “hangouts”
hange of information, goods, service, and payments by electronic means.
History of E
commerce actually began in the 1970s when larger corporations started creating private networks to share
information with business partners and suppliers. This
process is called Electronic Data Interchange (EDI).
Prodigy was running text ads and selling flowers in the early '80s. The first documented Online sale in
1994 was what?
Some major product categories have paved the way:
es ($5.95 B in 1999 sales),
computer hardware and software ($5.8 B),
books ($1.7 B),
gifts and flowers ($730 M),
music ($540 M), and
apparel and footwear ($460 M),
Commerce Services Today
In 1999, the online market size for business services was
estimated at $22 billion.
Primary service categories include
financial ($7.3 billion, 1999),
professional ($4.4 billion),
administrative support ($3.9 billion),
corporate travel ($5 billion), and
telecommunications ($1.5 billion).
By 2003, Forrest
er Research predicts that online services will represent nearly 8 percent of the overall
sector hardly a drop in the bucket.
Future of E
eMarketer, an Internet technology (IT) research and reporting firm, estimates that the dollar figure for e
mmerce will rise from approximately
In Europe, consumers' internet purchases will jump from:
commerce is projected to speed past $1 trillion in annual revenue by 2003
Future Trends to Watch in E
Women take con
. Women make or influence 80 percent of household sales in the United States,
according to WomanTrend, despite the fact that they make up 51 percent of the population.
The untapped get tapped
. Two highly touted markets $509 million health and beauty,
and $513 million
grocery still lag behind expectations.
More "click and mortar
." Traditional retailers Circuit City, Crate and Barrel, Sears, Toys R Us, Wal
and Federated Department Stores missed the boat in 1995 and 1996, but rest assured they "g
et it" now, and
are attempting re
entry, this time around with more money and smarts. Watch out.
Still a Long Way To Go
Andersen Consulting and Forrester Research both show shopping cart abandonment rates of 25%.
commerce still accounts for less than 1
% of total retail sales
Pure plays are struggling to maintain cash flow and are either:
Security Issues are Important
What is Wholesaling?
All the activities involved in selling goods and services to those buying for resale or business use.
those firms engaged
in wholesaling activity.
Wholesalers buy mostly from producers and sell mostly to:
Why are Wholesalers Used?
Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Types of Wholesalers
independently owned business that takes title to the merchandise it handles.
they don’t take title to the goods, and they perform only a few functions.
wholesaling by sellers or buyers themselves rather than through independent wholesalers.
Retailer Marketing Decisions
Wholesaler Marketing Mix
t and service assortment
Trends in Wholesaling
Consolidation within the industry is reducing # of wholesalers
Distinction between large retailers and wholesalers blurs
Wholesalers will continue to increase the servic
Wholesalers are beginning to go global
Integrated Marketing Communications Strategy
Marketing Communication Mix or Promotion Mix
Two Factors are Changing the Face of Today’s Marketing Communications:
The Need for Integrated Marketing Communications
Integrated Marketing Communications
(IMC), the Company Carefully Integrates and Coordinates
Many Communications Channels to Deliver a Clear, Consistent, and Compelling Message About the
Organization and Its Product or Service.
Elements in the Communication Process
Key Factors in Good Communication
Sellers need to know w
hat audiences they wish to reach and response desired.
Sellers must be good at encoding messages that target audience can decode.
Sellers must send messages through media that reach target audiences
Sellers must develop feedback channels to assess audience
’s response to messages.
Steps in Developing Effective Communication
Step 1. Identifying the Target Audience
Step 2. Determining the Communication Objectives Buyer Readiness Stages
Step 3. Designing a Message
Step 4. Choosing Media
Personal Communication Channels
personal Communication Channels
Step 5. Selecting the Message Source
Step 6. Collecting Feedback
Setting the Total Promot
One of the Hardest Marketing Decisions Facing a Company is How Much to Spend on Promotion.
Based on What the Company Can Afford
Based on a Certain
Percentage of Current or Forecasted Sales
Based on Determining Objectives & Tasks, Then Estimating Costs
Based on the Competitor’s Promotion Budget
the Promotion Mix
Product Placement is the use or display of a product or service in an entertainment program.
The placement involves a payment to th
e entertainment vehicle, but does not involve payment for “airtime”
Famous examples include:
Promotion Mix Strategies
Strategy that Calls for Spending A Lot on Advertising and Consumer Promotion to Build Up (Pull)
Strategy that Calls for Using the Salesforce and Trade Promotion to Push the Product Through the
Strategy Selected Depends on:
Socially Responsible Marketing Communication
Advertising and Sales Promotion
Advertising, Promotions, and Publicity
U.S. advertisers spend in excess of $212 billion each year;
Worldwide spending exceeds $414 billion.
Advertising is used by:
What is Advertising?
Advertising is Any Paid Form of Non
personal Presentation and Promotion of Ideas, Goods, or Services by an
Setting Advertising Objectives
ith a specific
audience during a specific
inform consumers or build primary demand
build selective demand
compares one brand to another
keeps consumers thinking about a product
Setting the Promotion Budget
After determining its advertising objectives, the marketer must set the advertising budget for each product and
market. (From Chapter 14)
based on what the
company can afford
based on a certain percentage of current or forecasted sales
based on determining objectives & tasks, then estimating costs
based on the competitor’s promotion b
Setting the Advertising Budget
Factors to be considered when setting the advertising budget:
Developing Advertising Strategy
Advertising Strategy Consists of Two Major Elements and Companies are realizing the Benefits of Planning These
Developing Advertising Strategy: Creating Ad Messages
Plan a Message Strategy
Develop a Message
Creative Concept “Big Idea”
Developing Advertising Strategy: Message Execution
“Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest.
Typical message execution styles:
Slice of Life
Mood or Image
Advertising Strategy: Selecting Advertising Media
Step 1. Decide on Reach, Frequency, and Impact
Step 2. Choosing Among Major Media Types
Step 3. Selecting Specific Media Vehicles
Step 4. Deciding on Media Timing
International Advertising Decisions
Adaptation of global advertising
Advertising media dif
fer considerably in availability & cost
Regulation in advertising practices
Comparison ads not acceptable in all countries
Programs must be matched to local cultures and customs
What is Sales Promotion ?
Sales promotion is a mass communication techniqu
e that offers short
term incentives to encourage purchase or
sales of a product or service.
Rapid Growth of Sales Promotion
Sales promotion can take the form of . . .
Rapid growth in the industry has been achieved because:
Product managers ar
e facing more pressure to increase their current sales,
Companies face more competition,
Advertising efficiency has declined,
Consumers have become more deal oriented.
Sales Promotion Objectives
term sales or help build long
term market sh
Get retailers to:
Major Consumer Sales Promotion Tools
Major Consumer Sales Promotion Tools
Major Trade Sales Promotion Tools
Trade Promotion Objectives
Persuade Retailers or Wholesalers to Carry a Brand
Give a Brand Shelf Space
Promote a Brand in Advertising
Push a Brand to Consumers
Major Business Sales Promotion Tools
Generate Business Leads
Developing the Sales Promotion Progra
Decide on the Size of the Incentive
Set Conditions for Participation
Determine How to Promote and Distribute the Promotion Program
Determine the Length of the Program
Evaluate the Program
What is Public Relations?
Public relations involves building good
relations with the company’s various publics by obtaining favorable
publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.
Major Public Relations Functions
Public Relations Departments May Per
form Any of All of the Following Functions:
Press Relations or Agentry
Major Public Relations Tools
Corporate Identity Materials
Public Service Activities
Major Public Relations Decisions
Setting Public Relations Objectives
Choosing the Public Relations Messages and Vehicles
Implementing the Public Relations Plan
Public Relations Results
Personal Selling and Sales Management
Nature of Personal Selling
Most salespeople are well
trained professionals who work to build and maintain long
relationships with customers.
The term salesper
son covers a wide spectrum of positions from:
What is Personal Selling?
way, personal communication between salespeople and individual customers. Communication can be:
The Role of the Sales Force
Personal selling is effective becau
se salespeople can:
probe customers to learn more about their problems,
adjust the marketing offer to fit the special needs of each customer,
negotiate terms of sale, and
term personal relationships with key decision makers.
The Role of the Sal
Serves as a Critical Link
Between a Company and its Customers Since They:
Major Steps in Sales Force Management
Designing Sales Force Strategy and Structure
exclusive territory to
sell the company’s full product line
sales force sells only a portion of the company’s products or lines
sales force sells only to certain customers or industries
Some Traits of Good Salespeo
Current Salespeople, Employment Agencies, Classified Ads, College Students, Internet
The Average Sales Training Program lasts for Four Months and Has the Following Goals:
people know & identify with the company
Learn about the products
Learn about competitors’ and customers’ characteristics
Learn how to make effective presentations
Understand field procedures and responsibilities
To Attract Salespeo
ple, a Company Must Have an Attractive Plan Made Up of Several Elements
Annual Call Plan
Sales Force Automation
Management gets information about its salespeople in several ways:
Formal evaluation of performance can be done qualitatively or quantitatively.
Evaluation methods of performance includ
Direct and Online Marketing: The New Marketing Model
Mass Marketing and Direct Marketing
What is Direct Marketing?
consists of direct connections with carefully targeted individu
al consumers to both obtain an
immediate response and cultivate lasting customer relationships.
Forms of Direct Marketing
Direct Response TV
Benefits and Gr
owth of Direct Marketing
Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or
is the process of building, maintaining, and using customer databases and other databases for the purposes of
contacting and transacting with customers.
How companies use their databases:
Online Marketing is c
onducted through interactive online computer systems, which link consumers with
Who is the Online Customer?
They tend to be younger, more affluent, better educated, and more male than the general population; female
usage almost e
Other characteristic of net users:
Promise and Challenge of Online Marketing
Limited Consumer Exposure and Buying
Skewed User Demographics and Psychographics
Chaos and Clutter
Public Policy and Ethical Is
sues in Direct Marketing
Irritation to Consumers
Unfairness, Deception, or Fraud
Invasion of Privacy