2. Distribution Channels
• A set of interdependent organizations
(intermediaries) involved in the process of
making a product or service available for
use or consumption.
• Channel decisions
– affect other marketing decisions
– involve long-term commitments
3. Role of Intermediaries
Role of Intermediaries
•Greater efficiency in making goods
available to target markets.
•Intermediaries provide
– Contacts
– Experience
– Specialization
– Scale of operation
•Match supply and demand.
6. Channel Behavior and Conflict
Channel Behavior and Conflict
• The channel will be most effective when:
– each member is assigned tasks it can do best.
– all members cooperate to attain overall channel goals and
satisfy the target market.
• Focus on individual goals leads to conflict
– Horizontal Conflict occurs among firms at the same level
of the channel.
– Vertical Conflict occurs between different levels of the
same channel.
7. Vertical Marketing Systems
Vertical Marketing Systems
• Corporate
– common ownership at different channel levels
• Contractual
– contractual agreement among channel members
• Administered
– leadership assumed by dominant members
8. Innovations in Marketing Systems
Innovations in Marketing Systems
Horizontal Marketing
Horizontal Marketing
System
System
Two or more
companies at one
channel level join
together to increase
coverage
Example:Banks in
Grocery Stores
Hybrid Marketing
Hybrid Marketing
System
System
A single firm sets up
two or more
marketing channels
to increase coverage
Example:Retailers,
Catalogs, and Sales
Force
9. Channel Design Decisions
Channel Design Decisions
Analyzing Consumer Service Needs
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Setting Channel Objectives & Constraints
Identifying Major Alternatives
Identifying Major Alternatives
Intensive
Intensive
Distribution
Distribution
Selective
Selective
Distribution
Distribution
Exclusive
Exclusive
Distribution
Distribution
Evaluating the Major Alternatives
Evaluating the Major Alternatives
11. Logistics
Logistics
• Involves entire supply chain
• Increasing importance of logistics
– effective logistics is becoming a key to winning and
keeping customers.
– logistics is a major cost element for most companies.
– the explosion in product variety has created a need for
improved logistics management.
– information technology has created opportunities for
major gains in distribution efficiency.
12. Goals of Logistics system
Goals of Logistics system
• Provide a Targeted Level of Customer Service at
the Least Cost.
• Maximize Profits, Not Sales.
Higher Distribution Costs/
Higher Customer Service Levels
Lower Distribution Costs/
Lower Customer Service Levels
13. Logistics Functions
Logistics Functions
• Order Processing
• Warehousing
• Inventory Management
• Transportation
• Design system to minimize costs of attaining
objectives
14. Transportation Modes
Transportation Modes
Rail
Rail
Nation’s largest carrier, cost-effective
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
for shipping bulk products, piggyback
Truck
Truck
Flexible in routing & time schedules, efficient
Flexible in routing & time schedules, efficient
for short-hauls of high value goods
for short-hauls of high value goods
Water
Water
Low cost for shipping bulky, low-value
Low cost for shipping bulky, low-value
goods, slowest form
goods, slowest form
Pipeline
Pipeline
Ship petroleum, natural gas, and chemicals
Ship petroleum, natural gas, and chemicals
from sources to markets
from sources to markets
Air
Air
High cost, ideal when speed is needed or to
High cost, ideal when speed is needed or to
ship high-value, low-bulk items
ship high-value, low-bulk items
15. Integrated Logistics Management
Integrated Logistics Management
Concept Recognizes that Providing Better Customer
Service and Trimming Distribution Costs Requires
Teamwork, Both Inside the Company and Among All
Teamwork
the Marketing Channel Organizations.
Cross-Functional Teamwork inside
Cross-Functional Teamwork inside
the Company
the Company
Building Channel Partnerships
Building Channel Partnerships
Third-Party Logistics
Third-Party Logistics
