Chapter 12: Distribution Channels

How does information flow? (5)

1) Customer to Store 2) Store to Buyer 3) Buyer to Manufacturer 4) Store to Manufacturer 5) Store to Distribution Centre

What are the types of distribution channel structures?

1) Direct Distribution 2) Indirect Distribution 3) Multichannel Distribution

What are ways merchandise flows?

1) Inbound Transportation 2) Receiving and Checking 3) Storing and Cross-Docking 4) Getting Merchandise Floor-Ready 5) Shipping Merchandise to Stores 6) Inventory Management Through Just-in-Time Systems

What are the types of functions performed in the distribution channel?

1) Transactional 2) Logistical 3) Facilitating

3) Corporate Vertical Marketing System

Parent company has complete control and dictates the priorities and objectives of the supply chain.

2) Store to Buyer What is this information used for?

Point-of-sale (POS) data transfers to headquarters - sale on specific item or entire store Used for future promotions, reorders, display of merchandise

What is distribution intensity? (3) What are the types?

The level of channels members to use eat each level of the supply chain. 1) Intensive Distribution 2) Selective Distribution 3) Exclusive Distribution

What is a distribution centre?

A facility for the receipt, storage, and redistribution of goods to company stores and customers; may be operated by retailers, manufacturers, or distribution specialists.

3) Buyer to Manufacturer What is this information used for?

Aggregate information for wholesalers. Create new orders, info to negotiate prices.

How do distribution channels add value?

Becomes more efficient, adds value by making more convenient and less expensive Channels help companies get their goods and services to users: a) Facilitate the exchange process by cutting the number of contacts necessary b) Adjust for discrepancies in the market's assortment of goods and services via sorting c) Standardize exchange transactions d) Facilitate searches by both buyers and sellers

1) Customer to Store

Cashier scans UPC tag. Purchase info automatically transferred by retailer - special packaging and promotion.

What are vertical marketing systems? What are the types of vertical marketing systems?

Channels members act as a unified system to maximize benefits by making system more efficient. 1) Administered Vertical Marketing System 2) Contractual Vertical Marketing System 3) Corporate Vertical Marketing System

3) Multichannel Distribution

Combination of both businesses and customers both indirect and direct.

What is electronic data interchange?

Computer-to-computer exchange of business documents from a retailer to a vendor and back. Advance shipping notice: supplier sent to retailers telling them exactly what to expect in shipment.

What is a data warehouse?

Data collected at point of sale then goes into a database warehouse. Information stored and aggregated by item, vendor, time, stores, etc. Marketing decisions regarding developing and replenishing merchandise assortments.

LO2

Describe distribution channel design and management decisions and strategies.

LO4

Explain how logistics management affects distribution strategy.

LO1

Explain the importance of distribution and the interrelationships among distribution channels, supply chain management, and logistics management.

3) Exclusive Distribution

Extreme form of exclusive distribution, only a few retailers in a territory. Maintain image and control of merchandise in a particular area. Strong incentive to sell products but not to the same extent as in exclusive territory. E.g. Rolex

What is the pull marketing strategy?

Get consumers to pull the product into distribution channels by demanding retailers to carry it. Promotional efforts are directed at consumers. Builds demand for product that may convince the retailers to carry the product.

1) Intensive Distribution

Get products into as many outlets as possible. Nationally branded products found in grocery and discount stores often use this approach. E.g. PepsiCo

2) Selective Distribution

Grant exclusive geographic territory to one or few retailers so no other retailers in the territory can sell a particular brand. Most appropriate consumers represent their products. Can potentially limit sales. Ensure enough inventory to offer customer adequate selection. Guarantee of supply gives strong incentive to push products, no competing retailers E.g. Seiko

LO3

Identify how distribution channels add value to businesses and consumers.

2) Contractual Vertical Marketing System What is a franchisor?

Independent firms at different levels of the supply chain join a contractual relationship to obtain economies of scale. Contract between franchisor and franchisee, allows franchisee to operate a retail outlet using the name and format developed by the franchisor.

What is logistics management?

Integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, in-process inventory, and finished goods from the point of origin to the point of consumption. Supply chain management takes a system wide approach to coordinating the flow of merchandise and includes both distribution management and logistics management.

1) Direct Distribution When is this method most often used? Why would companies use this method?

Manufacturers deal directly with consumers Significant role in the B2B market when dealing with the largest customers in the public and private sector Some companies might not be able to secure shelf space or pay the high listing fees

1) Administered Vertical Marketing System

No common ownership or contractual relationship, one dominant channel member controls relationship.

2) Indirect Distribution When are wholesalers used?

One or more intermediaries work with the manufactures to provide goods and services to consumers. One intermediary when there are large retailers. Wholesalers are often used when a company does not buy sufficient quantity to make to cost effective for a manufacture to deal directly with a retailer.

4) Store to Manufacturer

Purchase information transferred directly for the manufacturer to the buyer

What is the push marketing strategy?

Push the product onto consumers through distribution channels. Promotional efforts to convince channel members to carry their product.

What is supply chain management? What are wholesalers? What are retailers?

Set of approaches and techniques used to create and efficiently integrate their (suppliers, manufacturers etc). into a seamless value chain and distribute the right quantities at the right time and to minimize system wide costs while satisfying the service level their customers require. Firms that buy products and sell them to retailers. Sell products directly to consumers.

What is a distribution channel?

Set of institutions that transfer goods from point of production to the point of consumption. All of the institutions and marketing activities in the process. Make products avabile to consumers - individuals or businesses.

5) Store to Distribution Centre

Store communicates with the distribution center directly - regarding inventory and delivery

What is one way to manage supply chain?

Strategic Relationship: supply chain members are committed to maintaining long-term relationships, investing in opportunities that are mutually beneficial; requires mutual trust, open communication, common goals, credible commitments

What is one way to manage marketing channels?

Vertical Marketing Systems

What is channel conflict?

When channels members have conflicting goals, roles rewards, members not in agreement.

1) Transactional What are the parts? (4)

a) Buying: Purchase goods for resale to other intermediaries or consumers. b) Risk Taking: Own inventory that can become outdated. c) Promotion: Promote products to attract customers. d) Selling: Transact with potential customers.

3) Facilitating What are the parts? (2)

a) Gather Information: Share competitive intelligence about customers or other channel members. b) Financing: Extend credit and other financial services to consumers.

2) Logistical What are the parts? (2)

a) Physical Distribution: Transport goods to point of purchase. b) Risk Taking: Maintain inventory and protect goods.