week 8- 11.08.04 distribution and retailing issues
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week 8- 11.08.04week 8- 11.08.04
Distribution and Retailing Distribution and Retailing IssuesIssues
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Nature of Distribution Channels:Why use marketing intermediaries?
Definition : A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
Greater Efficiency: Specialization (contact, experience, scale
opera) Number of Contacts match Supply and Demand by
transforming assortments
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Contact Efficiency
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Overcoming Discrepancies
Discrepancyof
Quantity
Discrepancyof
Quantity
Discrepancyof
Assortment
Discrepancyof
Assortment
The difference between the amount of product produced and the amount an end user wants to buy.
The difference between the amount of product produced and the amount an end user wants to buy.
The lack of all the items a customer needs to receive full satisfaction from a product or products.
The lack of all the items a customer needs to receive full satisfaction from a product or products.
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Overcoming Discrepancies
TemporalDiscrepancy
TemporalDiscrepancy
SpatialDiscrepancy
SpatialDiscrepancy
A situation that occurs when a product is produced but a
customer is not ready to buy it.
A situation that occurs when a product is produced but a
customer is not ready to buy it.
The difference between the location of a producer and the
location of widely scattered markets.
The difference between the location of a producer and the
location of widely scattered markets.
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Number of Channel Levels
Producer and Final Consumer in channelFlows between channel levels
Product - Ownership -Payment Information – Promotion
Direct Marketing ChannelCompany sells directly to consumers
Indirect Marketing ChannelsCompany sells through one or more
intermediaries
More levels increase number of contacts, less control & more complex
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Channels for Consumer Products
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents orBrokers
WholesalerWholesalerChannelChannel
RetailerRetailerChannelChannel
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerChannelChannel
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Hybrid Marketing Channel
Consumersegment 1Consumersegment 1
Businesssegment 1Businesssegment 1
Consumersegment 2Consumersegment 2
Businesssegment 2Businesssegment 2
RetailersRetailers
DealersDealersDistributorsDistributors
ProducerProducer
Catalogues, telephoneCatalogues, telephone
Sales forceSales force
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Channel Intermediaries
RetailersRetailersRetailersRetailers
Merchant Merchant WholesalersWholesalersMerchant Merchant
WholesalersWholesalers
Agents Agents andand
BrokersBrokers
Agents Agents andand
BrokersBrokers
Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods
Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods
Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods
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Conventional versus Vertical & Horizontal Marketing Channel
Vertical marketingVertical marketingsystemsystem
Manufacturer
Wholesaler
Retailer
Consumer Consumer
Retailer
Conventional marketingConventional marketingchannelchannel
Manufacturer
Wh
ole
sale
r
HorizontalHorizontal marketing marketingsystemsystem
Man1
Wholesaler
Retailer
Consumer
Man2
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Channel Behaviour
Channels are complex behavioural systems Interaction between people and companies Formal and informal All members interdependent Each member a specialist
Individual - Company - Channel goals
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Channel Behaviour:types of channel conflict
Horizontal ConflictBetween members at same channel level
Vertical ConflictBetween different levels in same channel
Keys to Overall PerformanceEach member’s role clear and specifiedStrong conflict management
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Channel Design Decisions
Analysing consumer service needs
Setting channel objectives
Identifying and Evaluating major alternatives Type of Intermediaries. Number of Intermediaries: Intensive, Exclusive and Selective
(mkt coverage, control, realationships…)
Responsibility of members: Price, conditions of sale, territ, services.
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Levels of Distribution Intensity
Intensity LevelIntensity LevelIntensity LevelIntensity Level ObjectiveObjectiveObjectiveObjective Number of Number of IntermediariesIntermediaries
Number of Number of IntermediariesIntermediaries
IntensiveIntensive
SelectiveSelective
ExclusiveExclusive
Achieve mass marketselling.
Convenience goods.
Achieve mass marketselling.
Convenience goods.
Work with selected intermediaries.
Shopping and some specialty goods.
Work with selected intermediaries.
Shopping and some specialty goods.
Work with singleintermediary. Specialty
goods and industrial equipment.
Work with singleintermediary. Specialty
goods and industrial equipment.
ManyMany
SeveralSeveral
OneOne
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Market Factors
Market FactorsMarket FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Market FactorsMarket FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Customer ProfilesCustomer Profiles
Consumer or IndustrialCustomer
Consumer or IndustrialCustomer
Size of MarketSize of Market
Geographic Location
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Product Factors
Product FactorsProduct FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Product FactorsProduct FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Product Complexity Product Complexity
Product PriceProduct Price
Product Life CycleProduct Life Cycle
Product DelicacyProduct Delicacy
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Producer Factors
Producer FactorsProducer FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Producer FactorsProducer FactorsThat Affect That Affect
ChannelChannelChoicesChoices
Producer Resources Producer Resources
Number of Product LinesNumber of Product Lines
Desire for Channel ControlDesire for Channel Control
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Channel Management:selecting channel members
What makes the best?Years in businessOther lines carriedGrowth and profitCooperation & reputationSales force size & qualityRetail customers, location
and growth potential
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Physical Distribution & Logistics Management
Major impact on:Customer satisfactionOperating costs
Handle - store - move products and servicesRight productRight customerRight place and time
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Electronic Data Interchange
Information technology that replaces paper
documents that accompany business
transactions.
On Linehttp://www.walmartstores.com
On Linehttp://www.walmartstores.com
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Criteria for RankingModes of Transportation
Relative Cost
TransitTime
Reliability
Capability
Accessibility
Traceability
HighestHighest LowestLowest
Air WaterPipeRailTruck
Water Rail Pipe Truck Air
Pipe Truck Rail Air Water
Water
Truck
Rail Truck Air Pipe
Rail Air Water Pipe
Air Truck Rail Water Pipe
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RETAILING
All activities in selling goods and services directly to final consumers for personal, non-business use.
Most via retail storesNon-store growing fast
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Retailing
Amount of service Product lines Relative prices Organizational
approach
Self-service retailers Customers are willing to
self-serve to save money Discount stores
Limited-service retailers Most department stores
Full-service retailers Salespeople assist
customers in every aspect of shopping experience
High-end department stores
Specialty stores
Retailers Are Retailers Are Classified By: Classified By:
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Retailing
Amount of service Product lines Relative prices Organizational
approach
Specialty stores Narrow product lines with
deep assortments Department stores (laundry,
household products). Wide variety of product lines
Supermarkets Convenience stores
Limited line Superstores
Food, nonfood, and services Category killers
Giant specialty stores
Retailers Are Retailers Are Classified By: Classified By:
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Retailing
Amount of service Product lines Relative prices Organizational
approach
Discount stores Low margins are offset by
high volume Off-price retailers
Independent off-price retailers
TJ Maxx, Marshall’s Factory outlets
Levi Strauss, Reebok Warehouse clubs
Sam’s Club, Costco
Retailers Are Retailers Are Classified By: Classified By:
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Retailing
Amount of service Product lines Relative prices Organizational approach
Corporate chain stores Commonly owned / controlled
Voluntary chains Wholesaler-sponsored groups
of independent retailers (IGA) Retailer cooperatives
Groups of independent retailers who buy in bulk (Associated Grocers)
Franchise organizations Based on something unique
Merchandising conglomerates Diversified retailing lines and
forms under central ownership(target)
Retailers Are Retailers Are Classified By: Classified By:
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Target Market and Positioning
Define target markets and Select positioning
Variety?Depth of assortment?Convenience?Low prices?
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Presentation of the Retail Store
Employee Type & DensityEmployee Type & Density
Merchandise Type & DensityMerchandise Type & Density
Fixture Type & DensityFixture Type & Density
SoundSound
OdorsOdors
Visual FactorsVisual Factors
Factors Factors inin
CreatingCreatingStore’sStore’s
Atmosphere Atmosphere
Factors Factors inin
CreatingCreatingStore’sStore’s
Atmosphere Atmosphere
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Factors to Consider in Site Selection
Economic growth potential
Economic growth potential
Area competitionArea competition
GeographyGeography
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Non-Store Retailing
Growing much faster than store retailing
a third of all sales by 2005Direct MarketingDirect SellingAutomatic Vending
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The Future of Retailing
New forms and shorter lifecycles
Non-store types growing
Growth of mega-retailers
Rising role of technology
Global expansionStores as “hangouts”