1. UNIT F MANAGEMENT OF DISTRIBUTION, PROMOTION, AND SELLING
Classify channel member relationships.

2. The Distribution Process
Essential to successful exchange of goods and services
Functions to reconcile the differences between offerings of producers and demands of consumers
Critical aspects
Correctly filled orders
Timely delivery
Delivery to correct location
Undamaged products

3. Distribution channels
Distribution channels (marketing channels): The routes followed in the process of making a product or service available for use or consumption by the consumer or business user.
Intermediary: A business involved in activities that move products from the producer to the final user; also known as a middleman or channel member.

4. Types of channels
Direct marketing channel: A marketing channel that has no intermediaries; the company sells directly to consumers.
Sales representatives calling on a user in person
Catalog sales
Internet sales
Telemarketing

5. Types of channels
Indirect marketing channel: A channel containing one or more intermediary levels. Example: Manufacturer to wholesaler to retailer to consumer
*The more levels there are, the more complex the channel is, and the less control the producer has.

6. Functions performed by channel members that add value to products
Wholesalers and industrial distributors
Source of information
Provide contacts with prospective customers
Help with promotion and sales strategies
Quick delivery
Provide goods in smaller quantities than if directly from producer
Possible credit terms available

7. Functions performed by channel members that add value to products (cont.)
Retailers
Convenient location
Convenient shopping hours
Credit terms for consumers
Merchandise return policies
Variety of products from many producers available for comparison and to meet customer needs
One-stop of limited-stops shopping

8. Channel behavior and organization
Channel conflicts: Disagreement among marketing channel members about goals and roles.
Conflicts are common and it is a challenge to develop cooperation among the channel members.
Horizontal conflict occurs among members at the same level.
Vertical conflict occurs between members at different levels in the chain.

9. Channel behavior and organization (cont.)
Conventional distribution channel: A channel consisting of one or more independent producers, wholesalers, and retailers, each of which is a separate business making its own decisions about providing what its customers want.
Each of the independents is seeking to maximize its own profit potential, even at the expense of profits for the system as a whole.

10. Channel integration strategies to help solve channel conflicts
Vertical marketing system (VMS): A distribution channel structure in which one channel member (perhaps the manufacturer) owns the organizations at the other levels in the channel, has contracts with them, or has so much power that they all cooperate and act as a unit.
Corporate
Contractual
Administered

11. Channel integration strategies to help solve channel conflicts (cont.)
Vertical marketing systems
Corporate VMS
Various stages of production and distribution are integrated under single ownership.
Example: Luxottica makes Ray-Ban and several other famous eyewear brands. It sells them at LensCrafters and Sunglass Hut, which it also owns.

12. Channel integration strategies to help solve channel conflicts (cont.)
Vertical marketing systems
Contractual VMS
Independent firms at different levels of the production and distribution stages join together through contracts for their mutual benefit.
Franchises are the most common type of contractual relationship.
Examples: fast-food franchises such as McDonald’s and hotel/motel industry franchises such as Holiday Inn

13. Channel integration strategies to help solve channel conflicts (cont.)
Vertical marketing systems
Administered VMS
Leadership is assumed by dominant channel members with size and power rather than through ownership or contract agreements.
Examples: major retailers such as Wal-Mart, Barnes & Noble, and Home Depot; major manufacturers of well-known and highly accepted brand products such as Proctor and Gamble and General Electric

14. Channel integration strategies to help solve channel conflicts (cont.)
Horizontal marketing system: A channel arrangement in which two or more companies at the same channel level join together to pursue a new marketing opportunity.
Companies may be competitors or noncompetitors.
Combined resources result in greater accomplishment for both companies than either could do alone.
A company successful in global marketing may pair with a company not as experienced.

15. Channel integration strategies to help solve channel conflicts (cont.)
Multichannel distribution system (hybrid marketing channel): A distribution system in which a single firm develops two or more marketing channels to reach one or more customer segments.
Has increased in recent years
Example: IBM sells computers through retail stores, a sales force, and online.

16. Channel integration strategies to help solve channel conflicts (cont.)
Disintermediation: The displacement of traditional intermediaries from a marketing channel as a result of technological advances, the growth in direct and online marketing, and the appearance of new types of intermediaries.

17. Channel integration strategies to help solve channel conflicts (cont.)
Disintermediation (cont.)
More and more companies are marketing directly to the consumer.
Competition forces producers to develop new channels such as Internet, but doing so often brings them into direct competition with their established channels.
Traditional intermediaries must find new ways to provide value added or they will disappear.

18. Steps in the channel decision-making process
Analyze consumer needs.
Determine customer preferences.
Determine feasibility and costs of providing what customers want.
Set channel objectives.
Determine target market and level of service.
Determine appropriate channels for that market and service level.

19. Steps in the channel decision-making process (cont.)
Identify and evaluate major channel alternatives.
Identify types of intermediaries available such as company sales force, manufacturer’s agents, industrial distributors, wholesalers, etc.

20. Steps in the channel decision-making process (cont.)
Identify and evaluate major channel alternatives. (cont.)
Decide on the desired number of intermediaries.
Intensive distribution is used when the desire is to sell the product in as many outlets as possible.
Selective distribution is used to limit the number of outlets in a given geographic area.
Exclusive distribution provides protected territories in a given geographic area to enhance product image, prestige, high profit margins, and greater channel control.

21. Steps in the channel decision-making process (cont.)
Identify and evaluate major channel alternatives. (cont.)
Establish agreement among channel members regarding price policies, territorial rights, and special services to be performed by each.

22. Steps in the channel decision-making process (cont.)
Design the system and select the channel members based on appropriateness and expertise.
Perishability of the product
Geographic distance between the producer and consumer
Special handling requirements of the product
Number of users of the product
Number of products manufactured
Financial strength of the producer and the level of control desired

23. Management of channel members
Market to and with the intermediaries as well as through them.
Help channel members see the mutual benefit when the distribution system is successful.

24. Motivation of channel members
Positive motivators
Higher margins
Special deals
Premiums
Cooperative advertising
Sales contests
Recognition and rewards
Negative motivators
Threats to reduce margins
Threats to delay delivery
Threats to end the relationship

25. Evaluation of channel member performance based on standards
Sales quotas
Average inventory levels
Customer delivery time
Treatment of damaged and lost goods
Cooperation in company promotion and training programs
Services to the customer