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B207 Reading 7: The Marketing Mix – Place (Distribution Channels) - Coggle…
B207 Reading 7: The Marketing Mix – Place (Distribution Channels)
1. Distribution Channels and Value Delivery Networks
Importance:
An offering must be made available so customers can purchase it easily, ensuring sufficient quantities, appropriate outlets, and acceptable delivery costs.
Value Delivery Network
: The complex set of channel members (suppliers, distributors) that enables an organisation to offer products to customers.
Channel Member Functions (providing value, efficiency, expertise, and reach):
Information
: Vital source of information about the marketing environment.
Promotion
: Communicating promotions for a product.
Contact
: Being in contact with potential buyers and influencing purchase decisions.
Matching
: Influencing aspects of the product to match customer needs.
Negotiation
: Agreeing on price or terms to facilitate exchanges.
Financing
: Providing funding for channel distribution.
Risk Taking:
Taking on some risks involved in distribution.
2. Types of Distribution Systems
Traditional Distribution:
Each channel member (Manufacturer - Wholesaler - Retailer - Consumer) is independent and pursues individual goals, which can lead to channel conflict.
Vertical Marketing System (VMS):
Channel members act as a unified system under the leadership of one channel member.
Corporate VMS:
One channel member owns the others (e.g., Apple, which controls manufacturing and its own stores).
Contractual VMS
: Members have contractual arrangements (e.g., Franchises like McDonald's, car dealerships).
Administered VMS:
Control is exerted through superior size or power (e.g., major supermarkets, large retailers like Walmart).
Collaborative (Horizontal) Distribution:
Organisations at the same level in the channel collaborate for mutual advantage (e.g., hauliers sharing lorry capacity, or competitors sharing rail boxcars).
Types
: Backhaul sharing, co-loading, continuous move routing, physical internet.
Barriers:
Entrenched culture, loss of control, and sharing sensitive data.
3. Channel Strategy and Management
Multiple Distribution Channels
: Used to serve different segments or offer multiple purchase options (e.g., physical stores and online).
Omni-channel World:
A major problem in marketing is dealing with this world and linking the vast array of channel interfaces. Experts suggest:
Understanding the customer journey to be present when clients need you.
Creating an offer once and making it available simultaneously in every channel.
Choosing the Right Channel (Influencing Factors):
Level of service desired by customers (e.g., expert fitting vs. low prices).
Size of the company.
Type of product:
Convenience products > Intensive distribution
Shopping products > Selective distribution (fewer, selected outlets)
Speciality products > Exclusive distribution (one or few exclusive outlets).
Competitors' distribution.
Environmental factors (STEEPLE) (e.g., population density, internet access).
Managing Conflict:
Conflict arises when channel members' expectations are breached or when members act in their own self-interest, threatening others.
Mitigation:
Good relationships, clear policies/procedures, and legal compliance (e.g., EU rules on vertical agreements).
Legal Issues:
Arrangements like exclusive distribution (selling only one manufacturer's product) or sales territories restrictions can raise legal issues by restricting competition.