1. Distribution and Channel Management
Product
Price
Customer
Distribution
(Place)
Promotion
Distribution: The activities that make products available
to customers when and where they want to purchase them

2. Channel-Selection Decision
Who are potential customers? • Where do they buy? • When do they buy?
How do they buy? • What do they buy?
50% are men
15% buy with iPhone
ale
S
Most male buyers are
single with no children
USA
100% of sales are domestic
25% buy instore
39% use laptops
50% use desktops
40% women buy online

3. Distribution / Channel Management
is Important Because:
•
•
•
It affects sales — if the product is not available it can’t be sold
It affects profits — distribution can contribute up to 50 percent
of the final selling price of some goods
It influences customer satisfaction
The Marketing Channel Creates the Utility of:
•
•
•
•
time = when
place = where
possession = access
information = communication

4. Marketing Channel: The group of individuals and organizations that direct
the flow of products from producers (business) to customers – B2C
1
2
3
4
5

5. The Channel can have many Intermediaries (B2C)
A.)
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B.)
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6. And International Distribution Channels Can
Include More as Exporters and Importers

7. Business to Business Marketing Channels (B2B)
E.)
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8. Marketing Channel Design
Indirect Distribution
Uses intermediaries to
reach the target market
•
•
•
•
Type
Location
Density
Channel Levels
Direct Distribution
vs
Reaches the target
market directly
• Uses its own
sales force or
distribution outlets
• Uses the Internet

9. Marketing Channel Design
Indirect Distribution is considered when:
•
•
•
Intermediaries can perform distribution functions more
efficiently and at a lower cost
The target market is hard to reach directly
The business does not have the resources to perform the
distribution function
3
2
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10. Marketing Channel Design
Direct Distribution is considered when:
• The target market is easily identifiable
• A knowledgeable and personal sales-force is a key ingredient
• The business has a wide variety of products available for the
target market
• Sufficient resources are available
• Intermediaries are not available for reaching the target market
• Intermediaries do not possess the capacity to service the
requirements of the target market
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11. Marketing Channel Design
Internet Marketing Channels:
•
•
•
•
•
•
•
•
•
•
•
SEO (Search Engine Optimization)
PPC (Pay Per Click Campaigns)
Social Media Marketing
Affiliate Marketing
Shopping Channels (ie. Google Product)
Mobile Marketing
Video Marketing
eDM (email Direct Marketing)
Online PR / Article Content Marketing
Display Advertising
Directory / Review Sites (ie. Yelp)

12. Marketing Channel Design
Multiple Marketing Channels:
Simultaneously using different marketing channels to reach diverse target
markets.
Oakley Retail / Outlet Stores
Oakley Website
Specialty Retailers
Online Retailers
Mail Order Catalogs
Retail Stores
SGHI Website

13. Putting together all the Intermediaries
in the Marketing Channel Creates
the Supply Chain
Key Tasks in Supply Chain Management
•
•
•
•
planning = coordination the partnerships to meet customer needs
sourcing = purchasing the goods and services to support the channel
delivering = moving the product through the channel
fortifying = the relationship with the customer

14. Selecting the Channel Design
Nature of the product:
•
•
•
•
Technical / complex (Specialist and Agents)
Customized and specific (Direct Distribution)
Less expensive / standardized (Longer Channels)
Brand image exclusivity (Limited Availability)
3
2
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15. Selecting the Channel Design
Nature of the business:
• It’s size and scope – e.g. can it afford an in-house salesforce
• Does it have an established distribution network
• How much control does it want over distribution
3
2
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16. Selecting the Channel Design
The Competition:
• What distribution channels and intermediaries do they use?
• Is it an international product?
• What’s the geographical spread?
3
2
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17. Selecting the Channel Design
Environmental Forces:
•
•
•
•
Adverse economic conditions in play
New technologies available e.g. software delivery
New labor or environmental laws
Taxes, tariffs, and trade agreements
3
2
1
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18. Selecting the Channel Design
Characteristics of the Intermediaries:
•
•
•
•
•
Market Coverage
Sales Forecast
Costs
Resources
Profitability
•
•
•
•
•
Control
Motivation
Reputation
Competition
Contracts
3
2
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19. Selecting the Channel Design
Market Coverage:
•
•
•
•
Does the profile of customers match the target market profile?
Are the number of potential customers big enough to meet the
required distribution penetration?
Is the sales force big enough to cover the territory?
Is the existing delivery fleet and warehouse facilities adequate?
3
2
1
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20. Selecting the Channel Design
Sales Forecast:
• What’s their sales forecast?
• Are they realistic?
• What are they willing to commit to in inventory?
• Do they have a marketing budget?
Some manufacturers even ask their distributors for a marketing plan
showing how they intend to market the supplier’s products.
3
2
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21. Selecting the Channel Design
Costs:
• What will the relationship cost in terms of discounts,
commissions, stock investment and marketing?
3
2
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22. Selecting the Channel Design
Resources:
• Does the target market require anything special such as technical
assistance, installation, quick deliveries, instant availability?
• If so can the distributor provide it?
3
2
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23. Selecting the Channel Design
Profitability:
• How much profit will they generate for the manufacturer?
3
2
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24. Selecting the Channel Design
Control:
•
•
•
•
Do they have a reporting system in place?
How do they deal with problems?
How often are review meetings scheduled?
Can you influence the way they present your products?
3
2
1
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fac
Wh
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sal
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4
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25. Selecting the Channel Design
Motivation:
• Does the intermediary convey a sense of excitement and
enthusiasm about the product?
• What their sales force reaction to the product?
3
2
1
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fac
Wh
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sal
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4
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26. Selecting the Channel Design
Reputation:
• Does the intermediary have a solid track record of successes?
• How long have they been in business?
• Is their business dependent on one key-player, or is team based?
3
2
1
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27. Selecting the Channel Design
Competition:
• Does the intermediary distribute any competitor’s products?
3
2
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28. Selecting the Channel Design
Contracts:
• Does the intermediary demand exclusivity?
• Is the contract binding or flexible based on performance?
3
2
1
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29. Intensity of Market Coverage
Intensive
Selective
Convenience
products such as
Coke, Doritos
Consumer
products ie.
laptops, televisions
Available in many
retail locations
Available in some
retail locations
Exclusive
Specialty products
ie., Rolex watches
Available in few
retail locations

30. Supply Chain Management
Effective Distribution
Occurs when a limited number of retail locations account for a significant
percentage of the market. For example, the product is distributed 30% of
available retail outlets, but those retailers account for 80% of the market.

31. Supply Chain Management
Profitability
• Margins = (Revenues - Channel Costs)
Channel costs are:
Distribution costs / Advertising costs / Selling Costs

32. Supply Chain Management
Channel Conflict
Occurs when one channel member believes another channel member is
engaged in behavior that is preventing them from achieving their goals.
Sources of Channel Conflict
Channel member bypasses another member and sells or buys direct
Profit margins are uneven between channel members
Manufacturer believes channel member is not providing attention to its product
Manufacturer engages in dual distribution

33. Supply Chain Management
Channel Power
The channel leader may be any member of the supply chain.
Referred to as the Channel Captain, they are the dominant member
that takes on the role of coordinating, directing, and influencing the
other member’s goal achievements
Forms of Power
Ability to reward or coerce other members
Experts within the market
Legitimate right to dictate behavior

34. Supply Chain Management
Strategic Relationships
Two common strategies are Vertical Marketing Systems
and Horizontal Marketing Systems

35. Supply Chain Management
Vertical Marketing Systems
Manufacturers and intermediaries working closely together
They plan production, delivery and promotional schedules.
Share resources when possible.
Managed by the Channel Captain
Example: Luxottica
The manufacturer Luxottica purchased the brand “Oakley” and the
retail presence of “The Sunglass Hut” to deliver its products.

36. Supply Chain Management
Horizontal Marketing Systems
Occurs when two organizations on the same channel level cooperate
(e.g. two wholesalers or two retailers)
They share their expertise and channels
Decreases time to market entry
Example: Apple / Starbucks partnership
The purpose was for Starbucks customers to wirelessly browse,
search, preview, and purchase music from iTunes.

37. Legal Issues in Chain Management
Dual Distribution
The use two or more marketing channels to distributed the
same products to the same target market.
Considered illegal when the manufacturer uses company-owned outlets
to force independent retailers out of business by undercutting their prices.

38. Legal Issues in Chain Management
Restricted Sales Territory
Favored by intermediaries to protect a sales territory.
Conflicting rulings by the courts regarding the restraint of trade.

39. Legal Issues in Chain Management
Tying Agreements
An agreement where the manufacturer requires intermediaries to purchase
other products in addition to the most popular items.
The related practice of full-line forcing, where the manufacturer requires
the intermediary to carry the entire line. Deemed okay by the courts if
they are able to carry competing products

40. Legal Issues in Chain Management
Exclusivity
An agreement where the manufacturer forbids intermediaries
to carry competing products.
Deemed illegal if:
• If the deal blocks as much as 10% of market share
• The sales revenue is deemed “sizable”
• The manufacturer is larger and intimidating to the intermediary

41. Legal Issues in Chain Management
Refusal to Deal
The courts have held that manufacturers have the right to choose channel
members with which they will do business.
However, within existing channels manufacturers may not legally refuse
to deal with intermediaries merely because they resist policies that
are anticompetitive or restrain trade.