Chapter 8 Distribution channels and
logistics management
The learning objectives
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The nature of distribution channels
Channel behavior and organization
Channel design decisions
Channel management decision
Physical distribution and logistics management
1.The nature of distribution
channels
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What is distribution?
Why are marketing intermediaries used?
The function of distribution channel
Channel level
What is distribution channel?
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A set of interdependent organizations involved
in the process of making a product or service
available for use or consumption by the
consumer or business user.
How a Distributor Reduces the
Number of Channel Transactions
1
2
3
4
5
6
A. Number of contacts
without a distributor
MxC=3X3=9
7
8
9
= Manufacturer
= Customer
How a Distributor Reduces the
Number of Channel Transactions
1
B. Number of contacts
with a distributor
MxC=3+3=6
4
Store
2
5
3
= Manufacturer
6
= Customer
= Distributor
Distribution Channel Functions
Information
Transfer
Payments
Physical
Distribution
Risk Taking
Communication
Negotiation
Ordering
Financing
Consumer Marketing Channels
0-level channel
Manufacturer
Consumer
1-level channel
Manufacturer
Retailer
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Consumer
Retailer
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Consumer
Retailer
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Consumer
2-level channel
Mfg
 Wholesaler
3-level channel
Mfg
 Wholesaler
Jobber

Industrial
distributors
Manufacturer’s
representative
Manufacturer’s
sales branch
Consumer
Manufacturer
Industrial Marketing Channels
Customers’ Desired Service Levels
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Lot size
Waiting time
Spatial convenience
Product variety
Service backup
Why are marketing intermediaries used?
Distribution channel function
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Information
Promotion
Contact
Matching
negotiation
Channel level
Channel behavior and organization
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Channel conflict
Vertical marketing system
Horizontal marketing system
Hybrid marketing systems
Types of Vertical Marketing Systems
Corporate
Common Ownership at Different
Levels of the Channel
Administered
Leadership is Assumed by One or
a Few Dominant Members
Contractual
Contractual Agreement Among
Channel Members
Conventional Distribution Channel vs. Vertical
Marketing Systems
Vertical
marketing
channel
Manufacturer
Manufacturer
Wholesaler
Retailer
Wholesaler
Conventional
marketing
channel
Retailer
Consumer
Consumer
Channel conflict
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Horizontal conflict
Vertical conflict
Vertical marketing systems
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Conventional distribution
VMS
Corporate VMS
Contractual VMS
Administered VMS
Franchise organization
Horizontal marketing system
Hybrid marketing channel
2.channel design decision
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Analyzing consumer service needs
Setting channel objectives and constraints
Identifying major alternatives
Evaluating the major alternatives
Identifying major alternative
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Types of intermediaries
Number of marketing intermediaries
Responsibilities of channel members
Break-Even Cost Chart
Manufacturer’s
sales agency
Company
sales force
Selling
costs
(dollars)
SB
Level of sales (dollars)
Number of marketing intermediaries
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Intensive distribution
Exclusive distribution
Selective distribution
3.Channel management Decision
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Selecting channel members
Motivating channel members
Evaluating channel members
Channel Management Decisions
Training
Motivating
Evaluating
FEEDBACK
Selecting
4.physical distribution and logistics
management
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Physical distribution(marketing logistics)
major logistics function
Integrated logistics management
Third-party logistics
Major logistics function
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Order processing
Warehousing
Inventory
transportation
Integrated logistics management
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Cross-functional teamwork inside the company
Building channel partnerships
Third-party logistics
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An independent logistics provider that performs
any or all of the functions required to get their
clients’ product to market.