Distribution Strategy Lectures 16-17

CHANNEL OF DISTRIBUTION The set of independent institutions & agencies that, by an exchange of outputs, are involved in making the product or service available from the point of production to the point of consumption

THE NEED FOR DISTRIBUTION STRATEGY ECONOMICS EFFICIENCY REQUIREMENT TO MAINTAIN LEVELS OF EXPERTISE TO MAXIMISE GROWTH

Place objectives Type of channel Customer service level desired Direct Indirect Type of physical Degree of market distribution exposure Intermediaries How to facilities needed (intensive, /facilitators manage selective, or needed channels exclusive)

DIRECT & INDIRECT IMPLICATIONS DIRECT - the producer deals with consumers/ end-users complete control closer to the consumer strategy adjustment lack of availability of intermediaries services/business-to-business INDIRECT - uses intermediaries to reach the consumer/end-user buying patterns geographic dispersement economics efficiency maintain expertise

Factors Related to the Use of Direct Distribution Manufacturer Consumer Agent Eg. Tupperware Consumer Hospital Patient Location ISP User Direct (producer to customer) distribution is common when: the customer is a business or organisation (rather than a final consumer) aggressive personal selling is required and/or when customers need special technical service the product is primarily a service rather than a physical good working with intermediaries would be difficult to maintain control of the marketing mix the producer can perform marketing functions more efficiently (economically) by itself

Indirect Channels of Distribution Traditional channel system—a channel in which the various channel members make little or no effort to cooperate with each other Channel Captain—A manager who helps direct the activities of the whole channel Tries to avoid—or resolve—conflicts May be either a producer or an intermediary Guides the whole channel to compete better with other channels Effective allocation of functions Develops a common product-market commitment

TYPES OF INTERMEDIARIES FACILITATORS - assisting (facilitating) in the process of making the product or service available to the consumer/end-user RETAILERS - dealing with the ultimate consumer for personal use WHOLESALERS - dealing with purchasers buying for re-sale or business use

FACILITATORS assisting (facilitating) in the process of making the product or service available to the consumer/end-user for example: transport companies; warehousing operations; finance companies

Distribution Centre Special kind of warehouse designed to speed the flow of goods to avoid unnecessary storing costs Speeds bulk breaking to reduce inventory carrying costs Helps to centralise control of physical distribution activities

Level of Market Exposure Exclusive Selective Intensive Selling through Selling through Selling through all responsible only those only one and suitable intermediaries intermediary in wholesalers who will give a particular and retailers the product geographic who will stock special region and/or sell the attention product Few Many Number of intermediaries