1 / 21

Place (Distribution)

Professor Joel Huber BA 360 Marketing Management Fuqua School of Business. Introduction Three C’s Four P’s Product Placement Promotion Price Summary. Place (Distribution). Agenda. The function of channels Channel design Depth Breadth Relationships with channel members.

rpitman
Download Presentation

Place (Distribution)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Professor Joel Huber BA 360 Marketing Management Fuqua School of Business Introduction Three C’s Four P’s Product Placement Promotion Price Summary Place (Distribution)

  2. Agenda • The function of channels • Channel design • Depth • Breadth • Relationships with channel members

  3. Marketing Channels • Channels are intermediaries whose function is to facilitate the movement of things between producers and customers • Channels exist when they are more efficient than direct distribution (note the internet is a channel) M C M C M C M D C M C M C Pure direct distribution (zero level channel) Number of Contacts = 9 Pure intermediation (one-level channel illustrated) Number of Contacts = 6

  4. Generic Channel Functions • Product Information • Promotion & Demand Generation • Product Customization • Quality Assurance • Lot Size • Assortment • Availability • After Sales Service • Logistics • Financing • Waiting Time • Spatial Convenience (Especially Internet)

  5. Channel Depth • Issue isn’t whether these functions will be done, it is who will do them! • To the extent that the manufacturer does them • Its costs go up => its prices will be higher • When some of them are shifted to intermediaries • Manufacturer’s costs are lower, but intermediaries will add their charges • If intermediaries are more efficient than manufacturer, prices should be lower than under direct distribution • All else the same, consumers will purchase from the system giving the lowest price, which explains why efficiency is necessary for channels to exist

  6. Example – Grocers do the walking

  7. Channel Flow Figure Internet -

  8. Channel Breadth • Intensive distribution • As many outlets as possible • Selling support not considered vital • Firm seeks to minimize customers’ cost of obtaining offering • Selective distribution • Multiple, but limited, outlets per area • Firm seeks optimal tradeoff between selling support and the costs customers must face to obtain the offering, both are considered important • Exclusive distribution • Single outlet per area • Firm seeks strongest selling support • Customers’ cost of obtaining offering not considered vital

  9. Channel Breadth Guidelines • Internet limits ability to selectively distribute information goods.

  10. Example - Selective to Extensive

  11. Example - Parts Exchange

  12. Channel Relationships: Power • Power in the channel relationship is • The ability of one channel member to get another to do what it otherwise would not • Four bases of power • Coercive power • Reward power • Expert power • Referent power

  13. Channel Relationships: Conflict • Conflict in the channel arises when the interests of entities diverge • Vertical conflict => interests of different levels within same channel are opposed • Horizontal conflict => interests of different members at same level are opposed • Minimizing/handling conflict • Avoidance: superordinate goals, personnel exchanges, joint membership in trade associations • Resolution: diplomacy, mediation, arbitration

  14. Sources of Channel Conflict

  15. Mutiple Channels- PC’s Manufacturer Wholesale VAR Office Retail Computer Retail Private Label Catalog Large Corporate Account (National) OEM Individual User Small Corporate Account Government

  16. Channel evolution-Package Goods • 1980’s a few goods companies dominated: P&G, Lever, Kraft, General Foods • Each had multiple brands, high advertising budgets, frequent new products • Each had salesforces (n=500) who stocked shelves and encouraged retailers to promote products • New competitors found themselves facing a $50MM advertising barrier or they could not get shelf space

  17. How manufacturers lost their edge • Discovered that cash cow brands could be milked for profit—opened doors for competitors • Frequent consumer and retail dealing resulted in greater switching among brands • There were fewer truly new products coupled with decreased perceived differences among brands • To make money brand companies manufactured store or generic brands

  18. How retailers gained an edge • Developed quality store brands • Played equally matched competitors against each other for shelf space—Trade promotions went from $8B in 1980 to $80B in 2000 • Used proprietary scanner data to • Reveal profitability and vulnerability—cut back number of SKU (stock keeping units) • Understand the value of shelf position, displays • Track the impact of new product introductions • Instituted slotting allowances

  19. Slotting allowances • Originally were charges to add a new slot in the warehouse for new products • Became general fee for new products, fees if product fails, and the pay-to-stay allowance • Negotiated with each company separately, allow the retailers to act like monopsonists • Smaller and less powerful companies pay more • Established companies pay less

  20. Resolution • Retailers moves have made brands less profitable for manufacturers • Retailer competition has kept retailer profit low • Efficient consumer response has made the system more efficient • Big winner—consumers!

  21. Summary • Channels exist when they are more efficient than direct distribution • Channel length is determined on the basis of comparative efficiency and effectiveness • Channel breadth is a function of customers’ perceptions of the offering’s uniqueness, complexity, consequences of a poor choice • All channels are subject to conflict stemming from divergent interests of members • Conflict generates evolutionary changes

More Related