LEOB_Session9_MFM3

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SESSION 9 LEGAL ENVIRONMENT OF BUSINESS 1

Distribution - introduction : 

Distribution - introduction Distribution (or "Place") is the fourth traditional element of the marketing mix. The other three are Product, Price and Promotion.

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The Nature of Distribution Channels Most businesses use third parties or intermediaries to bring their products to market. They try to forge a "distribution channel" which can be defined as "all the organisations through which a product must pass between its point of production and consumption" 3

THE IMPORTANCE OF CHANNELS OF DISTRIBUTION : 

THE IMPORTANCE OF CHANNELS OF DISTRIBUTION MARKETING INTERMEDIARIES are organization that assist in moving goods and services from producer to industrial and consumer users. They are organizations (formerly called "middlemen") in the middle of a series of organizations that join together to help distribute goods.

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A CHANNEL OF DISTRIBUTION is the whole series of marketing intermediaries who join together to transport and store goods in their path from producers to consumers. A WHOLESALER is a marketing intermediary that sells to other organizations. A RETAILER is an organization that sells to ultimate consumers. CHANNELS OF DISTRIBUTION enhance communication flows and the flow of money and title to goods. The latest trend is to try to eliminate wholesalers and the need for retail stores by selling over the Internet. 5

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Why does a business give the job of selling its products to intermediaries? After all, using intermediaries means giving up some control over how products are sold and who they are sold to. The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried run a sales operation itself.

RETAIL DISTRIBUTION STRATEGY : 

RETAIL DISTRIBUTION STRATEGY Different products call for different retail distribution strategies. INTENSIVE DISTRIBUTION puts products into as many retail outlets as possible, including vending machines. SELECTIVE DISTRIBUTION is the use of only a preferred group of the available retailers in an area. EXCLUSIVE DISTRIBUTION is the use of only one retail outlet in a geographic area.

Numbers of Distribution Channel Levels : 

Numbers of Distribution Channel Levels Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a "channel level".

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DEALERS Individual or firm that buys goods from a producer or distributor for wholesale and/or retail reselling A dealer is a principal and not an agent 11

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DISTRIBUTORS An entity that buys non-competing products or product lines, warehouses them, and resells them to retailers or direct to consumers provide strong manpower and cash support to the supplier or manufacturer's promotional efforts usually also provide product information, estimates, technical support, after-sales services, credit to the customers 12

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WHOLESALERS Person or firm that buys large quantity of goods from various producers or vendors, warehouses them, and resells to retailers Wholesalers who carry only non-competing goods or lines are called Distributors 13

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Buying Agent Individual or firm that locates supplies at best prices and terms, and (if required) warehouses or consolidates them as one shipment on behalf of a local or foreign buyer 14

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Selling Agent Selling agent or sales agent a person/firm who renders sales services to the manufacturer or the supplier may provide support in terms of marketing, promotion, and other allied activities 15

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RETAILERS Retail : Derived from the French word “retaillier” = to cut off a piece or to break bulk Retailer : A business or person that sells goods to the consumer, as opposed to a wholesaler or supplier, who normally sell their goods to another business Retailing : The last stage in movement of goods or services to the consumer 16

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Retailing  all activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use 17 RETAILERS

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Largest private industry in the world In Western economy it accounts for 8% of GDP Has generated a 19% return for the shareholders between 2004 - 06 where banks generated 9% and insurance generated 15.2% return Largest corporation in the world – Wal-Mart RETAIL : THE INDUSTRY 18

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Almost 50 retail organizations in the world feature in the list of Fortune 500 companies. The world over retail is not only the oldest but also one of the most advanced user of technology. 19 RETAIL : THE INDUSTRY

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From customers point of view, retailer serves by providing goods that he needs in the required assortment and at the right place and time. From an economic standpoint the role of a retailer is to provide real added value or utility to the customer. This comes from five different perspectives Functions of a RETAILER 20

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Provides finished goods and services in the form that is acceptable to the customer The retailer performs the function of storing the goods, and providing us with an assortment of products in various categories The retailer creates time utility by keeping the store open when the consumers prefer to shop 21 Functions of a RETAILER

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By being available at a convenient location he creates place utility Finally when the products are sold ownership utility is created 22 Functions of a RETAILER

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All these are real benefits which the Retailer offers by: Being close to potential customers Fully understanding the motivating factors that drive their customers By serving the consumers by way of functioning as a marketing intermediary and creating time, place and ownership utility 23 Functions of a RETAILER

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The Retailer also serves the manufacturers by: Performing the function of distributing the goods to the end users Creating a channel of information from manufacturer to the consumer By serving as a final link in the distribution chain Recommending products where brand loyalty is not strong or for unbranded products 24 Functions of a RETAILER

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25 Assignment

THE VALUE VERSUS THE COST OF INTERMEDIARIES : 

THE VALUE VERSUS THE COST OF INTERMEDIARIES 3 basic facts about intermediaries: Intermediaries can be eliminated, but their activities cannot be eliminated. Someone else still has to perform the tasks. Today many activities are being performed on the World Wide Web, and intermediaries are being eliminated. Intermediaries have survived in the past because they perform functions more effectively and efficiently than most manufacturers. Intermediaries add costs to products, but these costs are offset by values they create.

THE UTILITIES CREATED BY INTERMEDIARIES : 

THE UTILITIES CREATED BY INTERMEDIARIES UTILITY is an economic term for the value, or want satisfying ability, that is added to goods or services by organizations because the products are made more useful or accessible to consumers. Form Utility Time Utility Place Utility Possession Utility Information Utility Service Utility. For consumers to receive the maximum benefit from marketing intermediaries, the organizations must work together.

NON-STORE RETAILING : 

NON-STORE RETAILING Direct Selling Telemarketing Vending Machines, Kiosks, Carts E-tailing

BUILDING COOPERATION IN CHANNEL SYSTEMS : 

BUILDING COOPERATION IN CHANNEL SYSTEMS Firms are often linked together in formal relationships to form efficient DISTRIBUTION SYSTEMS. Corporate distribution system in which all the organizations in the channel are owned by one firm. Contractual distribution system Members are bound to cooperate through contractual agreements Administered distribution system The management by producers of all the marketing functions at the retail level.

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