INTERMEDIARIES IN CHANNEL MANAGEMENT

DISTRIBUTION

The “place ” element of the marketing mix.

 Distribution makes products available in adequate quantities, in

convenient locations, and at times when customers want to buy them.
 TO DO

Channel Intermediaries
Types of distribution channel
Channel strategy
Channel management
Physical distribution considerations
Ethical considerations
Summary
 CHANNEL INTERMEDIARIES

P C

Functions:
P C
Breaking bulk
P C
Reduce number of transactions and create
bulk for transport
P C
Accessibility to markets

Provide specialist P I C

support service
P C
 TYPES OF DISTRIBUTION CHANNELS

Consumer
Goods P A W R C

Industrial A D IC
Goods
P

Services SP A C

IC

Channel Strategy Decisions
Channel
selection
Market factors
(buyer behavior,
geographical concentration of customers)
Producer factors ( available
resources product mix offered)
Product factors (product size
, bulky or difficult to handle?)
Competitive factors
(competitor’s control over traditional
distribution channels)
CHANNEL STRATEGY
Distribution Intensity
Intensive distribution –
use of all available markets (e.g.
cigarettes)
 Selective distribution –
use of a limited number of outlets
in a geographical area (e.g. computers)
 Exclusive distribution –
only one intermediary is used
in a geographic area (e.g. cars sold
by only one dealer in each town)
Channel Integration
Conventional marketing
channels – independence of channel
members, little or no control (e.g. pricing,
brand image)
 Franchise operation – legal
contract in which producer and channel
intermediaries agree each a member’s
rights and obligations
 Channel ownership – by
purchasing retail outlets, producers
control their purchasing, production and
marketing activities
e.g. International Franchising

Benetton operates out of

5000 stores in 120
countries.
Each Benetton
Franchisee pays a one-off
lump sum – so called
‘key money’ – in return
benefits
from brand name.
 CHANNEL MANAGEMENT

Identification of candidates(trade sources, reseller enquiries

Selection Development of selection criteria
{ knowledge (market, product, customer); market coverage; quality and size of
sales force}

Motivate channel members to

(act as distributors; Allocate adequate commitment and ;resources to producer’s
Motivation lines) Possible motivators( financial rewards; Territorial exclusivity
Development of strong work relationship

A need to train channel members depends on their internal

Competences.
Training Can take on two forms:
(product knowledge/ Company knowledge)

Identification of (shortfalls in distributor skills and Competencies; lack of

distributors motivation)
Evaluation Important for (retention, training and motivation decisions)
Criteria include (sales volume and value; Profitability, Level of stocks, Quality and
position of display…)

Sources of channel conflict(differences in goals; Differences in desired

Managing product line)
Conflict  Avoiding and resolving conflict(training in conflict
handling;Developing a partnership approach, Channel ownership, coercion)
 PHYSICAL DISTRIBUTION SYSTEM

• Customer service –
What level of customer service
should be provided?

• Order processing – How

should the orders be handled?

• Inventory Control – How

much inventory should be held?
DHL. No one knows Asia like we do
• Warehousing – Where should
the inventory be located? How
many warehouses should be used?

• Transportation – How will

products be transported?

• Materials handling – How

will products be handled during
transportation?
DHL. No one knows Asia like we do
DHL. No one knows Asia like we do
 ETHICAL CONSIDERATIONS

Slotting allowance:

power shift from manufacturer to retailers, retailers charge „rent” for

shelf space
Grey markets:
product is sold through an unauthorized distribution channel,
undercutting of prices (e.g. car re-importing)
Exclusive dealing:
manufacturer prohibits distributors that markets its products from selling
the products of competing suppliers
Restrictions in supply:
small suppliers are concerned that the power of large manufacturers
and retailers will mean they are squeezed out of the supply chain
Fair trading:
producers situated in countries of the developing world may suffer from economic
hardship (e.g. Café direct)
THANK YOU