Distribution Management

Topics: Marketing, Pricing, Marketing plan Pages: 37 (7507 words) Published: March 14, 2011
Growing Importance of Marketing Channels:
1. Explosion of IT and E-commerce
2. Harder to gain sustainable competitive advantage through other P’s 3. Growing power of distributors (esp. retailers who act as gatekeepers of consumer markets – agents of consumers not producers) 4. Need to reduce distribution costs

MC Definition:
The external contactual organisation that management operates to achieve its distribution objectives (from view of mgmt. Definition will differ for each stakeholder)  
External – not part of firm.
Contactual organisation – those firms involved in negotiatory functions (buying, selling, transferring title) as a product moves from producer to ultimate user.  
Operates – implies management involvement in developing MC.  
Distribution objectives – MC exists as a means of reaching these.  
Distribution involves:
1. Channel strategy – broader, the entire process of setting up and operating the MC 2. Logistics management – narrower, providing product availability at time and place in MC

Flows in MCs:
·       Product flow                            physical movement of product (top down) ·       Negotiation flow              buying/selling functions (top down – 2 way for WS-R and R-C) ·       Ownership flow              movement of title (top down – 2 way for WS-R and R-C) ·       Information flow              encompasses all players ·       Promotion flow              including advertising, promotions etc involves all players.  

Why Use Intermediaries?
1. They are more specialised at distribution functions (therefore more efficient) 2. Contactual efficiency, wholesalers eliminate the need for direct contact with R/C, thus reducing the number of contacts needed. (See pg. 19)

MC structures: see pg. 20
Ancillary Structure
The group of institutions (facilitating agents) that assists channel members in performing distribution tasks (Fed ex, transport companies). Their role is to provide services to channel members after the basic channel decisions have been made by mgmt.   

Producers often lack the expertise or economies (of scale/scope) to deliver products directly to the end user. Therefore intermediaries are used.  
Independent businesses that assist producers in the performance of negotionary functions and other distribution tasks.  
1. Wholesalers – engage is selling goods for resale.

a. Merchant wholesalers buy large quantities (taking title) and then resell products in smaller quantities to retailers.

Distribution tasks for Producers:                                              Distribution tasks for Customers: - Provide market coverage                                                  - Assuring product availability - Making sales contacts                                                                        - Customer service  - Holding inventory                                                                        - Credit and financial assistance - Processing orders                                                                        - Offering assortment convenience - Gathering market info                                                                        - Breaking bulk - Offering customer support                                                          - Advice and tech support  

a. Agents, Brokers and Commission merchants don’t take title to the goods, but are actively involved in negotiatory functions (buying/selling) while acting of behalf of their clients.

a. Manufacturers’ sales branches and offices are owned and operated by producers but physically separated from manufacturing plants.

2. Retailers – engage in selling products for personal...
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