MAN1075 10. Distribution and Channel Management PDF

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MAN Lecture 1011/05/10. Distribution and Channel Management Functions of channel intermediaries Reconciling the needs of producers and consumers Break bulk as manufacturer produce in large quantities Wholesaler buys the bulk so retailers can buy in smaller quantities Allowing customers to just buy o...

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Marketing Principles MAN1075 Lecture 10 11/05/2020

10. Distribution and Channel Management -

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Functions of channel intermediaries - Reconciling the needs of producers and consumers - Break bulk as manufacturer produce in large quantities - Wholesaler buys the bulk so retailers can buy in smaller quantities - Allowing customers to just buy one or few of that item - Retailers may not have resources to buy large bulk - Improving efficiency - Reducing transactions - Improving accessibility - Helps take the products where customers are located away from manufacturers - Time gap - manufacturer may only produce some days but intermediary allows customer to buy as and when they want - Providing specialist services - Car servicing or MOT is not done by manufacturer Distribution channels for consumer goods - Producer - consumer - Selling straight to customer - Making more profit - Can sell to a customer at a lower price - iTunes - Ebay - RyanAir - Producer - retailer - consumer - Size of retailer could make it convenient to sell to them - Retailer may be able to buy in large bulk - Able to deal directly with producer - Retailers have a lot of power nowadays - Producer - wholesaler - retailer - consumer - When retail size is small - Capacity to buy in bulk is limited - Wholesaler buys in bulk and sells in smaller quantities to retailer - Producer - agent - wholesaler - retailer - consumer Multi channel distribution - Distribution may take many forms depending on type of product, size of organisation and market - Distribution may be direct (manufacturer to consumer) or indirect (through wholesalers, agents and retailers to the consumer) - Examples of multichannel distribution include organisation-specific stores (high street), other specialist retail outlets (Currys), catalogue shops (Argos), agents, online retail stores (Amazon) and organisation-specific websites Distribution channels for business-to-business goods - Producer - business consumers - Expensive product so requires more customer relationship building - Producer - agent - business customers - Agent may not communicate brand message correctly - Control of brand is not up to producer - May not push producer’s product if commission not as high as other products they may be selling - Producer - distributor - business customers

Marketing Principles MAN1075 Lecture 10 11/05/2020

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- Generally less expensive - Frequently bought by customers - Producer - agent - distributor - business customers - Can help if there are language barriers or cultural differences Distribution channels for services - Service provider - consumer or business customer - Service provider - agent - consumer or business customer - As there is no stock there is no need to have a distributor or wholesaler - Service provider has close relationship with customer so intermediary not necessary - Agent only needed if geographic area is different Channel strategy - Channel selection - Distribution intensity - Channel integration - Influences - Market factors - Buyer behaviour - How the consumer wants to be served - Where they want to buy the product - Where customer is based (dispersed or grouped together) - Producer factors - Not having enough expertise to perform channel functions (warehouse or delivery) - Not enough understanding of the customer base - May need a distribution centre to distribute the products - May not be happy to lose control of brand so may sell a high price or try to offer promotions to retain control but this often sends wrong message - Product factors - More variety - Easier to sell to customers directly in-store or online - Produced in smaller quantities - Products that are complex in nature and are technical - Perishable products cannot go through a long channel - won’t last - Competitive factors - Producers may use a different distribution channel to compete in an alternative way - Technology factors - Advancements have changed dynamics of distribution channels - Reduced operational costs - Access to customers anywhere at anytime - Internet security has allowed consumers to feel safe whilst purchasing online - Process automations have contributed in proliferation of goods and services online Distribution intensity - Intensive distribution - Uses all available distribution channel options - Greater market coverage

Marketing Principles MAN1075 Lecture 10 11/05/2020

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Saturation in market With mass market products it is important that product is always available otherwise consumers will go with substitute - Selective distribution - Fewer retailers/distributors - Nature of product demands high service quality - Manages supply and demand curve profitably - Exclusive distribution - Controls supply in market and reduces buyer power - Sold unlimited outlets - Create demand and opportunity for supplier to sell at high price due to limited availability Channel integration - Conventional marketing channels - Product ownership moves from producer to distributor to retailer - Producer loses control over product as it is given to distributor - can create conflict of interest among channel entities as distributor may sell at a lower price to make bigger margins - Brand equity may get damaged if sold lower - Producer may lose touch with customer due to distance created by adding intermediaries in the channel - Trade off between control and cost - Franchising - Legal contract between producer and channel member - Charge a fee for marketing, training and for financial services - Franchising has a contractual vertical integration - Contract allows franchisor to dictate how it is run - May be a conflict between intermediaries don’t see eye to eye - Have to give up percentage of sales - Opened when it is not economical to open a retail store - Channel ownership Channel management - Selection - Selecting the right distributor through trade sources or networking - Develop a selection criteria based on product knowledge, needs of customer - Motivation - Sharing financial gains - Rewards and incentives - Commission - Training - If product is technical, distributor may require training - Evaluation - Retain or eliminate distributor/entity - Look at: - Sales volume - Profits - Managing conflict - Vital aspect that cannot be ignored Managing channel conflict - Sources of conflict:

Marketing Principles MAN1075 Lecture 10 11/05/2020

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Differences in goals - Producer wants more market share whereas distributor may want more profit - Differences in desired product line - Multiple distribution channels - Inadequacies in performance - Avoiding and resolving conflict - Developing a partnership approach - Training - Marketing partitioning - Improving performance - Channel ownership - Coercion Ethical issues in distribution - Slotting allowances - Charging a premium price for a middle space on a shelf - Exclusive dealing - Minimising competitors - Restrictions in supply - Can decrease demand in market - May put customers off - Grey markets - Selling unlicensed products - Fair trading - Protects small businesses from large buyers - Could damage them - Helps them access large market...