Mkc Lesson 9 - Distribution (place)

Types of distribution (based on market coverage)

- Intensive distribution - Exclusive distribution - Selective distribution

Marketing channel functions

- Marketing information - analyse sales data and other information in databases and information systems. Perform or commission marketing research. - Marketing management - Establish strategic and tactical plans for developing customer relationships and organisational productivity - Facilitating exchanges - Choose product assortments that match the needs of customers. Cooperate advertising, personal selling, sales promotion, publicity and packaging - Price - Establish pricing policies and terms of sales - Physical distribution - Manage transportation, warehousing, materials handling, control and communication

Retailing

Describes any exchange in which *the buyer is the ultimate consumer of the product.* When people think of retailing, many immediately think of department stores, supermarkets and specialist shops. Retailing excludes transactions in which the buyer intends to resell the product or use it in the making of another product. Virgin Australia is a retailer.

Exclusive distribution

Distributes products through a single intermediary for any given geographic region. Generally used for products that are only purchased after a great deal of deliberation by the consumer or where exclusivity adds to the appeal of the product. e.g. prestige cars and designer furniture.

Selective distribution

Distributes products through intermediaries chosen for a specific reason. Falls between intensive and exclusive distribution. Most appropriate for goods that require some degree of deliberation by the consumer and where the consumer might visit multiple stores to compare prices and products.

Intensive distribution

Distributes products via every suitable intermediary. Obvious strategy for every day purchases such as bread.

Consumer product distribution channels

Distribution channel 1: producer to consumer. e.g. Google. Consumers often feel that they get a better deal by going through this channel. However, this is often not the case as producers are reluctant to undercut the prices of their retail distributors. Distribution channel 2: Producer to retailer to consumer. Distribution channel 3: Producer to wholesaler to retailer to consumer - This is a common choice for goods that are sold in high volumes through numerous retailers. Examples include grocery items and mass-marketed clothing The advantage for the producer is in dealing with larger volumes to fewer buyers rather than small volumes to numerous buyers. The advantage for the retailer is the ability to buy a range of different lines from one source (the wholesaler) rather than having to deal with large numbers of producers. Distribution channel 4: Producer to agent/broker to wholesaler to retailer to consumer. This is a common choice for exports, where the complexities of dealing with different legal, regulatory and cultural factors suggest an experienced and skilled agent will be able to more effectively deal with intermediaries in the foreign market. It is also used for mass marketed products where the producer believes an agent can more effectively sell the products to wholesalers. Distribution channel 5: Producer to agent/broker to consumer - this channel is commonly used in the financial services industry. For example, mortgage brokers deal directly with consumers and the banks and other financial institutions that offer loans.

Horizontal and vertical channel integration

In any supply chain, certain functions must be undertaken if a product is to make its ways from producer to consumer. Within any existing channel it is possible to *redistribute* particular responsibilities and obligations between different channel members. This is known as channel integration.

Distribution channels

Many manufacturers and service businesses deal directly with the consumers of their products. This approach to marketing is known as *direct distribution* and it is particularly common for services products, as services are directly tied to the service provider. Conversely, many producers, especially makers of physical products, rely on other organisations and individuals to help them get their product to end users. This approach is known as *indirect distribution* and the main organisations and individuals who act in the distribution chain between the producer and end user are known as *marketing intermediaries.* The key marketing intermediaries are industrial buyers, wholesalers, agents and brokers and retailers. The path from the manufacturer or service provider to the end user is known as the distribution channel or marketing channel.

Vertical channel integration

Occurs when different stages of the distribution channel are combined under one management structure. For example, vertical channel integration occurs when a wholesaler buyers a retailer or transport business. Vertical integration enables closer cooperation and coordination between the two stages of the marketing channel. At its most extensive, vertical integration brings *all stages of the marketing channel under one management structure*. The resultant structure is known as a vertical marketing system.

Horizontal channel integration

Occurs when organisations at the same level of operation are combined under one management structure. For example, horizontal channel integration occurs when a retailer buys out a competitor.

Distribution

Placing products in the hands of the consumer is the marketing function known as 'distribution' or 'place'. Distribution requires a chain or network of organisations and individuals. The chain that exists between producers and consumers (or organisational buyers in the case of the business-to-business market) is known as a distribution channel. The key organisations that make up the distribution channel are called intermediaries. The main intermediaries are wholesalers, industrial buyers, agents or brokers, and retailers. Distribution channel intermediaries themselves often rely on a host of specialist service providers.

Direct distribution

Producers of goods or services deal directly with end-users. No help of intermediaries. In this case, a single company owns and manages the whole channel to serve a large market. This allows for more control, higher profit rates, but also results in limited market reach and higher expenses and more risk

Indirect distribution

Producers rely on marketing intermediaries to help them get their offering to end users. This allows for a wide market reach, profits to be shared with distributors, however, retailers may also sell your competitors' products. Marketers can also use a combination of direct or indirect distribution in different target markets or the same target markets.

Supply-chain management

The entire reason intermediaries are used is to allow producers, all of the other intermediaries and consumers to focus on what they are best at and thereby make the path from producer to consumer as efficient as possible. This can most effectively be achieved when the producer and the intermediaries fully understand the goals and needs of the other parties and work together to find efficiencies. This approach is known as supply-chain management. Formally, the supply chain consists of the producer and marketing intermediaries as well as all of the other parties that play direct or indirect roles in getting products to consumers; for example, raw materials suppliers, transport companies, wholesalers and retailers.

Marketing intermediaries

The main organisations and individuals who act in the distribution chain between the producer and end user. Because they have expertise, equipment, experience, contacts, skills and scales of economy, intermediaries help producers achieve better results than producers can achieve when acting alone. The existence of an intermediary can make the whole process more efficient for both the producer and the consumer, which can lead to cost savings.

Types of retailers

There are many different forms of retailer, each offering relative strengths and weaknesses for the customer and the producer or wholesaler. These involve: - Specialty retailers - General-merchandise retail stores - Online retailing

Specialty retailers

Usually carry just one or a small number of different types of products, but within that product line, they carry a great deal of variety. Types of specialty retailers: - Specialty stores - Category killers - Off-price retailers