DistributionDistributionBMI 3C MarketingBMI 3C Marketing

DistributionDistribution

• Businesses need to distribute Businesses need to distribute their product so that consumers their product so that consumers can find it and buy itcan find it and buy it

• Once the product has been Once the product has been delivered to the consumer the delivered to the consumer the marketing process is donemarketing process is done

DistributionDistributionThere are two components to There are two components to distribution:distribution:1.1.Setting the Distribution ChannelsSetting the Distribution Channelsselecting, developing and managing how the selecting, developing and managing how the product is going to get the productproduct is going to get the product

2.2.Using the Distribution ChannelsUsing the Distribution Channelsactually shipping the product throughactually shipping the product through

Distribution Distribution ChannelsChannels

• Channels of distribution Channels of distribution are are the paths that goods follow the paths that goods follow from producer to consumerfrom producer to consumer

• Marketers have to decide which Marketers have to decide which path or paths a product should path or paths a product should taketake

Questions to Questions to ConsiderConsider

• Is the consumer industrial or institutional?Is the consumer industrial or institutional?

• How large is the local market?How large is the local market?

• What is the income of the target market?What is the income of the target market?

• What are the buying habits of the What are the buying habits of the consumers?consumers?

• Will the selected channel reach a sufficient Will the selected channel reach a sufficient number of consumers?number of consumers?

Questions to Questions to ConsiderConsider

• Is the item seasonal or high fashion?Is the item seasonal or high fashion?

• Can the channel become a competitive Can the channel become a competitive advantage?advantage?

• Is the product custom made?Is the product custom made?

• Will the product spoil over time?Will the product spoil over time?

• How large or heavy is the item?How large or heavy is the item?

Questions to Questions to ConsiderConsider

• Does the product come with a Does the product come with a manufacturer’s warrant?manufacturer’s warrant?

• Is the product price sensitive?Is the product price sensitive?

LogisticsLogistics

• Logistics are the process of designing and Logistics are the process of designing and managing a supply chainmanaging a supply chain

• It consists of It consists of allall the activities involved in the activities involved in getting goods and services to the consumer, getting goods and services to the consumer, including: getting raw materials and including: getting raw materials and equipment to the manufacturer, producing the equipment to the manufacturer, producing the product, and then shipping to the wholesalers, product, and then shipping to the wholesalers, importers and retailersimporters and retailers

• Logistics can often dictate the pathLogistics can often dictate the path

Distribution PolicyDistribution Policy

• Distribution policy Distribution policy in the in the ultimate commander of what ultimate commander of what channel is selectedchannel is selected

• There are four policies possible: There are four policies possible: intensiveintensive, , selectiveselective, , exclusiveexclusive and and integratedintegrated

Intensive DistributionIntensive Distribution

• Intensive distribution happens Intensive distribution happens when the product is sold when the product is sold everywhereeverywhere

• Products can be modified to fit the Products can be modified to fit the distribution channels wanteddistribution channels wanted

• EXAMPLE:EXAMPLE: soda comes in plastic soda comes in plastic bottles, glass bottles, aluminum bottles, glass bottles, aluminum cans, and fountain mixes cans, and fountain mixes

Selective DistributionSelective Distribution

• Selective distribution happens when Selective distribution happens when manufacturers limit the availability of its manufacturers limit the availability of its productsproducts

• They may think having it available They may think having it available everywhere will cause the product to lose everywhere will cause the product to lose some appealsome appeal

• Limiting the outlets makes the product Limiting the outlets makes the product harder to get and therefore more valuable harder to get and therefore more valuable to the consumers that buy themto the consumers that buy them

Exclusive DistributionExclusive Distribution

• Exclusive distribution occurs when Exclusive distribution occurs when the manufacturer has made deals the manufacturer has made deals with one or two retailerswith one or two retailers

• This provides further prestige to the This provides further prestige to the product because often the retailers product because often the retailers that seek out exclusive distribution that seek out exclusive distribution have an added value in the target have an added value in the target consumer’s mind about products in consumer’s mind about products in that price rangethat price range

Integrated Integrated DistributionDistribution

• Integrated distribution happens Integrated distribution happens when the manufacturer when the manufacturer alsoalso owns the outlets at which they owns the outlets at which they are soldare sold

• This ensures the price remains This ensures the price remains at the level the company wantsat the level the company wants

Channel CaptainsChannel Captains

• Channel captains Channel captains control the control the distribution channelsdistribution channels

• There are four channel captains: There are four channel captains: manufacturersmanufacturers, , importersimporters, , wholesalerswholesalers and and retailersretailers

ManufacturersManufacturers

• Manufacturers are the makers of a Manufacturers are the makers of a productproduct

• Manufacturers with prominent Manufacturers with prominent brand names or top selling brand names or top selling products command the best shelf products command the best shelf and display spaceand display space

• The rest of the competition fights The rest of the competition fights for the restfor the rest

ImportersImporters

• Importers are the companies that bring Importers are the companies that bring manufactured goods into the countrymanufactured goods into the country

• They have negotiated for exclusive They have negotiated for exclusive distribution rights for the productdistribution rights for the product

• As a result, they are the ones in charge of As a result, they are the ones in charge of the product in this countrythe product in this country

• Being exclusive means you can dictate Being exclusive means you can dictate sales terms and conditionssales terms and conditions

WholesalersWholesalers

• Wholesalers buy large quantities of goods Wholesalers buy large quantities of goods from various manufacturers and resell them from various manufacturers and resell them to retailersto retailers

• They are the “middle men” of the sales They are the “middle men” of the sales processprocess

• For retailers, they are the primary sources of For retailers, they are the primary sources of the goodsthe goods

• The larger and more important they are, the The larger and more important they are, the more they can control these marketsmore they can control these markets

RetailersRetailers

• Retailers are the outlets Retailers are the outlets consumers buy the products atconsumers buy the products at

• The more powerful the retailer in The more powerful the retailer in the market, the more they can the market, the more they can dictate sales terms from the dictate sales terms from the suppliers, such as packaging suppliers, such as packaging requirements, discounts and requirements, discounts and additional promotional materialadditional promotional material

Transportation Transportation FactorsFactors

There are four major factors:There are four major factors:

1.1.DestinationDestinationthe distance between shipping and arrival as well as terrain determines the distance between shipping and arrival as well as terrain determines costscosts

2.2.WeightWeightheavy or bulky items will cost more than lighter shipments because heavy or bulky items will cost more than lighter shipments because more more fuel is needed to make the vehicles gofuel is needed to make the vehicles go

3.3.VolumeVolumelarger shipments can fill containers, smaller shipments need to find others larger shipments can fill containers, smaller shipments need to find others to share withto share with

4.4.Types Of GoodsTypes Of Goodssome goods need special transportation considerations, such as reinforced some goods need special transportation considerations, such as reinforced containers for dangerous materials or temperature control for containers for dangerous materials or temperature control for frozen/refrigerated itemsfrozen/refrigerated items

Free On BoardFree On BoardAlso called “Also called “freight on boardfreight on board,” shipments change many hands ,” shipments change many hands and so ownership of the goods go with it. There are two types and so ownership of the goods go with it. There are two types of control as to who is responsible during the process:of control as to who is responsible during the process:

1.1.F.O.B. DestinationF.O.B. Destinationthe shipper/seller has full responsibility until it reaches the buyerthe shipper/seller has full responsibility until it reaches the buyer

2.2.F.O.B. SourceF.O.B. Sourcethe buyer is responsible once the deal has been madethe buyer is responsible once the deal has been made

WhoWho is responsible is important because it determines who is responsible is important because it determines who pays for transportation — and who is responsible for things pays for transportation — and who is responsible for things like insurance, damaged goods and items lost in shippinglike insurance, damaged goods and items lost in shipping

Transportation Transportation ModesModes

What do you think the advantages What do you think the advantages and disadvantages are of shipping and disadvantages are of shipping by the following methods?by the following methods?