Distribution:
1. Is the Internet a distribution channel?
A distribution channel is the system of organizations involved in the process of making a product or service available for consumption or use.
Marketing channels therefore facilitate the exchange of goods and services between buyers and sellers.
• The Internet, as any other marketing channel, has emerged as a way to better serve the needs of one or more customer segments.
2. What are the functions of channel intermediaries?
Efficiency: Distribution costs are reduced only if the retailers can perform the required functions more efficiently than the manufacturers could in the direct channel.
• While the channel intermediary reduces the number of interactions the manufacturer must undertake, the total number of interactions has increased.
• In any distribution systems with more than two manufacturers serving two customers, the addition of a single intermediary reduces the number of transactions and therefore has the potential to reduce total distribution costs.
Effectiveness: the ability of the channel to perform functions that create value for customers.
• For example, a retailer might provide a personal sales staff that disseminates product knowledge to the customer, increases the convenience of purchasing the product by geographic proximity, offers complementary product lines, and offers easy returns and exchanges.
3. What is disintermediation and what are its implications for channel intermediaries and customers?
Disintermediation:
• A strategy that involves the elimination of a channel intermediary.
• Internet has become a driving force for disintermediation
• Overall result is positive because channel works more closely to create value for customers.
• Elimination of channel intermediary
• E.g. one hallmark of the new economy is a move from traditional manufacturer-retailer-consumer channels to direct online channels that eliminate the retailer.
• Internet – driving force for disintermediation
• The Internet enables firms to interact at a much lower cost and higher speed than ever before.
• Frequency and complexity of communication between buyers and sellers, but tighter links between channel members, which facilitates lower inventory and shipping costs.
4. What are the distribution levers and how do they affect relationships between intermediaries and buyers and sellers?
Intermediary Type
Direct
• Firms can go direct via the Internet, telephone or mail.
Traditional Retailer
• A retailer is a business whose sales volume comes primarily from sales to final consumers.
Virtual Shopping Malls
• Provide much the same appeal as in traditional retailing: a shopping “destination”.
• Especially important for brands with low awareness or brands in product categories where customers want to comparison shop.
Internet Exchange
• Equivalent of virtual shopping malls in the B2B area.
Number of Intermediaries
Exclusive distribution
• Very limited number of intermediaries.
• Firms such as John Deere, Acura and Kenneth Cole use exclusive distribution because they want to retain direct control over the marketing of their products and limit the extent to which their retailers compete directly with one another.
Intensive distribution
• Opposite of exclusive distribution
• Firm places the product in as many outlets as possible.
• Appropriate for low-involvement products that consumers select on the basis of convenience or impulse, e.g. snack foods, toiletries, tissue and magazines.
Selective distribution
• Middle-of-the-road strategy in which the firm seeks a balance between making the product as widely available as possible and controlling availability.
• Provides some protection for retailers against competitive pressure and encourages them to support the firm’s brand.
• At the same time, it ensures that the product is readily available at a price that is subject to competition.
• Number of Channels
– Single-Mode vs. Mixed-Mode
• Degree of Channel Integration
Intermediary Functions and Responsibilities