Lecture 13Lecture 13

Distribution channel decisionDistribution channel decision.. Channel management decisions.Channel management decisions.

The Importance of The Importance of PlacePlace It is a known fact that without distribution 'place' the best It is a known fact that without distribution 'place' the best

product or service will not be delivered and the marketing product or service will not be delivered and the marketing mix will break down and fail it . mix will break down and fail it . It was once said that ‘place’ is one of the most powerful It was once said that ‘place’ is one of the most powerful elements of the marketing mix, as it is the one way that we elements of the marketing mix, as it is the one way that we can both reach and can both reach and actually service the customer.actually service the customer.Place plays a pivotal role within the marketing mix, and the Place plays a pivotal role within the marketing mix, and the key to success will be its successfulkey to success will be its successfulintegration within it, ensuring that customers get their integration within it, ensuring that customers get their products at the right place and at the rightproducts at the right place and at the righttime. time. It also plays an important role, primarily because it It also plays an important role, primarily because it ultimately affects the sales turnover and profit margins of ultimately affects the sales turnover and profit margins of the organization. the organization.

1.1. It organizes the exchange process though It organizes the exchange process though distributiondistribution

2.2. It organizes communications It organizes communications

Therefore sometimes the channels of distribution can becalled marketing channels or combination

of distribution and communications

Distribution works on 2 main principles

Influences on distributionInfluences on distribution

Fuel pricesFuel pricesEnvironmental legislationEnvironmental legislationTaxationTaxationTransportation choicesTransportation choicesNational/global National/global transportation transportation infrastructureinfrastructureNature of product and Nature of product and product characteristics – product characteristics – perishability and so on perishability and so on Packaging Packaging Product life cycleProduct life cycleChanging life cycleChanging life cycle

The emergence of ICTThe emergence of ICTCustomer expectationsCustomer expectationsLevel of complexity in Level of complexity in customer buying behaviorcustomer buying behaviorCompetitive strategies Competitive strategies Product targetsProduct targetsDemandDemandMarket sizeMarket sizeContribution toward costsContribution toward costsMarketing mix Marketing mix componentscomponentsCustomer servicesCustomer servicesTechnical supportTechnical support

Distribution is ultimately about providing Distribution is ultimately about providing a service, a service of delivery to the a service, a service of delivery to the customer, essentially getting product customer, essentially getting product from A to B.from A to B.

The main marketing issues elates to The main marketing issues elates to channels.channels.

The successful management of the The successful management of the supply chain will be achieved through supply chain will be achieved through selecting, motivating, and controlling selecting, motivating, and controlling distributors and distribution outlets.distributors and distribution outlets.

Distribution channels: Distribution channels: definitiondefinition

Distribution channels consists of a group Distribution channels consists of a group of individuals or organization that assist of individuals or organization that assist in getting the product to the right place in getting the product to the right place at the right time. at the right time.

They enable the manufactured products They enable the manufactured products to flow from a manufacturer to the end-to flow from a manufacturer to the end-user in many different ways.user in many different ways.

Marketing intermediaries are groups Marketing intermediaries are groups which are linking the producers and which are linking the producers and customers.customers.

Wholesalers Wholesalers – – they are buying products from they are buying products from manufacturer, store them within their warehouse and manufacturer, store them within their warehouse and sell products to the tradesell products to the trade . . RetailersRetailers – – the final shopping points (real or virtual). the final shopping points (real or virtual). Their role is to manage the transaction in which the Their role is to manage the transaction in which the buyer makes a purchase decision buyer makes a purchase decision Distribution/dealersDistribution/dealers – – groups of intermediaries who are groups of intermediaries who are associating with stocking products for manufacturers associating with stocking products for manufacturers and selling them on, including after-sales services, and and selling them on, including after-sales services, and credit facilities. Dealers are slightly different as they quite credit facilities. Dealers are slightly different as they quite often specialize in selling one particular brand (car often specialize in selling one particular brand (car dealers).dealers).Agents/brokersAgents/brokers/ / facilitatorsfacilitators – – do not take physical do not take physical procession of the goods, and act on behalf of the procession of the goods, and act on behalf of the manufacturer to sell their products. Their aim is to bring manufacturer to sell their products. Their aim is to bring buyers and sellers togetherbuyers and sellers together ..

FranchiseeFranchisee – – holds a contact to market holds a contact to market and supply a product or service that has and supply a product or service that has been very strictly designed and developed been very strictly designed and developed by the franchiser. The franchiser has strict by the franchiser. The franchiser has strict terms and conditions on store design, terms and conditions on store design, store layout and contents sold within the store layout and contents sold within the retail outlet.retail outlet.LicenseeLicensee – – similar to franchise. The similar to franchise. The licensee pays royalties on sales to the licensee pays royalties on sales to the licensor.licensor.MerchandiserMerchandiser – – are responsible for store are responsible for store displays relating to different products. displays relating to different products.

Distribution is highly expensive, there Distribution is highly expensive, there are a lot of add-on costs: marketing, are a lot of add-on costs: marketing, administrative, packaging, order administrative, packaging, order processing and receiving and making processing and receiving and making paymentspayments

Network of links for manufacturer can Network of links for manufacturer can contain 10 key buyers, who then contain 10 key buyers, who then distribute out to another 10 buyers (10 distribute out to another 10 buyers (10 x 10 = 100 links)x 10 = 100 links)

Lynne

Troy

Todd

Diane

Compaq

IBM

Apple

Hewlett-Packard

Computer City

HP®

Diane

Lynne

Troy

Todd

Apple

IBM

Compaq

Hewlett-Packard

Contacts with no intermediaries4 producer x 4 buyers=16 contacts

Contacts with one intermediaries4 producer + 4 buyers=8 contacts

Category of marketing Category of marketing activitiesactivities

Possible activities requiredPossible activities required

Marketing informationMarketing information

Marketing managementMarketing management

Facilitating exchangeFacilitating exchangePromotion Promotion

Price Price Physical distributionPhysical distribution

Customer servicesCustomer services

Relationships Relationships

Analysis of information such as sales data. Carrying out Analysis of information such as sales data. Carrying out research studiesresearch studiesEstablish objectives, plan activities and manage. Co-Establish objectives, plan activities and manage. Co-ordinate financing, risk taking, evaluate channels activitiesordinate financing, risk taking, evaluate channels activitiesChoose and stock products that match buyers needsChoose and stock products that match buyers needsSet promotional objectives, co-ordinate advertising, personal Set promotional objectives, co-ordinate advertising, personal selling, promotionsselling, promotionsEstablish pricing policies, terms and salesEstablish pricing policies, terms and salesManage transport, warehousing, materials handling, stock Manage transport, warehousing, materials handling, stock control, and communicationscontrol, and communicationsProvide channels for advise, technical support, after-sales Provide channels for advise, technical support, after-sales services, and warrantiesservices, and warrantiesFacilitate communication, products, parts, credit control,Facilitate communication, products, parts, credit control,Maintain relationships between manufacturer and retail Maintain relationships between manufacturer and retail outlets, and customer/consumeroutlets, and customer/consumer

Direct•Internet•Telephone•Mail•Catalogue•Own channel

Direct•Internet•Telephone•Mail•Catalogue•Own channel

Salesforce •Own •Another firm’s•Contract

Salesforce •Own •Another firm’s•Contract

Intermediary •Franchise•Wholesaler•Agent/Merchant•Distributor•Partner

Intermediary •Franchise•Wholesaler•Agent/Merchant•Distributor•Partner

Distribution optionsDistribution options

Manufacturer Manufacturer Manufacturer Manufacturer

customer Customer Customer Customer

Retailer

Wholesaler

Retailer Retailer

Wholesaler

Agent/broker

Typical range of channel of distributionTypical range of channel of distribution

Channel levelsChannel levels

A A zero-level channel zero-level channel (also called a (also called a direct-direct-marketing channel) marketing channel) consists of a manufacturer consists of a manufacturer selling directly to the final customer. The major selling directly to the final customer. The major examples are door-to-dour home parties, mail examples are door-to-dour home parties, mail order, telemarketing, TV selling, Internet selling. order, telemarketing, TV selling, Internet selling. Avon sales representatives sell cosmetics door-Avon sales representatives sell cosmetics door-to-door.to-door.

A A one-level channel one-level channel contains one selling contains one selling intermediary, such as a retailer. intermediary, such as a retailer. A A two-level channel two-level channel contains two intermediaries. contains two intermediaries. In consumer markets, these are typically a In consumer markets, these are typically a wholesaler and a retailer. wholesaler and a retailer. A A three-level channel three-level channel contains three contains three intermediaries. In the mi packing industry, intermediaries. In the mi packing industry, wholesalers sell to jobbers, who sell to small retawholesalers sell to jobbers, who sell to small reta

Logistical valueStock

SortingBreaking bulk

Transportation

Value added logistical services

Facilitating valueShared riskMarketing

Administration

Transportation valueFinancingTraining

InformationAfter sales

The distribution channel and the The distribution channel and the customercustomer

Passing of goods and services direct from manufacturer Passing of goods and services direct from manufacturer to customersto customersPassing of goods and services via retailer and then to a Passing of goods and services via retailer and then to a consumerconsumerPassing of goods from manufacturer via a wholesaler Passing of goods from manufacturer via a wholesaler and then directly to a consumerand then directly to a consumerPassing of goods from manufacturer via wholesaler, Passing of goods from manufacturer via wholesaler, then on to a retailer, and subsequently on to a consumerthen on to a retailer, and subsequently on to a consumerAdditionally, the manufacturer can distribute the Additionally, the manufacturer can distribute the products via agent to a wholesaler, and then follow the products via agent to a wholesaler, and then follow the routes routes

Selecting the channels of Selecting the channels of distributiondistribution

What are the product characteristics and What are the product characteristics and how do they affect methods of how do they affect methods of distribution?distribution?Who are their customers?Who are their customers?Where are their customers?Where are their customers?What are their customer requirements?What are their customer requirements?How, when and where do they want to buy How, when and where do they want to buy products?products?What are their competitors doing by way What are their competitors doing by way of distribution?of distribution?What is the cost of distribution?What is the cost of distribution?What are the legal and regulatory What are the legal and regulatory constraints of distribution?constraints of distribution?

Intermediary selection criteriaIntermediary selection criteria

Operational criteriaOperational criteria Knowledge of local marketsKnowledge of local markets Appropriate premises and equipmentAppropriate premises and equipment Technological systems and processesTechnological systems and processes Product knowledge and expertiseProduct knowledge and expertise Payment facilitiesPayment facilities Sales force structure, size, and effectivenessSales force structure, size, and effectiveness Efficient customer service infrastructureEfficient customer service infrastructureStrategic criteriaStrategic criteria Quality assurance processesQuality assurance processes Management abilityManagement ability Innovative Innovative Willing partnershipWilling partnership Levels of loyalty and cooperationLevels of loyalty and cooperation

Channel strategyChannel strategy

There are three types of market There are three types of market coveragecoverage::

Intensive – Intensive – as many available outlets as as many available outlets as possible (chocolate bars, newspapers)possible (chocolate bars, newspapers)

Selective –Selective – different products are only different products are only available in some outlets (electrical available in some outlets (electrical appliances, certain bread)appliances, certain bread)

ExclusiveExclusive -possibly only one outlet in the -possibly only one outlet in the geographical area (specialty products: geographical area (specialty products: special cars)special cars)

Intensive distributionIntensive distribution

Intensive distribution Intensive distribution means that as many means that as many available outlets as possible hold this product, available outlets as possible hold this product, for example chocolate, newspapers, bread and for example chocolate, newspapers, bread and so on. Intensive distribution will mean so on. Intensive distribution will mean convenience to the customer and increased convenience to the customer and increased customer satisfaction. customer satisfaction.

The sale of groceries in petrol and service The sale of groceries in petrol and service stations is an example of how intensive stations is an example of how intensive distribution has growndistribution has grown

Selective distributionSelective distribution

Selective distribution Selective distribution is different in that is different in that some products are only available from some products are only available from some outlets, for example electrical some outlets, for example electrical appliances, certain brands of clothes and appliances, certain brands of clothes and fashion products.fashion products.

Exclusive distributionExclusive distribution

Exclusive distribution is where possibly only the Exclusive distribution is where possibly only the outlet in a certain geographic area supplies a outlet in a certain geographic area supplies a product. product.

This method of distribution usually relates to This method of distribution usually relates to specialty products, for example special cars, specialty products, for example special cars, deluxe clothing and so on.deluxe clothing and so on.

Often exclusive distribution is relevant to niche Often exclusive distribution is relevant to niche products.products.

Intensive Intensive Selective Selective Exclusive Exclusive

Maximum # of outlets Maximum # of outlets covered to maximize covered to maximize availabilityavailability

Target outlets in as many Target outlets in as many geographical regions as geographical regions as possiblepossible

Consumer convenience Consumer convenience productsproducts

High # of purchasersHigh # of purchasersNigh purchase frequencyNigh purchase frequencyImpulsive purchaseImpulsive purchaseLow priceLow price

Medium level of Medium level of customers – but likely to customers – but likely to be significantbe significant

Less intensive Less intensive distribution of outletsdistribution of outlets

Retailers may require Retailers may require specialist knowledgespecialist knowledge

Shopping-based Shopping-based productsproducts

Medium # of shoppersMedium # of shoppersPurchase is occasionalPurchase is occasionalPurchase is more likely Purchase is more likely

to be plannedto be plannedMedium priceMedium price

Relatively few Relatively few customerscustomers

Limited retail outletsLimited retail outletsClose retailer-customer Close retailer-customer

relationshipsrelationshipsSpecialty productsSpecialty productsInfrequent purchaseInfrequent purchaseHigh involvement and High involvement and

planned purchase planned purchase High priceHigh price

Vertical marketing systemsVertical marketing systems are are professionally managed and centrally professionally managed and centrally coordinated marketing channels coordinated marketing channels designed to achieve channel economies designed to achieve channel economies and maximum marketing impact.and maximum marketing impact.

Major types of vertical marketing systemsMajor types of vertical marketing systems:: corporatecorporate contractualcontractual administeredadministered

A distribution system where two or more A distribution system where two or more channel members are connected by ownership channel members are connected by ownership or legal obligation (limited (simple) definition)or legal obligation (limited (simple) definition)

A marketing channel in which a single channel A marketing channel in which a single channel member will coordinate or manage channel member will coordinate or manage channel activities to achieve efficient, low-cost activities to achieve efficient, low-cost distribution, aimed at satisfying target market distribution, aimed at satisfying target market customer (expand definition)customer (expand definition)

Product design and developmentProduct design and developmentBrandingBrandingPricingPricingPromoting Promoting Stock control and storageStock control and storageMerchandizing Merchandizing TransportationTransportationRetailingRetailingCustomer serviceCustomer serviceFinance/creditFinance/creditWarranties/guarantiesWarranties/guaranties

Manufacturer-sponsored retailfranchise system

(Ford)

Manufacturer-sponsored retailfranchise system

(Ford)

Manufacturer-sponsored wholesale

franchise system(Coca-Cola)

Manufacturer-sponsored wholesale

franchise system(Coca-Cola)

Wholesaler-sponsoredvoluntary chains(Western Auto)

Wholesaler-sponsoredvoluntary chains(Western Auto)

Administered verticalmarketing systemProcter & Gamble

Administered verticalmarketing systemProcter & Gamble

Vertical marketingsystem

Vertical marketingsystem

Corporate verticalmarketing system

(Polo/Ralph Lauren)

Corporate verticalmarketing system

(Polo/Ralph Lauren)

Service-sponsored retailfranchise system

(Holiday Inn)

Service-sponsored retailfranchise system

(Holiday Inn)

Contractual verticalmarketing system

Contractual verticalmarketing system

Wholesaler-sponsoredvoluntary chains(Western Auto)

Wholesaler-sponsoredvoluntary chains(Western Auto)

Wholesaler-sponsoredvoluntary chains(Western Auto)

Wholesaler-sponsoredvoluntary chains(Western Auto)

Servicesponsored

franchise system(H&R Block)

Servicesponsored

franchise system(H&R Block)

The combination of successive The combination of successive stages of production and stages of production and distribution under a single distribution under a single ownership is a ownership is a corporate vertical corporate vertical marketing systemmarketing system. .

These types of marketing systems These types of marketing systems can develop via either can develop via either forward forward integrationintegration or or backward integrationbackward integration..

Under a Under a contractual vertical marketing contractual vertical marketing systemsystem, , independent production and independent production and distribution firms integrate their efforts distribution firms integrate their efforts on a contractual basis to obtain on a contractual basis to obtain greater greater functional economies and marketing functional economies and marketing impactimpact than they could achieve alone. than they could achieve alone.

Contractual systems are the Contractual systems are the most most popularpopular among the three types of among the three types of vertical marketing systems, accounting vertical marketing systems, accounting for about 40% of all retail sales.for about 40% of all retail sales.

Contractual VMSContractual VMSWholesaler-sponsored voluntary Wholesaler-sponsored voluntary chains:chains: Wholesalers organize voluntary Wholesalers organize voluntary chains of independent retailers to help chains of independent retailers to help them compete with large chain them compete with large chain organizations.organizations.

The wholesaler develops a program in The wholesaler develops a program in which independent retailers standardize which independent retailers standardize their selling practices and achieve buying their selling practices and achieve buying economies that enable the group to economies that enable the group to compete effectively with chain compete effectively with chain organizations.organizations.

Contractual VMSContractual VMS

Retai ler cooperat ives:Retai ler cooperat ives: Retailers take the Retailers take the initiative and organize a new business initiative and organize a new business entity to carry on wholesaling and possibly entity to carry on wholesaling and possibly some production. some production. Members concentrate their purchases Members concentrate their purchases through the retailer co-op and plan their through the retailer co-op and plan their advertising jointly. advertising jointly. Profits are passed back to members in Profits are passed back to members in proportion to their purchases, Nonmember proportion to their purchases, Nonmember retailers can also buy through the co-op retailers can also buy through the co-op but do not share in the profits.but do not share in the profits.

Contractual VMSContractual VMSFranchise organizat ions:Franchise organizat ions: A A channel member called a channel member called a franchisor franchisor might link several successive stages in might link several successive stages in the production-distribution process. the production-distribution process. Franchising has been the fastest-Franchising has been the fastest-growing retailing development in growing retailing development in recent years. recent years. Although the basic idea is an old one, Although the basic idea is an old one, some forms of franchising are quite some forms of franchising are quite new.new.

FranchisingFranchising is a contractual is a contractual arrangement between a parent arrangement between a parent company (a company (a franchisorfranchisor) and an ) and an individual or firm (a individual or firm (a franchiseefranchisee) that ) that allows the franchisee to operate a allows the franchisee to operate a certain type of business under an certain type of business under an established name according to established name according to specific rules.specific rules.

Franchise association in Europe, Franchise association in Europe, USA, Russia.USA, Russia.

Administered vertical marketing Administered vertical marketing systemssystems achieve coordination at achieve coordination at successive stages of production successive stages of production and distribution by theand distribution by the size size and and influenceinfluence of one channel member of one channel member rather than through ownershiprather than through ownership..

The combination of institutions at the The combination of institutions at the same level of channel operation under same level of channel operation under one managementone management

The balance of power within the The balance of power within the distribution channeldistribution channel

The balance of power within the distribution channel The balance of power within the distribution channel is an interesting concept to consider. As each party is an interesting concept to consider. As each party has its own set of objectives to pursue and its own has its own set of objectives to pursue and its own agenda, fitting in with a partner organization can agenda, fitting in with a partner organization can potentially cause conflict. potentially cause conflict. Who then holds the balance of power? Who then holds the balance of power? Is it the manufacturer because they have the products Is it the manufacturer because they have the products

available for market? available for market? Or the intermediary, who may decide they do not want to Or the intermediary, who may decide they do not want to

sell on the product to retail outlets? sell on the product to retail outlets? Or is it the retailers themselves, who will decide on the Or is it the retailers themselves, who will decide on the

most appropriate brand to sell to their customers?most appropriate brand to sell to their customers?

The balance of power within the The balance of power within the distribution channeldistribution channel

Channel cooperation is critical, and channel members need to Channel cooperation is critical, and channel members need to be united.be united.

They should share information, agree to be directed to the They should share information, agree to be directed to the same target markets, and together maximize efficiency.same target markets, and together maximize efficiency.

Often a channel leader will be identified to enable a co-Often a channel leader will be identified to enable a co-ordinated effort of all parties in the marketing channel.ordinated effort of all parties in the marketing channel.

To become a leader, the channel member must want to direct To become a leader, the channel member must want to direct and influence the channel’s overall performance. To do so, the and influence the channel’s overall performance. To do so, the leader should have significant power and driving force in order leader should have significant power and driving force in order to succeed.to succeed.

To gain the power in the relationship, the organization will likely To gain the power in the relationship, the organization will likely to be of significant size, with major resources. to be of significant size, with major resources.

It must have the respect of the other channel members. It must have the respect of the other channel members.

It must be able to punish or reward other channel members It must be able to punish or reward other channel members effectively. effectively.

Channel conflictChannel conflictAn additional problem for many suppliers is An additional problem for many suppliers is channel conflict,channel conflict, especially for premium and especially for premium and high-priced products and services. high-priced products and services. Conflicts can arise Conflicts can arise verticallyvertically, that is between , that is between sequential memberssequential members in a distribution network in a distribution network such as agents and distributor over such matters such as agents and distributor over such matters as carrying a particular range or price increases. as carrying a particular range or price increases. Horizontal conflictsHorizontal conflicts may arise between members may arise between members of a channel such as between of a channel such as between agents or between agents or between distributorsdistributors where competition may be deemed to where competition may be deemed to be unfair. be unfair. Within any channel there are often collisions of Within any channel there are often collisions of interests given all channel members naturally interests given all channel members naturally seek to maximize their profits and resources. seek to maximize their profits and resources. However, one particular area has seen a However, one particular area has seen a significant amount of channel conflict in recent significant amount of channel conflict in recent years: years: grey marketing. grey marketing.

Grey marketingGrey marketing Grey marketingGrey marketing occurs when distributors purchase goods in occurs when distributors purchase goods in one market, either from an authorized dealer or directly from one market, either from an authorized dealer or directly from the manufacturer, and resell the same goods in another the manufacturer, and resell the same goods in another market at a higher price.market at a higher price.They They undercut the pricesundercut the prices of the authorized dealers in a of the authorized dealers in a market and still make a healthy profit. Such activity is not market and still make a healthy profit. Such activity is not necessarily illegal, but can fall foul of licence agreements or necessarily illegal, but can fall foul of licence agreements or be counter to trade regulations. be counter to trade regulations.

For example, Tesco lost a dispute with Levi's to sell jeans sourced in For example, Tesco lost a dispute with Levi's to sell jeans sourced in the grey marker in its supermarkets.the grey marker in its supermarkets.

Companies that find their goods being distributed by grey Companies that find their goods being distributed by grey marketers face a mix of problems aside from lost profits.marketers face a mix of problems aside from lost profits.For a start, price discounting can affect their image and For a start, price discounting can affect their image and relationships with authorized dealers can become strained relationships with authorized dealers can become strained as they watch their markets being eroded.as they watch their markets being eroded.

Term is used to describe the management of Term is used to describe the management of every part of the distribution process is every part of the distribution process is extremely important to ensuring that products extremely important to ensuring that products are moved from manufacturer to the point of are moved from manufacturer to the point of sale efficiently and effectively.sale efficiently and effectively.Elements of consideration:Elements of consideration: Cost involvedCost involved Methods of transport – road, rail, plane, shipping, Methods of transport – road, rail, plane, shipping,

internetinternet Routes usedRoutes used Stock, storage and stock controlStock, storage and stock control Protection and delivery of stockProtection and delivery of stock Timing Timing – the key element (JIT (Just in time) – the key element (JIT (Just in time)

managementmanagement Evaluating the effectiveness of methods of distribution Evaluating the effectiveness of methods of distribution

and being aware of other alternativesand being aware of other alternatives

Physical distribution management (PDM)

Customer servicesCustomer services

Order processingOrder processing

Materials handlingMaterials handling

WarehousingWarehousing

Stock/inventory managementStock/inventory management

Transportation Transportation

The key success factors of PDM The key success factors of PDM include all elements of marketing mix:include all elements of marketing mix:

Product characteristicsProduct characteristics

PackagingPackaging

PricingPricing

Promotional campaignsPromotional campaigns

““Just in time” (JIT) conceptJust in time” (JIT) conceptTiming is a critical element of PDM, as many companies work on the Timing is a critical element of PDM, as many companies work on the delivery of materials and components on a delivery of materials and components on a Just in Time Just in Time basis (JIT). basis (JIT). It means that the manufacturer of products, or the supplier of raw It means that the manufacturer of products, or the supplier of raw materials, must deliver the necessary materials or components as and materials, must deliver the necessary materials or components as and when required. when required. For example, a window manufacturer, who makes windows for office For example, a window manufacturer, who makes windows for office buildings, will be making windows to order and will be required to buildings, will be making windows to order and will be required to deliver them at certain periodic times in the construction of the deliver them at certain periodic times in the construction of the building. building. The concept of JIT was developed to encourage maximized efficiency of The concept of JIT was developed to encourage maximized efficiency of manufacturing. manufacturing. Both save significant amounts of money, which means that the cost Both save significant amounts of money, which means that the cost savings can be passed on to the customer, making products cheaper savings can be passed on to the customer, making products cheaper to purchase.to purchase.

Channel choice considerations

1. Target market coverage 2. Buyer requirements 3. Profitability

a. Intensive distribution a. Information a. Total revenue

b. Selective distribution b. Convenience b. Total costs

c. Exclusive distribution c. Variety

d. Attendant services

Channel choice considerations

1. Target market coverage 2. Buyer requirements 3. Profitability

a. Intensive distribution a. Information a. Total revenue

b. Selective distribution b. Convenience b. Total costs

c. Exclusive distribution c. Variety

d. Attendant services

Environmental

factors

Environmental

factorsConsumer

factorsConsumer

factorsProductfactors

Productfactors

Companyfactors

Companyfactors

Push and pull strategiesPush and pull strategies

Push strategyPush strategyThe way in which The way in which products make their way products make their way to customers is a critical to customers is a critical consideration to consideration to marketers marketers

TheThe push element relates push element relates to distribution and how to distribution and how personal selling links the personal selling links the supplier to the customer, supplier to the customer, pushing the product out to pushing the product out to the market.the market.

Pull strategyPull strategyOn the other hand, the pull On the other hand, the pull strategy is very heavily strategy is very heavily reliant on advertising, reliant on advertising, packaging and sales packaging and sales promotions directly aimed promotions directly aimed at the consumer, at the consumer, effectively pulling them or effectively pulling them or attracting them to the attracting them to the product, encouraging them product, encouraging them to purchase and forge a to purchase and forge a lasting relationship.lasting relationship.

Pull strategy: examplesPull strategy: examplesThe huge growth in Internet marketing The huge growth in Internet marketing and direct marketing has really speeded and direct marketing has really speeded this process up with promotional this process up with promotional incentives.incentives.For example, Marks and Spencer (M&S) For example, Marks and Spencer (M&S) are now giving discount vouchers to are now giving discount vouchers to M&S store card holders to encourage M&S store card holders to encourage them to make additional purchases. them to make additional purchases. Next Directory has introduced a variety Next Directory has introduced a variety of offers including free delivery or 20 per of offers including free delivery or 20 per cent off on orders over £100. cent off on orders over £100.

Key factors influencing Key factors influencing push strategiespush strategies

Key factors influencing Key factors influencing pull strategiespull strategies

Level of economic and Level of economic and financial stabilityfinancial stabilityNeed for economies of Need for economies of scalescaleMature or saturated Mature or saturated marketsmarketsConsumer credit restrictionsConsumer credit restrictionsPolitical instabilityPolitical instabilityIntense competitionIntense competitionHigh operation costsHigh operation costsIndication of lowIndication of low market market growgrow

Level of economic and Level of economic and financial stabilityfinancial stabilityInnovative cultureInnovative cultureUnderdeveloped retail Underdeveloped retail infrastructure for the infrastructure for the productsproductsHigh investment potentialHigh investment potentialHigh levels of market High levels of market growthgrowthSocial stabilitySocial stabilityPolitical stabilityPolitical stability

ManufacturerManufacturer

WholesalerWholesaler

Retailer

ConsumerConsumer

Flow ofpromotion;mainlypersonalsel l ingdirected tointermediaries

Flow ofdemand

stimulation

ManufacturerManufacturer

WholesalerWholesaler

RetailerRetailer

ConsumerConsumer

Flow ofpromotion;mainly advertisingdirected toconsumers

Flow ofdemand

stimulation

A. Push strategy B. Pull strategy

Expansion of # of computersExpansion of # of computers

On-line customer purchasesOn-line customer purchases

Strategic levelStrategic level Operational levelOperational level

Improved corporate imageImproved corporate image

Improved customer serviceImproved customer service

Increased visibilityIncreased visibility

New market growth New market growth opportunitiesopportunities

Lower overall business costsLower overall business costs

Speed of transactions increasedSpeed of transactions increasedManagement of information Management of information improvedimprovedIncreased service levels of Increased service levels of customerscustomersRemoval of time constraintsRemoval of time constraintsRemoval of distance constraintsRemoval of distance constraintsAbility to complete transactions Ability to complete transactions electronicallyelectronicallyAccess to full competitive arenaAccess to full competitive arenaOpportunities for new revenuesOpportunities for new revenuesCost-effectivenessCost-effectivenessMore effective/closer More effective/closer relationships with business relationships with business partnerspartnersImproved understanding of Improved understanding of customer requirementscustomer requirements

Key performance and evaluation measures include:Key performance and evaluation measures include: Regular reviewRegular review a forum for problem review and solutiona forum for problem review and solution Monthly, quarterly and year sales data analysisMonthly, quarterly and year sales data analysis Average stock levelsAverage stock levels Lead and delivery timesLead and delivery times Zero defects Zero defects Customer service complaintsCustomer service complaints Marketing support – achieving marketing objectives, level of Marketing support – achieving marketing objectives, level of

marketing activity, sales promotions, distributor incentivesmarketing activity, sales promotions, distributor incentives Spot-check of distributions further down the supply chainSpot-check of distributions further down the supply chain Annual performance auditAnnual performance audit

# of leads# of leads

Increased salesIncreased sales

Customer retentionCustomer retention

Increased market shareIncreased market share

Brand enhancement and loyaltyBrand enhancement and loyalty

Customer service Customer service

Basic marketing channel functionsBasic marketing channel functions must be must be performed around the world, but performed around the world, but within the within the context ofcontext of the traditions, customs, geography, the traditions, customs, geography, and the economic history of the individual and the economic history of the individual countries and societies.countries and societies.

Understanding the marketing channels in Understanding the marketing channels in global markets is often a global markets is often a prerequisite to prerequisite to successful marketingsuccessful marketing..

Thank you for Thank you for attention.attention.