Chapter 10:

 Explain why companies use distribution channels and
the functions these channels perform.
 Discuss how channel members interact and how they
organize to perform the work of the channel.
 Identify the major channel alternatives open to a
company.
 Explain how companies select, motivate, and evaluate
channel members.
 Discuss the nature and importance of physical
distribution and integrated logistics management.
Chapter Objectives

 The Nature of Distribution
Channels
 Set of interdependent
organizations involved in the
process of making a product or
service available for use or
consumption by the consumer
or business user.

Why are Marketing Intermediaries
used?
 The use of intermediaries result from
their greater efficiency in making goods
available to target markets.
 Offers the firm more than it can achieve
on its own through the intermediaries:
 Contacts
 Experience
 Specialization
 Scale of operation

 Intermediaries play an important
role in matching supply and demand.
Producers produce narrow assortments, but
consumers want broad assortments.
Intermediaries buy large quantities of many
producers and break them down into the
smaller quantities preferred by consumers.

Distribution Channel Functions
 A distribution channel moves goods from producers to
consumers. It overcomes the major time, place, and
possession gaps that separate and services from those who
would used them.
 Members of the marketing channel:
 Information
 Promotion
 Establishing contact
 Matching buyers with sellers
 Negotiation
 (Physical distribution, Financing, Risk-taking)

If the channel is functioning the way
that it should be, the work of the
channel should be divided so that the
various functions can be assigned to the
channel members who can perform
them most efficiently and effectively to
provide satisfactory assortments of goods
to target consumers.

Number of Channel Levels
 A channel level is a layer of middlemen that
performs some work in bringing the product and
its ownership closer to the final buyer.
 DIRECT MARKETING CHANNEL
 Where is there are no intermediary levels between
manufacturer and consumer.
 INDIRECT MARKETING CHANNEL
 Where there can be numerous and a variety of
intermediaries involved in bringing the good or service
from the manufacturer to the consumer or business
customer.

 Business marketing channels are similar in their
design except the intermediaries perform
functions relative to the business market rather
than consumer market.
 Types of Flows:
 Physical Flow of products
 Flow of ownership
 Payment Flow
 Information Flow
 Promotion Flow

 https://www.youtube.com/watch?v=ALoo4vr
KKUw

RETAILING
&
WHOLESALING

 IT INCLUDES ALL THE ACTIVITIES
INVOLVED IN SELLING GOODS OR
SERVICES DIRECTLY TO FINAL
CONSUMER FOR THEIR PERSONAL,
NON-BUSINESS USE.
RETAILING

 A retailer is a business whose sales come
primarily from retailing.
 Manufacturer, wholesaler, and retailer can all do
retailing.
 Retailing can be dine in stores(store retailing) or
out of a store (non-store retailing).
 Direct mails, catalogues, telephone,TV home
shopping shows, home and office parties, door-to-
door, vending machines, Internet, etc.

TYPES OF
RETAILERS

Relative Prices
 Pricing structure that
is used by the
retailers.
RETAIL ORGANIZATION
 Independent, corporate,
or contractual
ownership organization
AMOUNT OF SERVICE
 Self-service, limited
service and full-service
retailer.
PRODUCT LINE
 Length and breadth
of the product
assortment.

RETAILERS CAN OFFER THREE LEVELS OF
SERVICES:
 SELF-SERVICE RETAILER
– are retailer provide few or no services to
shoppers. Shoppers perform their own location.
a. Self-service is the basis of all discount
performance.
b. It is typically used by sellers of
convenience goods and nationally branded, fast
moving shopping goods.

 LIMITED SERVICE RETAILER
-are retailers that provide only a limited number
if services to shoppers.
a. They carry more shopping goods about
which consumers need information.
b. Their increased operating cost result in
higher prices

L-SERVICE RETAILER
- Are retailers that provide a full range of
services to shoppers.
a. These stores usually carry more
specialty goods and slower-moving
items.
b. Personnel assists customers in the
buying process.
c. They provide many services which
result in higher operating costs that are
usually passed on to the customer as
higher prices.

Classification Of Retailing-
PRODUCT LINE

 Retailers can also be classified based on the
length and breadth of their product
assortments.
Specialty Store
Department Stores
Supermarkets
Convenience Stores
Superstores

 SPECIALTY STORE
-carry narrow product lines with a deep
assortment within that line.These stores
seem to be flourishing because of the
increasing use of market segmentation
,market targeting and product specialization.

 DEPARTMENT STORE
- are retail organizations that carry a wide
variety of product lines such as clothing,
home furnishing, and household goods. Each
line is operated as a separate department
managed by specialist buyers or
merchandisers.

 SUPERMARKETS
-are large, low-cost,low-margin,high-
volume, self-service stores that carry a
wide variety of food, laundry, and
household products.

 CONVENIENCE STORE
- Is a retail store located near a residential
area, opens long hours, seven days a week
and carries a limited line of high-turnover
convenience goods.

 SUPERSTORES
- Are stores almost twice the size of regular
supermarkets.They carry large assortment
of routinely purchased food and nonfood
items and offer such services as dry-
cleaning, post-office, photo finishing,
check cashing, bill paying, etc.

Retailers:
According To Their
Relative Prices

 DISCOUNT STORE
- Sells standard merchandise at lower prices by
accepting lower margins and selling higher
volume.
A true discount store regularly sells its merchandise
at lower prices, offering mostly national brands, not
inferior goods.
Intense competition from other discounters and
department stores have forced many discount
retailers to “trade up’.

 OFF-PRICE RETAILERS
-buy at less than regular wholesale prices and
sell at less than retail, usually carrying a
changing and unstable collection of higher-
quality merchandize.
PrimaryTypes
Independent off-price retailers
Factory outlet
Warehouse clubs or wholesale clubs or
membership warehouses

Classificationofretailing-
retailOrganization
Corporate Chain
(two or more outlets commonly
owned and controlled)
Voluntary Chain
(wholesaler-sponsored group of
independent retailers)
Retailer Corporation
(a group of independent retailers that
bands together to set up jointly owned
central wholesale operation)
Franchise Organization
(contractual association between a
manufacturer, wholesaler, or service
organization)
Merchandising Conglomerates
(combine several different retailing
forms under central ownership)

 CORPORATE CHAIN

 MERCHANDISING CONGLOMERATES

 FRANCHISE ORGANIZATION

Retailer Marketing
Decision

1. The retailer’s product assortment
must match target shoppers
expectation.

PRODUCT ASSORTMENT
Brand of merchandise merchandising
Events product differentiation
Strategies
SERVICE MIX
Key tool of non-price competition
For setting one store apart from one another
STORE’S ATMOSPHERE
Physical Layout
Feel that suits the target market and moves
customers to buy

2. A retailer’s price policy is a crucial
positioning factor and must be decided in
relation to target market, product and
service assortment, and competition.

PRICE DECISION
Target market
Product and service
Assortment
competition

3. The promotion decision involves
deciding among the normal promotion
tools of advertising personal selling
,sales promotion, and public relations
to reach customers

PROMOTION DECISION
 Using advertising
 Personal selling
 Sales promotion
 Public relation
 Direct marketing to reach customers

Place Decision
Location is the key to the retailer’s
ability to attract customers.The cost
of the right location are a significant
part of the retailer’s overall expense
consideration.
Most stores today cluster to increase
their ability to pull in consumers. And
give them the convenience of one-
stop shopping.

Forms of Clustering
CENTRAL BUSINESS DISTRICT
- problems have occurred with this form
for several years due to consumers moving to
the suburbs. Some central business districts are
making comebacks by using tactics that have
successful for shopping malls.

SHOPPING CENTER
- this is a group of retail businesses
planned, developed, owned, and managed as
unit.
 A regional shopping center is the largest and
most dramatic shopping center. It generally
contains between 40-200 store and attracts
customers from a wide area.
 A community shopping center contains
between 15-40 retail stores.
 The neighborhood shopping center generally
contains between 5-15 stores and is close and
convenient for consumers.These centers are also
called strip-malls.

WHOLESALING
 The activities involved in selling goods and
services to those buying for resale or
business use.
Wholesalers – are those engaged
primarily in wholesaling activity.

Channel Functions of
Wholesalers

1. SELLING AND PROMOTING
 wholesalers help one another in reaching
out to members of the channels
2. BUYING AND ASSORTMENT BUILDING
 wholesalers save their customers much
work
3. BULK-BREAKING
 wholesalers break large lots into small
quantities as s service for their customers.

4. WAREHOUSING
 wholesalers hold inventories thereby
reducing their customer’s risk.
5. TRANSPORTATION
 wholesalers provide quick delivery
6.Financing
 wholesalers finance inventories for their
customers thereby moving the risk away
from the manufacturing.

7. Risk-bearing
 wholesalers absorb risk by taking title to
the goods they posses
8.Market information
 wholesalers give information about market
condition to customers.
9.Management services and advice
 wholesalers help their customers with the
training function and show them how to
attract display merchandise,promote
merchandise and establish inventory control
systems.

Three major types of Wholesalers
1.Merchant wholesalers - independently owned
businesses that takes title to the merchandise
they handle.
1. full-service wholesalers
2. limited service wholesalers
2. Brokers and agents – don’t take title to the
goods and perform only a few functions.
3.Manufacturer’s sale branch and office-
wholesaling by sellers or buyers themselves
rather than through independent wholesalers.

Wholesalers define their targets groups
by examining and classifying:
1. Size of customer
2.Type of customer
3. Need for service
4. By other means

Marketing
Logistics and
Supply Chain
Management

Marketing Logistics (Physical Distribution)
- involves the tasks of planning, implementing, and
controlling the physical flow of materials and final
goods from points of use to meet the needs of
customers at a profit.
 List and briefly discuss the marketing channel
functions to the right customers in the right place at
the right time.
 It addresses:
- Outbound distribution
- Inbound distribution
- Reverse distribution
- Entire supply management

MAJOR LOGISTICS FUNCTIONS
1. ORDER PROCESSING- minimize cost of
attaining logistics objectives
2. WAREHOUSING- storage, distribution
automated
3. INVENTORY- when to order, how much to
order just-in-time.
4. TRANSPORTATION- carriers affects the
pricing of the products, delivery performance,
and condition of the goods when they arrive.

Order processing
Warehousing

Inventory

Transportation

Integrated Supply Chain Management
is the logistics concept that emphasizes
teamwork, both inside the company and
among all the marketing channel
organizations, to maximize the
performance of the entire distribution
system.

Integrated Logistics Management
Recognizes that providing better customer
service and trimming distribution costs requires
Teamwork, both inside the company and among
all the marketing channel organizations.
Involves
-cross-functional teamwork inside the company
- building channel partnership
- thirty-party logistics

End of Chapter10 ^_^