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C61 Distribution C62 Distribution channel A distribution channel is the set of of independent entities involved in the process of rendering a product.

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Presentation on theme: "C61 Distribution C62 Distribution channel A distribution channel is the set of of independent entities involved in the process of rendering a product."— Presentation transcript:

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2 C61 Distribution

3 C62 Distribution channel A distribution channel is the set of of independent entities involved in the process of rendering a product or service available for use or consumption

4 C63 Marketing channel decisions Are among the most critical decisions facing management Intimately affect all other marketing, and overall strategic decisions Involve relatively long-term commitments Create a key external resource Powerful inertial tendencies

5 C64 Why distribution channels? Matching supply and demand –The right quantities at the right time in the right place –Location, location, location!

6 C65 Three basic functions Adjusting the discrepancy of assortments Routinization of transactions Facilitate searching

7 C66 Adjusting the discrepancy of assortments Producers make large quantities Customers want small quantities Sorting –Arranging products or services according to class, kind, or size Sorting out –Grading products or output Accumulation –Aggregation of stocks from different suppliers Allocation –Distribution according to a plan (e.g., breaking bulk) Assorting –Putting together an appropriate package

8 C67 Routinization of transactions Reducing the cost of distribution Standard transactions minimize cost of bargaining Automation of reordering, payment

9 C68 Facilitate searching Aid producers and customers by structuring the information essential to both parties Intermediaries provide a place for buyers and sellers to find each other and exchange information Searching occurs because of uncertainty –Intermediaries reduce uncertainty for both parties

10 C69 What does technology do? Kills distance –The distance between buyer and seller disappears Homogenizes time –The Web site is open all hours and seasons Location is irrelevant, irrelevant, irrelevant! –Move from marketplace to marketspace

11 C610 Internet distribution matrix

12 C611 The death of distance and re- assortment/sorting Customers can’t always get exactly the mix they want Music Maker –Create your own CDs –Postal delivery now –In the future: Via the Web Press your own CD (or just store it on disk)

13 C612

14 C613 Death of distance and re- assortment/sorting Pros –Lowers costs –Free global distribution –One-to-one marketing Cons –Rampant piracy? –Record stores are bypassed –Cyberpayments?

15 C614 Death of distance and routinization The difficulty of routinely updating large industrial catalogs –frequency –complexity –large numbers of customers RS Components –Customized search pages –100,000 components –± 6,000 new components per month –Expect $65 ( $ 59) million in 2 years GE Plastics DuPont Lubricants

16 C615

17 C616 Death of distance and searching Lufthansa’s global reservation system lets travelers book from anywhere to anywhere wherever you might be Pick up the tickets at the airport Access the timetables, fares, and routes of competitors Lufthansa can directly interact with customers all over the world.

18 C617 Homogenization of time and reassortment/sorting Education is time and place bound Duke’s GEMBA allows its students to take elective courses anywhere, anytime over the Internet Students can self-assort the MBA program they want

19 C618 Homogenization of time and routinization BA executive club info –Millions by mail –Every month – Out-of-date on arrival Now –On-line –Up-to-the minute

20 C619

21 C620 Homogenization of time and searching Buyers and sellers often operate in different time spheres The Recruitment Business –Monster Board –50 000 jobs from more than 4 000 companies –Customized email updates for jobseekers Who got it wrong? –Times Higher Education Supplement Who got it right? –jobs.ac.uk

22 C621

23 C622 Irrelevance of location and re-assortment/sorting Dell Computers Web sales > $6 ( % 5.5) million/day Dell stock turn –30 times/year Compaq stock turn –12 times/year –CEO fired in Spring 1999

24 C623

25 C624 Irrelevance of location and routinization Major business-to-business purchasing off web sites –Caterpillar Attains an average saving of 6 percent through its Web supplier bidding system –General Electric Bidding process has been cut from 21 to 10 days Cost of goods has declined between 5 and 20 percent –Priceline

26 C625

27 C626 Irrelevance of location and searching No discussion of marketing on the Internet is complete, regardless of how many times you’ve heard about it, talked about it …

28 C627 From channels to media In the past, the channel was just that –a conduit Now, it is for far more than just moving products –A distribution medium rather than a channel

29 C628 Commoditization The complex and the difficult becomes simple and easy So simple that anyone can do them, and does A natural outcome of competition and technological advance Prices plunge and essential differences vanish The new economy puts Commoditization into overdrive –Speeds information flows Only antidotes –A niche market too small to be attractive to others –Innovation sufficiently rapid to stay ahead of the pack –Or … a monopoly

30 C629 Disintermediation As networks connect everybody to everybody, more opportunities for shortcuts When you can connect straight from the computer on your desk to the computer of your broker, stockbrokers look like overpriced terminal devices Supported by cheap, convenient and increasingly universal distribution networks (e.g., FedEx and UPS) As networks turn increasingly mass market, there is a continuous game of disintermediation and reintermediation To the winners go the customer relationships

31 C630 Mass model of distribution and communication Centralized control Substantial investment

32 C631 Network model of distribution and communication

33 C632 Conclusion The Web offers opportunities to perform the existing distribution functions of reassortment/sorting, routinization, and searching more efficiently and effectively Distribution will transform


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