Copyright 2000 Prentice Hall14-1 Chapter 14 Channel Management, Wholesaling & Physical Distribution: Delivering the Product

Copyright 2000 Prentice Hall14-2 Place: The Final Frontier n n Distribution may be the final “frontier” for competitive success. n “Place” where when n “Place” means making the goods and services available where and when customers need and want them. – – Internet is fast becoming an important place for consumers to shop for many items.

Copyright 2000 Prentice Hall14-3 What is a Distribution Channel? n n The Series of Firms or Individuals that Facilitate the Movement of a Product From the Producer to the Final Consumer. n n May include: – – manufacturers, – – wholesalers, – – retailers.

Copyright 2000 Prentice Hall14-4 Distribution Channel Functions Create Assortments Create Assortments Time Utility Time Utility Facilitating Functions Facilitating Functions Place Utility Place Utility Ownership Utility Ownership Utility Break Bulk Break Bulk

Copyright 2000 Prentice Hall14-5 What is a Wholesaling Intermediary? n n Wholesaling Intermediaries are firms that handle the flow of products from the manufacturer to the retailer or business user.

Copyright 2000 Prentice Hall14-6 Rack Jobbers Cash & Carry Wholesalers Mail-Order Wholesalers Truck Jobbers Drop Shippers Merchant Wholesalers take Title to Goods Types of Wholesaling Intermediaries Independent Intermediaries do Business With Many Different Manufacturers and Customers.

Copyright 2000 Prentice Hall14-7 Manufacturers’ Agents Selling Agents Commission Merchants Merchandise Brokers Merchandise Agents or Brokers Never take Title to Goods Merchandise Agents or Brokers Never take Title to Goods Types of Wholesaling Intermediaries Second Type of Independent Intermediary

Copyright 2000 Prentice Hall14-8 Sales Branch Sales Branch Sales Office Sales Office Manufacturers’ Showrooms Manufacturers’ Showrooms Types of Wholesaling Intermediaries Manufacturer-owned Intermediaries Have Operations Limited to One Manufacturer.

Copyright 2000 Prentice Hall14-9 Direct Channel Indirect Channel Direct Channel Indirect Channel Manufacturer Wholesaler Retailer Customer   Manufacturer Retailer Customer  Manufacturer Customer Channel 1 Channel 2 Channel 3 Types of Consumer Distribution Channels Indirect Channel

Copyright 2000 Prentice Hall14-10 Benefits of Different Consumer Channels n n Direct Channel – – Manufacturer can serve customers better. – – Lower prices than may be possible using a retailer. – – Control of pricing, service and delivery. n n Indirect Channel – – Customers are used to buying from certain retailers. – – Intermediaries help by: » » creating utility and » » transaction efficiencies.

Copyright 2000 Prentice Hall14-11 Steps in Distribution Planning (Fig. 14.3)

Copyright 2000 Prentice Hall14-12 Steps in Distribution Planning n n Channel Objectives – – Make a firm’s product available when, where, and – – in the quantities customers want and need, and – – at a minimum cost. n n Evaluating the Environment – – Marketers must consider the internal and external environments.

Copyright 2000 Prentice Hall14-13 Conventional Marketing System Marketing SystemConventional Horizontal Marketing System Horizontal Multiple-Level Distribution Channel in Which Channel Members Work Independently of One Another. Two or More Firms at the Same Channel Level Work Together to Get Their Product to the Customer. Example: United Airlines and Lufthansa Choosing a Distribution System

Copyright 2000 Prentice Hall14-14 Vertical Marketing Systems Vertical Marketing Systems (VMS) Vertical Marketing Systems (VMS) Corporate VMS Corporate VMS Contractual VMS Contractual VMS Administered VMS Administered VMS Retailer Cooperatives Retailer Cooperatives Franchise Organizations Franchise Organizations Wholesaler Sponsored VMS Wholesaler Sponsored VMS

Copyright 2000 Prentice Hall14-15 Intensive Distribution Intensive Distribution Exclusive Distribution Exclusive Distribution Selective Distribution Selective Distribution Intensity Distribution Intensity Choosing a Distribution System

Copyright 2000 Prentice Hall14-16 Developing Distribution Tactics Selecting Channel Partners Reward or Coercive Power Reward or Coercive Power Legitimate Power Legitimate Power Economic Power Economic Power Managing the Channel of Distribution Channel Leader Power Managing the Channel of Distribution Channel Leader Power Distribution Channels & the Marketing Mix

Copyright 2000 Prentice Hall14-17 Materials Handling Moving Products Into, Within, and Out of Warehouses Materials Handling Moving Products Into, Within, and Out of Warehouses Warehousing Number Needed Where What Type Warehousing Number Needed Where What Type Inventory Control When to order How much to order Inventory Control When to order How much to order Order Processing Received Processed Shipped Order Processing Received Processed Shipped Physical Distribution Functions Transportation Rail, Water, Trucks, Air, Pipeline, Internet Physical Distribution

Copyright 2000 Prentice Hall14-18 Rail Cost-effective for shipping bulk products, piggy-back, fishyback, birdyback. Rail Cost-effective for shipping bulk products, piggy-back, fishyback, birdyback. Water Low cost for shipping bulky, low-value, non perishable goods, slowest form. Water Low cost for shipping bulky, low-value, non perishable goods, slowest form. Truck Most important carrier for consumer goods, flexible. Truck Most important carrier for consumer goods, flexible. Air High cost, ideal when speed is needed or distant markets have to be reached Air High cost, ideal when speed is needed or distant markets have to be reached Pipeline Carry petroleum based products, very low cost, requires little energy. Pipeline Carry petroleum based products, very low cost, requires little energy. Transportation Modes Internet Web sites have products available, used especially for services. Internet Web sites have products available, used especially for services.

Copyright 2000 Prentice Hall14-19 Chapter Summary n Explain what a distribution channel is and what functions distribution channels perform. n Describe some of the types of wholesaling intermediaries found in distribution channels. n Discuss the steps in planning distribution channel strategies. n Describe the activities that are important in the physical distribution of goods.