Marketing Mix, Place of Distribution

1. Distribution Channels
Marketing Management
MANUEL OCAMPO JR. MBA - PCU

2. OLD WAY NEW WAY
Manufacturer as channel
captain
Retail power increasing
Distribution arrangements
fixed
Distribution arrangements
variable
Conflict models dominate Cooperative models ascendant
Push inventory systems
(loading intermediaries
common)
Pull inventory (efficient
consumer response systems)
Direct marketing rare Direct marketing common
Telecommunications
infrequent
Telecommunications widely
used

3. OLD WAY NEW WAY
Overnight distribution
unavailable
Overnight distribution
increasing
Fast delivery rare Delivery speed highly valued
Information technology
poorly used
Information technology
essential
Distribution – local / regional
Distribution –
regional/national/global
Slow progression: exclusive
→selective → intensive
Fast progression: exclusive
→selective → intensive
Customers patient Customers impatient

4. are sets of independent organizations involved in the
process of making a product or service available for
use or consumption. They are the set of pathways a
product or service follows after production,
culminating in purchase and use by the final end-user.
Distribution Channels

5. Why do business need
to use Distribution
Channels?
Because selling through
wholesalers and retailers
usually is much more
efficient and cost effective
than direct sales

12. CONTACT
Finding and communicating with prospective buyers
PROMOTION
Developing and spreading persuasive communications about an
offer
INFORMATION
Gathering and distributing marketing research and intelligence
information about the marketing environment

13. PHYSICAL DISTRIBUTION
Transporting and storing goods
NEGOTIATION
Agreeing on price and other terms of the offer so that
ownership or possession can be transferred
MATCHING
Shaping and fitting the offer to the buyer’s needs

14. RISK TAKING
Assuming financial risks such as the inability to sell inventory
at full margin
FINANCING
Acquiring and using funds to cover the costs of channel work

15. Suppliers
manage most
contact with
consumers and
end users
Direct
Channel
Intermediaries
like distributors,
wholesalers, and
retailers play a major
role in transferring
products to
consumers and end
users
Indirect
Channel

16. DIRECT DISTRIBUTION INDIRECT DISTRIBUTION
Small potential customer base Large potential customer base
Custom-tailored products
Stockable items, manufactured in
large quantities but sold in small
quantities
Large quantity sales Small quantity sales
Complex end-user customer
purchasing decisions — multiple
functions and high-level
executives
Simple end-user purchasing
decision — often by low-level
purchasing agents
Delivery speed not critical
Rapid delivery and service
important

17. ZeroLevel
OneLevel
TwoLevels
ThreeLevels

18. MANUFACTURER MANUFACTURER MANUFACTURER MANUFACTURER
Industrial Customer Industrial Customer Industrial Customer Industrial Customer
Industrial Distributors
Manufacturer
Representative
Manufacturer
Sales Branch
ZeroLevel
OneLevel
TwoLevels
ThreeLevels

19. PUSH
STRATEGY
Induce intermediaries to
carry, promote and sell
the product to end-user.
PULL
STRATEGY
Manufacturer uses
advertising and promotion
to induce customers

20. PRODUCER
INTERMEDIARIES
END USER /
CUSTOMER
PRODUCER
INTERMEDIARIES
END USER /
CUSTOMER
PUSH STRATEGY PULL STRATEGY
Marketing
activities
Marketing
activities
Demands
Demands
Demands
Demands
Marketing
activities

21. HORIZONTAL
CONFLICT
This is conflict
between firms at the
same level of the
channel

22. VERTICAL
CONFLICT
Refers to conflicts between
different levels of the same
channel

23. INTENSIVE
SELECTIVE
EXCLUSIVE
A form of distribution aimed at
having a product available in every
outlet
A form of distribution achieved by
screening dealers to eliminate all but
a few in any single area
A form of distribution that
established one or a few dealers
within a given area

24. Price Policy Conditions of
Sale
Distributor’s
Territorial
Rights
Mutual Services and
Responsibilities

25. 1 What is the distributor’s credit and financial condition?
2
What is the distributor’s selling capability? What is its historic sales
performance?
3
Will the distributor forgo competitive products? Does it welcome the
supplier’s products?
4
What is the distributor’s general reputation among suppliers and
customers?
5 Does the distributor have adequate market coverage?
6 How competent is the distributor’s management?
7
How does the distributor rate on aggressiveness, enthusiasm and taking
initiative?
8 Is the distributor the appropriate size to do business with us?

27. REFERENCES
1. Kotler, Philip, Marketing Management
Millennium Ed. Pearson Custom Publishing:
New Jersey, 2000.
2. Stone, Marilyn and John Desmond,
Fundamentals of Marketing. Routledge; New
York, 2007.
3. Capon, Noel, Managing Marketing in the 21st
Century. Wessex: New York, 2009.
4. Kotanabe, Masaaki and Kristaan Helsen, Global
Marketing Management, 5th Ed. Wiley and Sons:
New York, 2010.