Channels of Distribution and Logistics

Topics: Marketing, Distribution, Marketing management Pages: 66 (18757 words) Published: April 17, 2013
Chapter 6

Channels of distribution and logistics

By the end of this chapter you will:
n n n n

comprehend key elements and decisions in distribution channel design be able to evaluate different configurations of channel structure be familiar with recent trends and developments in channels of distribution appreciate the importance of managing the physical flows of products, services and information into, through, and out of the organization to its customers n grasp the meaning and scope of physical distribution and logistics management n be aware of developments and trends in production and manufacturing, particularly the growth of ‘lean manufacturing’ and implications for logistics n recognize the role of Information Technology and marketing in logistics

Channels of distribution and logistics


This chapter deals with the ‘place’ element of marketing strategy (i.e. ‘placement’ of goods and services from their respective providers into the hands of customers). Before we discuss the structure of marketing channels, followed by logistics, it is useful that we look at their emergence and the functions that channels perform.

The word ‘channel’ has its origins in the word for canal, which for marketing can be interpreted as a route taken by products as they flow from production to points of intermediate and final use. Marketing is a key factor in a continuous cycle that begins and ends with consumer wants. It is the role of the marketer to interpret consumer wants and combine them with empirical market data such as location of consumers, their numbers and preferences, to establish the starting point for manufacture. On completion of manufacture, the finished product is moved to the consumer and the cycle is complete when he or she obtains satisfaction resulting from product ownership.

Despite the growth of direct marketing (to be discussed in Chapter 10) in today’s complex economy, most producers still do not sell directly to final users. Between them and consumers lie marketing intermediaries. A distribution channel bridges the gap between user and producer, and so plays an integral role in the operation of the marketing concept. Relationships among channel members are influenced by the structure of the channel. Marketing channels can be described as sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

In addition to marketing channels satisfying demand by supplying goods and services in the right location, at the correct quantity and price, they should stimulate demand through promotional activities of retailers, manufacturers and wholesalers. In this way, a marketing channel should be


Channels of distribution and logistics

viewed not just as a demand satisfier, but as an orchestrated network that creates value for consumers through the generation of form, possession, time and place utilities. We start by examining ways in which distribution systems are designed and how channel policy is determined, depending on the degree of market exposure sought by a company.

The starting point for marketing channel design is the end consumer. Although an understanding of consumer purchasing patterns is essential, there are other factors that influence channel organization:

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There may be a restriction in choice of outlets available to suppliers, e.g. retail outlets may already have been secured by established manufacturers. Channel design will be influenced by the number, size and geographic concentration of consumers. If customers are few in number, but large and geographically concentrated, it may be that direct channels will be suitable. If customers are dispersed, the mechanics of direct channels become increasingly difficult and there will be a need for a large number...
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