Week 14: articals

Introduction

  • The distribution strategy supports both company-level and marketing objectives.

    • Distribution approaches can focus on growth and profitability.

    • Example: Monster Energy's distribution strategy aligns with its growth objectives.

  • Buyer Perspective on Distribution:

    • When needing food, buyers typically prefer convenience (shopping at a grocery store).

    • Alternatives include purchasing directly from various producers (bakery, dairy, farm).

    • This preference for one-stop shopping promotes 'contact efficiency', where multiple product types are available in one location.

Distribution Objectives

  • Distribution channels enhance efficiencies across different areas:

    • Product Form: Changes in product format affect distribution.

    • Example: Coca-Cola bottlers utilize a concentrated form for easier distribution; local bottling occurs to handle larger, heavier products efficiently.

    • Time and Place Efficiency:

    • Grocery retailers streamline the process by providing diverse products in a single shopping trip.

    • Consumers benefit from unified payment methods for multiple products.

  • Case Study: Chobani Yogurt

    • Successful growth through national and global distribution networks.

    • Facilitates easy access to products for distant consumers, e.g., yogurt available in Norwalk, California.

  • Primary Purpose of Distribution Channels:

    • Bridge the gap between the producer and the consumer, regardless of geographical distances.

Channel Partners That Support Objectives

  • Components of the distribution channel include:

    1. Producers: Farmers, manufacturers, craftsmen.

    2. Users: Individuals, households, businesses, institutions, governments.

    3. Middlemen: Wholesalers and retailers who assist in exchanges.

  • Functions of Channel Partners:

    1. Transactional Functions: Buying, selling, and risk assumption.

    2. Logistical Functions: Assembly, storage, sorting, transportation.

    3. Facilitating Functions: Post-purchase service/maintenance, financing, dissemination of information, channel coordination.

  • Critical Characteristics of Channels:

    • While institutions might be substituted, their functional roles cannot be eliminated.

    • Example: A direct mail producer of custom hunting knives absorbs various functions previously held by retailers.

    • Channel members often participate in multiple transactions, increasing complexity.

    • Routinization leads to predictable product availability, aiding both consumer and producer planning.

Direct vs Indirect Channels

  • Direct Channel: Simplest form of distribution where producers sell directly to consumers.

    • Examples:

    • Farmers markets

    • Etsy.com (online marketplace)

    • Oracle’s personal sales for software

    • Services can also be sold directly from provider to consumer.

  • Retail Channel:

    • Companies selling directly to consumers but not producing the products.

    • Retailers enhance contact efficiency by offering multiple products in one location.

    • Examples include Walmart, Amazon, Nordstrom, Dairy Queen.

  • Wholesale Channel:

    • Involves wholesalers who handle goods in large quantities for resale.

    • Example: Christmas-tree wholesalers, restaurant food suppliers.

  • Agent or Broker Channel:

    • Intermediaries who do not take ownership of goods.

    • Roles:

    • Agents: Represent either buyers or sellers (e.g., real estate agents).

    • Brokers: Facilitate transactions between buyers and sellers on a temporary basis.

    • Examples:

    • Insurance brokers, literary agents, export brokers.

Complexity of Distribution Channels

  • The complexity increases with the flow of materials and number of intermediaries involved.

  • Intermediaries must add value; otherwise, they may be phased out.

Service Outputs

  • Different customer segments have varying needs regarding distribution (place).

  • Service outputs are the marketing channel's productive outputs that consumers value.

  • Identifying service outputs aids in optimizing distribution strategies.

Common Service Outputs

  1. Spatial Convenience: Availability of product nearby.

  2. Timing of Availability: Immediate need versus willingness to wait for a product.

  3. Quantity Needs: Willingness to buy in bulk or smaller quantities.

  4. Assortment/Variety: Preference for specific needs versus flexibility in options.

  5. Service Needs: Requirement for assistance in the purchase process.

  6. Information Needs: Information sourcing prior or during purchase.

  • Trade-offs in service outputs must be managed; e.g., higher service levels typically increase costs.

Service Outputs in Practice

  • Practical example regarding egg purchasing scenarios:

    • Brunch Dining Experience: Higher emphasis on service, variety, and ambiance.

    • Family Breakfast Needs: Focused on convenience, timeliness, and price sensitivity.

  • Distribution Strategy for the Farmer:

    • To achieve higher prices, sell through restaurant suppliers, targeting high service outputs.

    • For volume sales, sell through wholesalers to supermarkets ensuring spatial convenience for consumers.

    • Awareness of different target buyers is critical for successful distribution.