Distribution

Why Distribution
Principle of minimum transactions Principle of assortment and sorting Principle of proximity Principle of Massed reserves Principle of Stability

Economic Utility
Form The quantity/mode of the product most preferred by the customer

Time

The availability of the product when the customer needs it. The availability of the product where it is needed. In B2B, it involves rapid/frequent product delivery. The process by which the customer obtains ownership or the right to use a product/service.

Place

Possession

Marketing Channel Flows from Customer to Supplier

Eight Generic Flows

1. Physical Possession 2. Ownership 3. Promotion 4. Negotiation 5. Financing 6. Risking 7. Ordering 8. Payment

Provide fast delivery Provide segment-base product assortment Provide local credit

Why Do Some End Users Prefer Distributors?

Distributors Can

Provide product information

Assist in buying decisions

Anticipate needs

Buy and hold inventory

Combine manufacturers outputs

Why Do Some Suppliers Prefer Distributors? Distributors Can

Share credit risk

Share selling risk

Forecast market needs

Provide market information

User Training

Different target markets have different expectations of the total offering

Think about the different training needs of corporate customers vs. consumers

Product Information
Dealers are likely to emphasize what an offering can accomplish, rather than how it can accomplish it

Product Support and Delivery

Institutional buyers expect more than consumers.

Financing
Institutional buyers are likely to expect suppliers/distributors to arrange credit.

The Physical Distribution Concept Focuses on Three Elements

Inventory Management Warehousing Transportation

It is a balancing of cost and service.

Inventory Management
Often the largest logistics cost. Inventory management tools are important for reducing logistics costs. While lower inventory levels result in lower costs, lower inventory levels may result in more frequent and costly transportation.

Transportation
Involves the choice of water, air, truck, rail, or pipeline. Slower transportation methods usually have lower costs, but imply larger safety stocks and longer lead times.

Warehousing
As inventory increases, so do warehousing costs. Lowering inventory levels and warehousing costs can lead to stockouts. Channels that focus on rapid movement of goods (as opposed to storage of large quantities) are likely to utilize distribution centers.

Channel Design Decisions

Intensity of distribution issues:
Through marketing intermediaries or a direct channel? 1) Kinds of channel partners 2) Structure of channel flows 3) How competitive advantage can be built One channel, dual distribution or multidistribution?

Product requires local stock.

Product is near the end of its product life cycle.

Small product line, unable to support a direct sales force.

Product is somewhat generic.

Factors Favoring the Use of Distributor Channels

Customers are widely dispersed.

Local repackaging, sizing, or fabrication is required

Product has low unit value.

Many small buyers.

Product is highly customized.

Significant missionary selling is required.

Product is new or innovative.

Factors not Favoring the use of Distributor Channels

Manufacturer requires control over product application.

Product is technically sophisticated.

Geographic concentration of large buyers.

Bases of Power in Marketing Channels

Soft Bases of Power Hard Bases of Power

Expertise

Information

Reward

Coercion

Identification

Legitimate

What is Retailing?
It is that business that is engaged in the sale of goods and services to consumers for their personal, family or household use. It is the final link in the distribution process.

Functions of a Retailer
Sorting Bulk Breaking Reach Information collection Payment Services Promotion

The Eight Ways To Win In Retailing The Pentagon & The Triangle
PLACE

COMMUNICATION

SYSTEM Systems

PRODUCT

Logistics LOGISTICS PEOPLE

Suppliers SUPPLIERS VALUE

Pentagon Concepts 8 Ways 2 Win

Size

Place

Location

Layout & design

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Pentagon Concepts 8 Ways 2 Win

Style & Fashion

Product
Assortment

Intensity

Pentagon Concepts 8 Ways 2 Win

Quality

Value
Price

Pentagon Concepts 8 Ways 2 Win

People

Pentagon Concepts 8 Ways 2 Win

Communication

Triangle Concepts 8 Ways 2 Win

SYSTEMS
Provide the mechanisms for controlling flows and operations Essential for managing categories item by item, store by store, market by market.

LOGISTICS

SUPPLIERS
Physical movement of goods from vendors to storesA major frontier for improving asset management and reducing cost throughout the channels of distribution Partners in marketing and distribution Effectiveness of the relationships determine both the rate and cost of sale, and the ability to implement some of the key triangle activities

Pentagon and Triangle Cos..

The concept of trade off

Either tradeoff Price for the other four corners of the pentagon pentagon Co. or Tradeoff the other corners of the pentagon for price leadership and excel on the triangle

The Strategic Profit Model

Net Profit Margin

Asset Turnover

Financial Leverage

Return on Net worth

Other Performance Parameters

Quick Ratio Collection Period Current Ratio Gross Profit Profit per space

How to increase profits in Retailing

Out-Store Activities Operation Based

In-Store Activities Space Management and Displays

Measures for space performance

Sales per linear foot of shelf space Gross Profit per linear foot shelf space Return on inventory investment Direct product Profitability of an item

Applying Category Management