Class 18: Distribution – 11/10

1. Is the Internet a distribution channel?
The internet is a distribution channel because it’s able to facilitate the exchange of goods and services between a buyer and the seller. 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
2. What are the functions of channel intermediaries? Objectives 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
Effectiveness: the ability of the channel to perform functions that create value for customers.
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. 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?
Awareness
Number of Intermediaries  Intensive distribution strategy should lead to greater awareness because the firm is accessible via more outlets. Nearly all distribution in the online world is intensive because of the Internet’s massive reach. However, participation in affiliate programs is one tactic that increases distribution intensity.
Number of Channels/ Intermediary Type  Given that different customers are likely to shop at different channel types, a greater variety of distribution channels increase market coverage and therefore awareness.
Exploration/ Expansion
Degree of Channel Integration As integration increases, the willingness to explore the potential for a relationship should increase. Very simply, integration increases the level of customer service, which increases the attractiveness of the firm as the relationship partner. Also important is the effect of channel integration on the reliability of customer service. Relationship quality comes not only from the level of the customer service, but also from whether the customer can count on the service from interaction to interaction.
Number of Channels/ Intermediary Type Likelihood of exploration increases as the number of channels increase Firms increase exploration and expansion of the relationship by ensuring they target their customers correctly. By understanding the needs of each target segment, the product or service can be delivered through the most appropriate distribution channel. As the perceived value of the product is enhanced, the willingness to explore increases.
Commitment
Degree of Channel Integration  The channel environment must be integrated for customers to commit. Customers expect to be treated in a holistic sense, rather than on a per-transaction basis.
Intermediary Type  Making a commitment to the firm requires trust and so the selection of the channel should be affected by the degree of trust that is associated with the alternatives. Another issue is the ability to form buyer-seller relationship in an indirect channel. Manufacturers that go direct have greater control over the brand’s marketing strategy and are more likely to generate commitment.
Number of Channels While a major advantage of employing multiple channels is the ability to appropriately serve multiple market segments, this strategy can also increase customer commitment within a segment. Customers often have different buying requirements based on the purchase situation, and their requirements can evolve over time as they grow older or their life situation changes.
Intermediary Functions and Responsibilities  The firm can enhance customer value and strengthen commitment by using market research to understand customer perceptions of service quality. Other channel functions and responsibilities that can lead to greater commitment include customer representative training, sales incentives that focus on customer satisfaction and increased margins.
Dissolution
Elimination of Channel Types Some customers, particularly those who find value in the functions carried out by the channel type that has been eliminated will complain or leave.
Reduction in the Number of Intermediaries Customers will find it more difficult to purchase the firm’s products and will complain or exit.
Reduction in Channel IntegrationBy customers being treated based only on part of their transactions, they are less likely to feel connected to the firm or brand, and dissolution is likely to follow.