Marketing Chapter 8 - Distribution

Channel coverage strategy: Selective distribution

- 2 Reasons why not every product should be intensely distributed: 1) Distribution costs go up and 2) Tradeoff between cover and sales effort. Greater number of outlets carrying a product, the lower the percentage of sales made by one outlet - Selective distribution: Distributing a product in selected outlets within a geographical area - Provides some coverage with some expectations of sales effort - Useful to think about these coverage strategies relative to competition or to how they change over time

Types of retailers: Supermarket

- A retail store which generally sells food items and household items

Channel coverage strategy: Global distribution

- Channel and distribution systems may be some of the most challenging to successfully globalize - Infrastructures, distribution networks, and responsibilities differ from country to country - Technology is making it easier - Large wholesalers becoming more common - exert a lot of power in the growth structure - Usually numerous types of wholesalers in developed countries - Variety within retailing across countries is generally greater than wholesaling - Some channels systems that have been replaced domestically have been adopted elsewhere

Functions of channel members: Transactional functions

- Contracting and promoting products to potential customers - Ex. Best Buy Sunday ads in the newspaper

Distribution

- Decisions involve managing the marketing channel, which is the pipeline of organizations through which a product passes from consumer to customer

Types of retailers

- Department store - Discount store - Warehouse store - Category killer - Specialty or boutique store - Supermarket - Convenience stores

Channel depth

- Depth refers to number of intermediaries between the producer of a good and its customer - Dell sells directly through the internet - Many smaller manufacturers use deep channels - Firm selling product overseas might have to add intermediary

E-Commerce / digital sales

- E-commerce accounts for the majority of the sales growth for many retailers - Traditional store-based-retailers are under pressure to find new ways to grow - Online and in-store shipping are a seamless experience for customers

Functions of channel members: Facilitation functions

- Include both researching and financing - Best Buy manager might provide Nikon representative with customer feedback on camera

Channel coverage strategy: Exclusive distribution

- Maximizes sales effort while minimizing coverage - Offered in only one outlet within a geographic area - Used by firms selling luxury goods or specialty products - Can be especially rewarding for a retailer: they get all profits from sale and the ability to sell other products to customers who came for the exclusive product - Retailers put in a ton of work to sell exclusive products

Omni-channel method

- More and more retailers have begun to establish a physical presence - Finding a balance between online and physical retail stores will be the key to maximizing both customer satisfaction and retail performance in the years ahead - Digital channel is reshaping the physical store - Retail stores have increased more open space - Retailers know more about their customers - Physical store gives e-retailers an opportunity to gain exposure, legitimize the brand, and grow the customer base - In order to build volume and scale, brands need multiple channels of distribution

Types of retailers: Specialty or boutique store

- Narrow focus, but smaller than category killer

Channel width (or coverage)

- Number of outlets offering a product in a particular geographic area - Selecting channel width based on factors like consumer's buying process and brand's desired competitive position

Types of retailers: Discount stores

- Offer large range of products to the end user, but at discount rate - Wal-Mart and Target

Types of retailers: Department store

- Offers wide range of products under one roof - Helpful, well-trained salespeople is key

Functions of channel members: Logistical functions

- Provided through physical distribution, storing, and sorting of goods - Ex. eggs transported from farms and sorted into sizes and quality

Channel coverage strategy: Intensive distribution

- Provides for the widest coverage - Used for items involving a routine buying decision - Proximity of customer is important - Availability and intensive distribution essential for low priced items purchased frequently

Types of retailers: Warehouse store

- Retail format which sells limited stock in bulk at discounted rate - Costco's

Types of retailers: Category killer

- Retailer that discount, specialty, and department stores find it almost impossible to compete with because of their narrow focus - Best Buy

Retailing

- Retailing has been among the least globalized of marketing activities, but that's changing rapidly - Opportunities for manufacturers who want to have control coordination of channel activities - Poses likelihood that these large worldwide retailers will become the dominant members of the channel structure

Types of retailers: Convenience stores

- Small stores run by individuals in the nearby locality to cater to daily needs of consumer base

Functions of channel members

- Transactional functions - Logistical functions - Facilitation functions

3 general types of channel coverage strategies

1) Intensive distribution 2) Selective distribution 3) Exclusive distribution - Global distribution

Supply chain

Network of business entities that support or perform marketing channel functions

Where does distribution fit into the Four P's?

Place