MODULE 6_Distribution, Retailing and other marketing channels.ppt

Hhhj

1. Dr. Saleh Alqahtani
Designing and Managing Designing and Managing
Value Networks and Value Networks and
Marketing ChannelsMarketing Channels
byby
PRINCE JAMES

2. Dr. Saleh Alqahtani
Establish channels for
different target markets
and aim for efficiency,
control, and
adaptability.
Kotler on
Marketing
PRINCE JAMES

3. Dr. Saleh Alqahtani
In this chapter, we focus on the following In this chapter, we focus on the following
channel questions from the viewpoint of the channel questions from the viewpoint of the
manufacturers:manufacturers:
What is the value network and marketing What is the value network and marketing
channel system?channel system?
What work is performed by marketing What work is performed by marketing
channels?channels?
What decisions do companies face in What decisions do companies face in
designing, managing, evaluating, and designing, managing, evaluating, and
modifying their channels? modifying their channels?
What trends are taking place in channel What trends are taking place in channel
dynamics?dynamics?
How can channel conflict be managed?How can channel conflict be managed?
Chapter Objectives
PRINCE JAMES

4. Dr. Saleh Alqahtani
What is a Value Network and
Marketing-Channel System?
Value NetworkValue Network
Marketing channelMarketing channel
PRINCE JAMES

5. Dr. Saleh Alqahtani
What is a Value Network and
Marketing-Channel System?
Channel integration characteristics:Channel integration characteristics:
Ability to order a product online, and Ability to order a product online, and
pick it up at a convenient retail pick it up at a convenient retail
locationlocation
Ability to return an online-ordered Ability to return an online-ordered
product to a nearby storeproduct to a nearby store
Right to receive discounts based on Right to receive discounts based on
total of online and off-line purchasestotal of online and off-line purchases
PRINCE JAMES

6. Dr. Saleh Alqahtani
How a Distributor Reduces theHow a Distributor Reduces the
Number of Channel TransactionsNumber of Channel Transactions
= Distributor= Distributor= Customer= Customer= Manufacturer= Manufacturer
B. Number of contacts B. Number of contacts
with a distributorwith a distributor
M x C = 3 + 3 = 6M x C = 3 + 3 = 6
Store
11
22
33
44
55
66
PRINCE JAMES

7. Dr. Saleh Alqahtani
Distribution Channel Functions
Ordering
Payments
Communication
Transfer
Negotiation
Financing
Risk Taking
Physical
Distribution
Information
PRINCE JAMES

8. Dr. Saleh Alqahtani
What Work is Performed by
Marketing Channels?
Acquire funds to finance inventories at different Acquire funds to finance inventories at different
levels in the marketing channellevels in the marketing channel
Assume risk connected with Assume risk connected with
carrying out channel workcarrying out channel work
Provide for the successive storage Provide for the successive storage
and movement of physical productsand movement of physical products
Provide for buyers’ payment of their bills Provide for buyers’ payment of their bills
through banks and other financial institutionsthrough banks and other financial institutions
Oversee actual transfer of ownership from one Oversee actual transfer of ownership from one
organization or person to anotherorganization or person to another
PRINCE JAMES

9. Dr. Saleh Alqahtani
Channel-Design Decisions
Push strategyPush strategy
Pull strategyPull strategy
Designing a channel system Designing a channel system
involves four steps:involves four steps:
Analyzing customer needsAnalyzing customer needs
Establishing channel objectivesEstablishing channel objectives
Identifying major channel alternativesIdentifying major channel alternatives
Evaluating major channel alternativesEvaluating major channel alternatives
PRINCE JAMES

10. Dr. Saleh Alqahtani
Consumer Marketing ChannelsConsumer Marketing Channels
Wholesaler Jobber Retailer Consumer   
Consumer
Retailer Consumer
Manufacturer
0-level channel
Wholesaler Retailer Consumer Mfg
2-level channel
Mfg
3-level channel
1-level channel
Manufacturer
PRINCE JAMES

11. Dr. Saleh Alqahtani
Industrial
distributors
M
a
n
u
f
a
c
t
u
r
e
r
C
o
n
s
u
m
e
r
Manufacturer’s
representative
Manufacturer’s
sales branch
Industrial Marketing
Channels
PRINCE JAMES

12. Dr. Saleh Alqahtani
Channel-Design Decisions
Analyze Customers’ Desired Analyze Customers’ Desired
Service Output LevelsService Output Levels
Lot sizeLot size
Waiting timeWaiting time
Spatial convenienceSpatial convenience
Product varietyProduct variety
Service backupService backup
PRINCE JAMES

13. Dr. Saleh Alqahtani
Channel-Design Decisions
Establish Objectives and ConstraintsEstablish Objectives and Constraints
Identify Major Channel AlternativesIdentify Major Channel Alternatives
Types of IntermediariesTypes of Intermediaries
Number of IntermediariesNumber of Intermediaries
Exclusive distributionExclusive distribution
Exclusive dealingExclusive dealing
Selective distributionSelective distribution
Intensive distributionIntensive distribution
PRINCE JAMES

14. Dr. Saleh Alqahtani
Channel-Design Decisions
Terms and Responsibilities of Terms and Responsibilities of
Channel MembersChannel Members
Price policyPrice policy
Conditions of saleConditions of sale
Distributors’ territorial rightsDistributors’ territorial rights
Evaluate the Major AlternativesEvaluate the Major Alternatives
Economic CriteriaEconomic Criteria
PRINCE JAMES

15. Dr. Saleh Alqahtani
Figure 17.4: The Value-Adds versus Costs of Different Channels
PRINCE JAMES

16. Dr. Saleh Alqahtani
SellingSelling
costscosts
(dollars)(dollars)
Level of sales (dollars)Level of sales (dollars)
Break-Even Cost Chart
CompanyCompany
sales forcesales force
Manufacturer’s Manufacturer’s
sales agencysales agency
SS
BB
PRINCE JAMES

17. Dr. Saleh Alqahtani
Channel Management Decisions
Selecting
F
E
E
D
B
A
C
K
Motivating
Training
Evaluating
PRINCE JAMES

18. Dr. Saleh Alqahtani
Types of Vertical Marketing Systems
Corporate
Common Ownership at Different
Levels of the Channel
Contractual
Contractual Agreement Among
Channel Members
Administered
Leadership is Assumed by One or
a Few Dominant Members
PRINCE JAMES

19. Dr. Saleh Alqahtani
Conventional Distribution Channel vs.
Vertical Marketing Systems
VerticalVertical
marketingmarketing
channelchannel
Manufacturer
Retailer
ConventionalConventional
marketingmarketing
channelchannel
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
W
h
o
l
e
s
a
l
e
r
PRINCE JAMES

20. Dr. Saleh Alqahtani
Channel Dynamics
Conflict, Cooperation, and CompetitionConflict, Cooperation, and Competition
Types of Conflict and CompetitionTypes of Conflict and Competition
Vertical channel conflictVertical channel conflict
Horizontal channel conflictHorizontal channel conflict
Multichannel conflictMultichannel conflict
Causes of Channel ConflictCauses of Channel Conflict
Goal incompatibilityGoal incompatibility
Unclear roles and rightsUnclear roles and rights
Differences in perceptionDifferences in perception
PRINCE JAMES

21. Dr. Saleh Alqahtani
Channel Dynamics
By adding new channels, a company faces By adding new channels, a company faces
the possibility of channel conflict which the possibility of channel conflict which
may include:may include:
Conflict between the national account Conflict between the national account
managers and field sales forcemanagers and field sales force
Conflict between the field sales Conflict between the field sales
force and the telemarketersforce and the telemarketers
Conflict between the field sales Conflict between the field sales
force and the dealersforce and the dealers
PRINCE JAMES

22. Dr. Saleh Alqahtani
Channel Dynamics
Managing Channel ConflictManaging Channel Conflict
DiplomacyDiplomacy
MediationMediation
ArbitrationArbitration
Legal and Ethical Issues Legal and Ethical Issues
in Channel Distributionin Channel Distribution
Exclusive distributionExclusive distribution
Exclusive dealingExclusive dealing
Tying agreementsTying agreements
PRINCE JAMES

23. Dr. Saleh Alqahtani
Chapter 18 Chapter 18
Managing Retailing, Managing Retailing,
Wholesaling, and Market Wholesaling, and Market
LogisticsLogistics
byby
PRINCE JAMES

24. Dr. Saleh Alqahtani
Successful “go-to-
market” strategies
require integrating
retailers, wholesalers,
and logistical
organizations.
Kotler on
Marketing
PRINCE JAMES

25. Dr. Saleh Alqahtani
Chapter Objectives
In this chapter, we focus on the following In this chapter, we focus on the following
questions about each marketing questions about each marketing
intermediary:intermediary:
What major types of organizations What major types of organizations
occupy this sector?occupy this sector?
What marketing decisions do What marketing decisions do
organizations in this sector make?organizations in this sector make?
What are the major trends in this sector?What are the major trends in this sector?
PRINCE JAMES

26. Dr. Saleh Alqahtani
Table 18.1: Major Retailer Types
Specialty Store: Specialty Store: Narrow product line with a deep assortment. A clothing store Narrow product line with a deep assortment. A clothing store
would be a would be a single-linesingle-line store; a men’s clothing store would be a store; a men’s clothing store would be a limited-linelimited-line
store; and a men’s custom-shirt store would be a store; and a men’s custom-shirt store would be a superspecialtysuperspecialty store. store.
Examples: Athlete’s Foot, Tall Men, The Limited, The Body Shop.Examples: Athlete’s Foot, Tall Men, The Limited, The Body Shop.
Department Store: Department Store: Several product lines—typically clothing, home Several product lines—typically clothing, home
furnishings, and household goods—with each line operated as a separate furnishings, and household goods—with each line operated as a separate
department managed by specialist buyers or merchandisers. department managed by specialist buyers or merchandisers. ExamplesExamples: :
Sears, JCPenney, Nordstrom, Bloomingdale’s.Sears, JCPenney, Nordstrom, Bloomingdale’s.
Supermarket: Supermarket: Relatively large, low-cost, low-margin, high volume, self-Relatively large, low-cost, low-margin, high volume, self-
service operation designed to serve total needs for food, laundry, and service operation designed to serve total needs for food, laundry, and
household products. household products. ExamplesExamples: Kroger, Food Emporium, Jewel.: Kroger, Food Emporium, Jewel.
Convenience Store: Convenience Store: Relatively small store located near residential area, Relatively small store located near residential area,
open long hours, seven days a week, and carrying a limited line of high-open long hours, seven days a week, and carrying a limited line of high-
turnover convenience products at slightly higher prices, plus takeout turnover convenience products at slightly higher prices, plus takeout
sandwiches, coffee, soft drinks. sandwiches, coffee, soft drinks. ExamplesExamples: 7-Eleven, Circle K.: 7-Eleven, Circle K.
See text for complete table
PRINCE JAMES

27. Dr. Saleh Alqahtani
Retailing
Levels of ServiceLevels of Service
Wheel-of-retailingWheel-of-retailing
Four levels of service:Four levels of service:
Self-serviceSelf-service
Self-selectionSelf-selection
Limited serviceLimited service
Full serviceFull service
PRINCE JAMES

28. Dr. Saleh Alqahtani
Retail Positioning Map
Bloomingdale’s
Kinney
Shoe
Wal-Mart
Tiffany
BroadBroad
NarrowNarrow
B
r
e
a
d
t
h

o
f
p
r
o
d
u
c
t

l
i
n
e
Value added
LowLow
HighHigh
PRINCE JAMES

29. Dr. Saleh Alqahtani
Classification Of Retailer Types
Specialty Stores
Department Stores
Supermarkets
Convenience Stores
Off-Price Retailer
Superstores
Catalog Showroom
Wide Variety of Product Lines i.e. Clothing,
Home Furnishings, & Household Items
Wide Variety of Food, Laundry, & Household
Products
Limited Line of High-Turnover Convenience
Goods
Inexpensive, Overruns, Irregulars, and
Leftover Goods
Large Assortment of Routinely Purchased
Food & Nonfood Products, Plus Services
Broad Selection, Fast Turnover, Discount
Prices
Narrow Product Line, Deep Assortment
Store Type Length and Breadth of Product
Assortment
Discount Stores
Broad Product Line, Low Margin, High
Volume
PRINCE JAMES

30. Dr. Saleh Alqahtani
Types of NonStore Retailing
Direct Selling
Direct Marketing
Buying Services
NonStore Retailing
Accounts for More
Than 12% of All
Consumer
Purchases, and is
trending up.
Automatic Vending
PRINCE JAMES

31. Dr. Saleh Alqahtani
Low Price
Low Status
Low Margin
Mid Price
Mid Status
Mid Margin
High Price
High Status
High Margin
Wheel of Retailing
PRINCE JAMES

32. Dr. Saleh Alqahtani
Why are Wholesalers Used?
Wholesaler
Functions
Management
Services & Advice
Selling and
Promoting
Market
Information
Buying and
Assortment Building
Risk Bearing Bulk Breaking
Transporting
Financing Warehousing
PRINCE JAMES

33. Dr. Saleh Alqahtani
Table 18.3: Major Wholesaler Types
Merchant WholesalersMerchant Wholesalers: Independently owned businesses that : Independently owned businesses that
take title to the merchandise they handle. They are called take title to the merchandise they handle. They are called
jobbers, distributorsjobbers, distributors, or , or mill supply housesmill supply houses and fall into two and fall into two
categories: full service and limited service.categories: full service and limited service.
Full-Service WholesalersFull-Service Wholesalers: : Carry stock, maintain a sales force, Carry stock, maintain a sales force,
offer credit, make deliveries, and provide management offer credit, make deliveries, and provide management
assistance. There are two types of full-service wholesalers: (1) assistance. There are two types of full-service wholesalers: (1)
Wholesale merchants sell primarily to retailers and provide a full Wholesale merchants sell primarily to retailers and provide a full
range of services. General-merchandise wholesalers carry range of services. General-merchandise wholesalers carry
several merchandise lines. General-line wholesalers carry one or several merchandise lines. General-line wholesalers carry one or
two lines. Specialty wholesalers carry only part of a line. (2) two lines. Specialty wholesalers carry only part of a line. (2)
Industrial distributors sell to manufacturers rather than to Industrial distributors sell to manufacturers rather than to
retailers and provide several services—carrying stock, offering retailers and provide several services—carrying stock, offering
credit, and providing deliverycredit, and providing delivery..
See text for complete table
PRINCE JAMES

34. Dr. Saleh Alqahtani
Wholesaling
Trends in WholesalingTrends in Wholesaling
Narus and Anderson identified four ways to Narus and Anderson identified four ways to
strengthen relationships with manufacturersstrengthen relationships with manufacturers
Sought clear agreement about their expected Sought clear agreement about their expected
function in the marketing channelfunction in the marketing channel
Gained insight into the manufacturers’ Gained insight into the manufacturers’
requirements by visiting their plantsrequirements by visiting their plants
Fulfilled commitments by Fulfilled commitments by
meeting volume targetsmeeting volume targets
Identified and offered value-added Identified and offered value-added
services to help their suppliersservices to help their suppliers
PRINCE JAMES

35. Dr. Saleh Alqahtani
Goals of the Logistics System
• Provide a Targeted Level of Customer Service at
the Least Cost.
• Maximize Profits, Not Sales.
Higher Distribution Costs/
Higher Customer Service Levels
Lower Distribution Costs/
Lower Customer Service Levels
PRINCE JAMES

36. Dr. Saleh Alqahtani
Inventory
When to order
How much to order
Just-in-time
Costs
Minimize Costs of
Attaining Logistics
Objectives
Warehousing
Storage
Distribution
Order Processing
Submitted
Processed
Shipped
Logistics
Functions
Transportation
Water, Truck,
Rail,
Pipeline & Air
Logistics Systems
PRINCE JAMES

37. Dr. Saleh Alqahtani
Market Logistics
Supply chain management (SCM)Supply chain management (SCM)
Value networkValue network
Demand chain planningDemand chain planning
Market logisticsMarket logistics
Market logistics planning has four steps:Market logistics planning has four steps:
Deciding on the company’s value Deciding on the company’s value
proposition to its customersproposition to its customers
Deciding on the best channel design and Deciding on the best channel design and
network strategy for reaching the customersnetwork strategy for reaching the customers
Developing operational excellence in sales forecasting, Developing operational excellence in sales forecasting,
warehouse management, transportation management, warehouse management, transportation management,
and materials managementand materials management
Implementing the solution with the best information Implementing the solution with the best information
systems, equipment, policies, and proceduressystems, equipment, policies, and procedures
Integrated logistics systems (ILS)Integrated logistics systems (ILS)
PRINCE JAMES

38. Dr. Saleh Alqahtani
Figure 18.2: Determining Optimal Order Quantity
PRINCE JAMES

39. Dr. Saleh Alqahtani
Rail
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
Truck
Flexible in routing & time schedules, efficient
for short-hauls of high value goods
Water
Low cost for shipping bulky, low-value
goods, slowest form
Pipeline
Ship petroleum, natural gas, and chemicals
from sources to markets
Air
High cost, ideal when speed is needed or to
ship high-value, low-bulk items
Transportation Modes
PRINCE JAMES

40. Dr. Saleh Alqahtani
1. Speed.
2. Dependability.
3. Capability.
4. Availability.
5. Cost.
Checklist for Choosing
Transportation Modes
PRINCE JAMES