MKT 304 Principles of Marketing Lecture 9: Place: Distribution Channels and Logistics

Size: px

Start display at page:

Download "MKT 304 Principles of Marketing Lecture 9: Place: Distribution Channels and Logistics"

Benjamin Poole
7 years ago
Views:

1 MKT 304 Principles of Marketing Lecture 9: Place: Distribution Channels and Logistics Exhibit 10-1 Place Decisions Chp (11-12) Place and distribution channels Channel behavior and organization Channel design decisions Physical distribution (i.e., logistics) Channel of Distribution: Case of Pepsi What do we mean by Place? CSUS needs six IBM NetVista A20i (63U) desktops when the summer term starts in Where to buy? How the computers go to their customers? A channel of distribution is a set of interdependent organizations involved in the flow of products from producers to final users or consumers. It s A Big Deal Between $500 million and $1 billion in sales were lost in 1994 because of this P

2 Channel System May Be Direct or Indirect Greater Control Lower Cost Internet Makes Makes Direct Direct Distribution Easier Distribution Easier Some Possible Reasons for For Choosing Direct Channels Direct Direct Contact Contact with Customer with Needs Customer Needs Quicker Quicker Response Response or Change or in ChangeMarketing Marketing Mix Mix Suitable Middlemen Not Available Intermediaries Provide Economies Without intermediary Manufacture 1 Customer 1 Manufacture 2 Customer 2 Number of bilateral contacts: 3 3 = 9 Manufacture 3 Customer 3 With a Central Market intermediary Manufacture 1 Customer 1 Interme- Manufacture 2 diary Customer = 6 Manufacture 3 Customer 3 Matching Demand and Supply Discrepancies Quantity Assortment Separations Space Time Information Values/Priority Ownership

3 Distribution Channel Functions Transactional functions Buying Selling Risk taking Logistical functions Sorting Transporting Storing Facilitating functions Financing Information Channel Specialists Adjust Discrepancies with Regrouping Activities Accumulating Bulk-Break ing Sorting Assorting Producers or Middlemen May Be Channel Captains

4 Number of Channel Levels Manufacturer Direct Channel Consumer Manufacturer Retailer Consumer Indirect Channel Single Level Manufacturer Wholesaler Retailer Indirect Channel Two Levels Consumer Manufacturer Manufacturer s Industrial Industrial representative distributor customer or sales branch Vertical Marketing Systems Focus on Final Customers Characteristics Type of channel Traditional Vertical marketing systems Administered Contractual Corporate Amount of cooperation Little or none Some to good Fairly good to good Complete Control maintained by Examples None Typical inde-pendents Economic power and leadership General Electric Contracts McDonald s One company ownership Florsheim Traditional Channel System Each channel member is a separate business seeking to maximize its own profits. Lack leadership Conflict often occurs Profits of the channel as a whole may not be optimal This is not mere speculation; rigorous research shows this to be true. Jeuland and Shugan, Marketing Science (1983)

5 Vertical Marketing Systems Major Types of VMS Corporate VMS (Complete Co-operation Own by 1 Company) Vertical integration Downstream Upstream Contractual VMS (Fairly good Co-operation) An important format: franchise organizations Administrated VMS (Fair cooperation Economic power and leadership) Horizontal Marketing Systems Two or more companies at the same channel level join together to seek new opportunities Multichannel Distribution Systems A firm sets up two or more marketing channels to reach one or more customer segments. The Best Channel System Should Achieve Ideal Market Exposure Intensive Macdonalds Market Exposure Strategies Selective Selective _ Commercial Products Exclusive - Luxury Cars = number of outlets Limiting Market Exposure

6 Producer Vertical Arrangements May Be Legal Wholesale Retailer Retailer Retailer Horizontal Arrangements Are Illegal Physical Distribution Planning, implementing, and controlling the physical flow of materials, final goods, and information from points or origin to points of consumption to meet customer requirements at a profit. Hot topics, and jobs! Supply chains: the value-added flows from suppliers to final users. Efficient consumer response (ECR) p354. Customer Service Level Must Meet the Target Customer s Needs Info on Product Availability Online Status Information Order Processing Time Advance Info on Delays Backorder Procedures Inventory Storage Factors Affecting PD Service Levels Delivery Time Compliance with requests Order Accuracy Defect Free Deliveries Damage in Transit Exhibit 11-1 Handling Adjustments/ Returns

7 Trade-Offs of Costs, Service and Sales Physical Distribution Concept Focuses on the Whole Distribution System Transporting Customer s customer Customer service levels Storing Product-handling Evaluating all relevant alternatives to find best system Information flows Costs Coordinating Logistics Activities among Firms

8 Shifting and Sharing Conflict Handling JIT Chain of Supply Ethical Issues May Arise Exhibit 11-4 Product Availability Coordination of PD False expectations about delivery speed Selling products that are not International delays in order confirmation available Shifting the burden of holding inventory Running out of popular Which Transporting Alternative Is Best? Goods Are Stored at a Cost

2 Most producers use to bring their products to market. A detailers B intermediaries C expediters D agents

2 Most producers use to bring their products to market. A detailers B intermediaries C expediters D agents MULTIPLE CHOICE QUESTIONS 1.Caterpillar (famous for earth moving equipment) has a powerful partnership with its dealers. Which of the following is one of the basic principles upon which this successful