Marketing chapter 13 distribution
13.1 Importance of marketing channel
- Distribution: the marketing mix component that is concerned with decisions about making
the product available to customers when and where they prefer to buy them, including the
selection of distribution channels and intermediaries.
- Distribution includes:
1. Strategic choices of marketing channels and intermediaries.
2. Alliances and long-term commitments to other organizations.
3. Decision about where and how customers will buy.
- Distribution channel: a network of independent organisations, that combined, perform all
the activities necessary to link producers and end customers.
- Distribution strategy: analysis, planning, implementation and control of activities that make
the right products available to the target market at the right time, at the right place and at
the lowest possible cost.
- Intermediaries: independent organisations or individuals that operate between the producer
and consumer in a channel of distribution (exporters, importers, wholesalers and retailers).
- Channel structure: the form of the distribution channel involve in selling, buying, transferring
title and performing related function.
- Channel length: number of intermediary levels used in the distribution channel.
- There are two basic types of channels:
1. Direct channels: the movement of products and services from producers to consumers
without the use of independent intermediaries.
2. Indirect channels: the producer depends on at least one intermediary to get his products
into the buyer’s hands.
,- When using intermediaries in the distribution channel, you give up some control and
functions.
Factors influencing the choice for a long or short channel:
- Most companies use multiple distribution distribution channels, rather than a single-channel
strategy, to be able to reach several market segments with a single product.
Dual distribution: strategy in which you use two types of distribution channels.
Multichannel distribution: Use two or more distribution channels, to expand market
coverage, lower costs an offer greater opportunities, contributing to higher sales.
- Hybrid system: special multichannel: members perform complementary tasks for the same
customer, instead of for different segments.
- To simplify the exchange process, channels of distribution create:
1. Place utility: by offering products in places where customers shop
2. Time utility: making products available when buyers want them
3. Possession utility: by providing ownership or arrangements that give customers the right
to use the product.
- Middlemen make selling products and services more efficient, by reducing the number of
sales contacts needed to reach the target market.
Accomplish this by:
1. Breaking bulk: buy large quantities of products from manufacturers but sell only a few or
even one at a time to many different buyers.
2.Creating assortments: reduce the number of transactions, by offering a wide variety of
products at one location, so customers can buy many items from one store/seller at once.
, - Without an intermediary, you would have to make more contacts to reach all the buyers in
the target market. With an intermediary you would have to make less contacts, which is
more efficient.
Intermediaries can add value with three functions:
1. Transactional: involves buying, selling and risk taking, the risk of not selling products you
stock.
2. Logistical: involves assorting, storing, sorting and transporting of merchandise.
3. Facilitating: make products attractive to buyers.
- Distribution functions: key tasks that intermediaries perform in the channel.
The six most important functions of the distribution channel:
1. Relationship building 2. Promotion
3. Sorting 4. Inventory control
5. Financing 6. Research and marketing information
Some functions, like promotion, product and title flows, make a forward flow, from seller to
buyer. Other functions, like ordering and payment, provide a backward flow, from buyer to
seller.
