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The Marketing Mix - Place (Distribution Channels) (Collaborative…
The Marketing Mix - Place (Distribution Channels)
Key points
Offerings need to be appealing to customers as well as being made available in a way that customers are able to purchase it easily
Must ensure that the key points are provided
Sufficient quantities
Appropriate outlets
Acceptable delivery costs
Distribution channels
Customers are given an options of their distribution channel
Kotler & Armstrong (2016)
'Value delivery network'
Complex set of channel members, such as suppliers and
distributors, that enable an organisation to offer its products to customers
Channel members can provide greater skills than an organisation on its own
Greater efficiency
Greater expertise
Greater reach
Functions that channel members perform
Information
Channel members can be a vital course of information about stakeholders and forces in the marketing environment
Can help a business with strategic planning
Promotion
Communicating promotions for a product
Contact
Some will be in contact with potential buyers or consumers and can influence their purchase decisions
Matching
Some may influence aspects of the product to enable it to match customers needs more closely
Negotiation
Agreeing price or terms to facilitate exchanges
Financing
Providing funding for channel distribution
Risk taking
Taking on some of the risks involved in channel
distribution
Types of distribution channels
Traditional distribution channels
One or more links in a chain from the manufacturer to the consumer
See Book 1 p 60
The length of the chain and the types of actors may vary
Some of the chains are getting shorter - providers dealing directly with buyers
Other chains are getting longer and more complicated
Business to business - agents and/or distributors
replacing wholesalers and retailers
Service distribution
Direct
Although agents may be used as geographical distances are large or it would be too costly for a service provider to provide its own local sales team
Each channel member is independent of each other and pursued their own goals that could conflict
Channel conflict if not resolved could potentially damage channel relationships and compromise the effectiveness of the whole distribution channel
Vertical marketing system (VMS)
Channel members act as a unified system under the leadership of one channel member on the basis of
Corporate VMS
Owning the other channel members
eg Apple
Contractual VMS
Having contractual arrangements with them
eg Restaurants
eg Car rentals
eg Hotels
eg Car dealerships
Administered VMS
Exerting control over them through superior size or power
eg Supermarkets
eg Large retailers
See Book 1 p 60
Collaborative distribution
Def - the sharing of distribution resources between two or more shippers to send their goods with a common logistics network
Unified channel system that takes place horizontally whereby organisations at the same level with a distribution channel collaborate to their mutual advantage
eg Sharing shipments and lorry space
eg sharing refrigerated rail boxcars on return journeys when they would otherwise be empty (Ocean Spray and Tropicana)
Barriers to collaborations
Entrenched cultures
Some loss of control
Sharing of sensitive data
Types of collaborative distribution
Backhaul
Sharing opposite routes to fill empty capacity
Co-loading
Sharing capacity in the same direction to fill up loads
Continuous move routing
Replacing separate shipments with multistop trips
Psychical internet
A shared network based on an interconnected logistics system of shared facilities for transporting and storing freight.
Multiple distribution channels
Used to service different segments of consumers and buyers through different channels or to offer them multiple channel options through which to buy
Many organisations offer options for purchasing both through physical stores and online
Important that this offer is made to meet their customers needs taking into account
The level of service desired
Consumers willingness to travel
Preferences for buying in-person or by phone or online
The organisations ability to meet these needs
A channel that is flourishing hand in hand with the internet is catalogues
Require content beyond product listings
Provide interest and leisurely perusal, and consumers can then use an online channel to make their purchase(s)
Choosing the right distribution channel
Organisations’ distribution objectives and choices may be influenced by
The level of service they wish to provide
Customers may seek advice at a distribution point
People may prioritise price over high levels of service
The size of the company
Affects how much of the distribution it can provide itself
The type of product
Convenience products
Use
intensive distribution
Widespread, convenient locations
Shopping products
Use
selective distribution
Fewer, selected outlets
Speciality products
Use
exclusive distribution
One or only a few exclusive outlets
Perishable products
May need to have short distribution designs
Competitors
Whether grouped together, such as restaurants or distanced,
such as concert stadia
Environmental factors
STEEPLE may influence distribution choices
To work well
Channel members need to maintain good relationships with each other and manage conflict
Any problem at one stage can affect others in the process
Conflict
Can arise when expectations between channel members are
breached
Members can act on their own interest that threaten in some way the interests of another member.
Misunderstandings through a lack of clear communication
Poor performance by a channel member
Evaluation points
Organisations need to consider both the needs of end buyers and other members in the distribution network
Smooth running of the distribution network can be facilitated by
putting in place policies and procedures to agree
Roles, responsibilities, restrictions, rights, rewards and sanctions
Channel agreements must comply with laws
relating to issues such as competition and exclusivity dealing.
European Union competition rules on ‘vertical agreements’ – ‘agreements for the sale or purchase of goods or services between parties operating at different levels of the supply chain’
Restrictions of manufacturers
Exclusive distribution/exclusive dealing
Def - Arrangements whereby a manufacturer requires its distributors to sell only its product(s) and precludes its distributors from selling competitors’ products
Sales territories restrictions
Prohibit them from selling the manufacturer’s product(s) outside of a designated area
Trying agreements
A manufacturer ties a distributor to taking more or all
of its products
All raise legal issues as they restrict competition restrain trade or create monopolies.
Omni-channel world
One of the seven big problems in marketing was identified is
'dealing with an omni-channel world’ and the linking of the vast array of channel interfaces
Its critical to consider the customer journey
You can be wherever your customer wants you to be
Customers do not always know what distribution channel they might chose
Channel choice depends on
Time of day
Location
Urgency
Type of product