1. Channel Management / Distribution

2. A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption
Bucklin - Theory of Distribution Channel Structure

3. Physical distribution is…
Organizing and moving products through the channels
aka: Logistics = ordering, transporting, storing, handling and inventory control
The 3rd largest expense for most businesses
(#1 Materials #2 Labor)

4. Explain how channel members add value
Right PLACE
Right TIME
Place UTILITY
Location – having the product where customers can buy it
Time UTILITY
Having the product available when the customer wants/needs it

5. Channel members add value to a product by performing certain channel activities expertly
Marketing
Packaging
Financing
Storage
Delivery
Merchandising
Personal selling

6. Distribution

7. 3 Dimensions of Channel Design
Types of intermediaries involved
Length of the channel
Intensity of various levels (Exclusive, Selective, Intensive)

8. Tasks of Intermediaries - Wholesalers
Break down ‘bulk’
Buys from producers and sell small quantities to retailers
Provides storage facilities
Reduces contact cost between producer and consumer
Wholesaler takes some of the marketing responsibility e.g sales force, promotions

9. Tasks of Intermediaries - Retailer
Much stronger personal relationship with the consumer
Hold a variety of products
Offer consumers credit
Promote and merchandise products
Price the final product
Build retailer ‘brand’ in the high street

10. 3 Dimensions of Channel Design
Types of intermediaries involved
Length of the channel
Intensity of various levels (Exclusive, Selective, Intensive)

11. Length of Channel
Channel length = number of levels in a distribution channel.
2 level
3 level
4 level
5 level
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Agent
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer

12. Describe when a channel will be most effective
The channel must be properly managed
Recognize the importance of their task and make informed decisions
Each member is assigned tasks it can do best

13. Describe when a channel will be most effective (cont.)
Channel members share a common goal
Commitment to quality of the product
Satisfying the target market’s needs and wants
All members cooperate to attain overall channel goals
If the channel is not effective, conflict occurs…..

14. Distinguish between horizontal and vertical conflict
Horizontal Conflict: occurs between channel members at the same level
Good, old-fashioned business competition
Ex: two retailers selling pet supplies compete to sell to the same target market

15. Distinguish between horizontal and vertical conflict (cont.)
Vertical Conflict: occurs between channel members at different levels within the same channel
Producers and wholesalers, wholesalers & retailers, or producers and retailers

16. 3 Dimensions of Channel Design
Types of intermediaries involved
Length of the channel
Intensity of various levels (Exclusive, Selective, Intensive)

17. Intensity of Channel Structure
Channel intensity: the number of intermediaries at each level of the marketing channel.
Intensive
Selective
Exclusive
Intensive: Used when convenience products are sold through virtually every available retail outlet in a particular market, e.g. soft drinks, candy, gum, cigarettes
Selective: Selectively distributed bands are available in multiple retail outlets in a particular market.
Shopping products, or those that consumers seek out, are sold through selective distribution.
Exclusive: Practiced when a manufacturer restricts product distribution to a single retailer in a particular market or just a relatively few retailers. Products that are expensive, infrequently purchased, are sought after by consumers (i.e. specialty goods), or which require considerable after-sale servicing are the most likely candidates for exclusive distribution
All Possible
Intermediaries
Relatively Few
Intermediaries
Just One
Intermediary

18. Intensive Distribution
= the use of all suitable outlets to sell a product.
The objective is complete market coverage and the ultimate goal is to sell to as many customers as possible, wherever they choose to shop.
Ex. Motor oil is sold in quick-lube shops, farm stores, auto parts retailers, supermarkets, drugstores, hardware stores, warehouse clubs, and other mass merchandisers.

19. Selective Distribution
= a limited number of outlets in a given geographical area are used to sell the product.
Very important to select channel members that maintain the image of the product & are good credit risks, aggressive marketers & good inventory planners.
Ex. Armani & Lucky Brand sell their clothing only through top department stores that appeal to the affluent customers who buy its merchandise. It does not sell in a chain megastore or a variety store.

20. Exclusive Distribution
= protected territories for distribution of a product in a given geographic area; business maintains tight control over a product
Ex. Franchisor legally requires a franchisee to sell only the franchisor’s products

21. Pepsi Channel of Distribution

22. Channel-management activities that take place at local businesses

23. OBJECTIVE TWO: Explain the relationship between customer service and channel management

24. Explain how customer service facilitates order processing
Ensures timely delivery of products
Effective communication is important
Order processing
Correct shipping information
Correct products
Handling complaints
Reducing the probability of complaints
Nice and friendly people

25. Actions to Facilitate Order Processing
Customer
Call Center
Online Order
Warehouse
Actions to Facilitate Order Processing
Inventory Check
No, Customer Notified of Backorder
Items
in Stock?
Yes, Item Packed for Shipment
Accounts Receivable Processes Payment
Item Shipped

26. Describe the role of customer service in following up on orders
Following up with your customers after the sale is an important part of providing good customer service.

27. Use of Technology in Distribution
Satellite tracking
a dispatcher has current knowledge of a delivery truck’s location and destination

28. Use of Technology in Distribution (cont.)
Tracking of package
Bar coding on package
Package scanned at transition points in distribution chain
Customer uses internet to follow package along distribution chain; may be used
Global distribution: in some countries the postal service is not reliable; package tracking facilitates global trade

29. UPS