Chapter Twelve The Nature of Distribution Objectives b

Chapter Twelve The Nature of Distribution

Objectives b. Explain general purpose of distribution b. Show distribution system’s contributions b. Understand pervasive nature of distribution b. Describe channel intermediary functions b. Identify different channel of distribution configurations b. Introduce vertical marketing systems b. Describe aspects of channel relations b. Explore legal and ethical aspects of distribution channels

Distribution’s Function b. The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost. b. The “when and where” is the function of Distribution

Distribution P R O D U C E R DISTRIBUTION C O N S U M E R

Channel of Distribution b All intermediaries involved in the exchange process b Excludes pre-manufacturing (raw materials or component parts) b Facilitate movement of physical goods and title PRODUCER INTERMEDIARIES CONSUMER

Channel Functions Physical distribution Communication & transaction Facilitating

Physical Distribution Functions Accumulating bulk Creating assortments Breaking bulk Reducing transactions Transporting & storing

Communication & Transaction Functions Gather & Disseminate Information 9 3 1 2 3757 24 1 Buying & Selling Personal Selling Advertising Transfer of Ownership Sales Promotion

Facilitating Functions Extra Services Credit Services Risk Taking

Typical Channels of Distribution ANUFACTURER ONSUMER GENT ETAILER HOLESALER

Business-to-Business Channels Direct Wholesaler Agent

Business-to-Business Channel Trends Infomediaries & Vertical Exchange

Vertical Marketing Systems b. Corporate systems - total ownership b. Contractual - legal relationships b. Administered - strong leadership

Planning the Channel of Distribution b. Determining the structure b. Marketing mix strategy b. Organizational resources b. External environmental factors b. Market characteristics b. Consumer preferences and behavior b. The nature and availability of Intermediaries b. Other environmental factors

Intensive Distribution Producer Seeks to obtain maximum product exposure at the retail level Retailer Retailer Retailer Retailer

Selective Distribution Producer Product is sold in a limited number of outlets Retailer Retailer

Exclusive Distribution Producer Product is sold in only one outlet in a given area Retailer

Channel Relationships b. Cooperation b. Conflict b. Power b. Coercive b. Expert b. Legitimate

Other Distribution Management Issues b. Reverse distribution b. Ethical, Political, & Legal One Coca Cola Distributor Difficult OK One thousand retailers

Review b. Explain general purpose of distribution b. Show distribution system’s contributions b. Understand pervasive nature of distribution b. Describe channel intermediary functions b. Identify different channel of distribution configurations b. Introduce vertical marketing systems b. Describe aspects of channel relations b. Explore legal and ethical aspects of distribution channels