Chapter 21 Section 21.2.ppt

 Chapter 21 Channels of Distribution

Section 21.2 Distribution Planning

Marketing Essentials

SECTION 21.2

SECTION 21.2

What You'll Learn

What You'll Learn

Distribution Planning

Distribution Planning

 _{The key considerations in distribution planning}  _{When to use multiple channels of distribution}

 _{How to compare the costs and control involved in}

having a direct sales force vs. using independent sales agents

 _{The three levels of distribution intensity}

 _{The effect of the Internet on distribution planning}  _{The challenges involved in distribution planning for}

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Why It's Important

Why It's Important

Distribution decisions affect the entire

company so it is important for you to know how they are made. It is also helpful to

know how they are carried out in different markets, including international and

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Key Terms

Key Terms

_{exclusive distribution}

_{integrated distribution}

_{selective distribution}

_{intensive distribution}

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Distribution planning involves decisions about a product's physical movement and transfer of ownership from producer to consumer.

Distribution decisions affect a firm's marketing program. Some of the major considerations are:

 _{the use of multiple channels}  _{control vs. costs}

 _{intensity of distribution desired}  _{involvement in e-commerce}

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Multiple Channels

Multiple channels are used when a product fits both industrial and customer needs.

 _{Example: Cookies sold to supermarkets and}

airlines.

_{Example: Garment company selling bed linens to}

consumers through Bed, Bath & Beyond and to the Holiday Inn hotel chain.

Proctor & Gamble Soap

Mfg sales to Consumer

Market

Wholesaler or Retailer Spartan

Foods or D&W who sales to

Consumer buys 1 or 2 bars of soap or shampoo

from D&W or Meijer or Walgreen's (a retailer)

Industrial Distributor sales

to

Shady Inn Motel or Betsy’s B&B or to Ed’s Office

cleaning business Hilton Hotels Inc.

purchases soap as an industrial

user

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Control vs. Cost

All manufacturers and producers must weigh the control they want to keep over the

distribution of their products against costs and profitability. Decisions can involve:

 _{using an in-house sales force or}

independent sales agents

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Who Does the Selling?

A manufacturer can decide to use its own sales

force or hire agents to do the selling, depending on how much control it wants over sales.

 _{Direct Sales Force Costly; manufacturer} maintains complete control.

 _{Agent Less costly; manufacturer loses}

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Retail giants like Wal-Mart and

Home Depot force manufacturers to adhere to strict criteria regarding

shipping, pricing, packaging, and merchandising. Some mfgs. adhere to these wishes because of the

large volume of business generated by the retail giants; some prefer to distribute products through smaller retailers.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Distribution intensity has to do with how

widely a product will be distributed. There are three levels of distribution intensity:

 _exclusive

 _selective

 _intensive

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Exclusive

distribution

involves protected

territories for distribution of a product in a

geographic area.

Distribution Planning

SECTION 21.2

A variation is

integrated distribution, in which a

manufacturer acts as wholesaler and retailer

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Selective distribution means that a limited number of outlets in a given geographic area are

used to sell the product.

Selective Distribution

 _{Example: Ralph}

Lauren selects only top department and

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Intensive distribution involves use of all suitable outlets for a product. The objective is complete market

coverage, and the ultimate goal is to sell to as many customers as possible.

 _{Example: Motor oil is sold in supermarkets,} farm stores, parts retailers, hardware stores,

warehouse clubs, even mini marts.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

E-commerce is the means by

which products are sold to customers and industrial buyers through use of the

Internet. In 2000 almost half of America's top retailers sold

online.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Businesses use the Web to sell to consumers and to facilitate industrial sales.

 _{Example: Panasonic uses its public Web}

site for information only, but it has a B2B Web site where retailers can check

orders, pricing, and promotions.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Online travel is a growing Internet industry. Which area of the industry has the largest share of the travel market?

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Distribution planning takes on a new dimension when businesses get involved in international trade. Different environments in foreign

markets require that businesses adjust their distribution systems. This also gives

businesses the opportunity to experiment with different distribution strategies.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

Distribution Planning for Foreign Markets

• Keiretsu – in Japanese means “strong alignment”

• Groups of closely related companies that do business with one another on a regular

basis.

SECTION 21.2

SECTION 21.2

_{Distribution Planning}

_{Distribution Planning}

E-marketplaces for B2B operations provide one-stop shopping and

savings for industrial buyers. Why would a business opt to be part of an

e-marketplace rather than have

Going to Marketplace

21.2

A

A

Reviewing Key Terms and Concepts

1. What key factors are considered when developing an effective distribution plan?

2. When are multiple distribution channels used?

3. Give two reasons for using a direct sales force instead of independent sales agents.

4. What are the levels of distribution intensity?

5. Explain the challenges businesses face when

21.2

A

A

Thinking Critically

What problems might be created by a

clothing manufacturer that establishes its own Web site to sell to the final

consumer, while it also sells the same items to retailers for resale to

End of Section 21.2

Marketing Essentials