Distribution

MARKETING CHANNELS (CHANNEL OF DISTRIBUTION):

n  A group of interrelated organizations that directs the flow of products from producers to ultimate consumers; also called channel of distribution.

n  Marketing intermediary – An individual or organization in a marketing channel that provides a link between producers, other channel members, and final consumers.

Functions of Marketing Intermediaries:

Functions of Marketing Intermediaries

n  Marketing intermediaries are vital in creating place, time, and possession utilities. They ensure that products are available on a timely basis where they are needed. Intermediaries provide services such as, storage, record-keeping, delivery, and so on.

Types of Marketing Channels 

n  Depending on the needs of target market, firm utilize many different types of marketing channels to distribute products. Generally channels for consumer products are different than channels for industrial products.

n  Consumer products: the four most commonly used channels for consumer products are shown below:

n  Industrial products: These channels are much shorter than the consumer   

             channels.

Intensity of Market Coverage:

n  Market coverage: The number of outlets in which a product is sold. For instance, Ispahani tea is sold in 4000 outlets of Dhaka city. So the market coverage of Ispahani tea is 4000 outlets.

n  Intensive Distribution – market coverage in which all available outlets are used for distributing a product. E.g. gum, chocolates, cigarettes, bread, eggs, and soft drinks, are distributed in almost all the outlets. (Convenience Product)

n  Selective Distribution – market coverage in which only some of the available outlets are used for distributing a product. E.g. furniture and electrical appliances are distributed selectively. (Shopping Product)

n  Exclusive Distribution – market coverage in which one outlet is used in a specific geographical area for distributing a product. E.g. Mercedes car or lexus car is distributed through a sole dealer. (Specialty Product)

PHYSICAL DISTRIBUTION:

n  Those activities that involve the movement of products through marketing channels from manufacturer to customers.

n  Setting Service Standards: Physical distribution begins with a consideration of customers’ needs.

·        Service Standards are specific, measurable goals relating to physical distribution activities. For example, when Federal Express guarantees overnight or 24 hour delivery, it must develop physical distribution activities that will achieve this service standard.

n  Transportation: shipping goods to customers by rail, truck, water                                                                     and pipeline –

·        Rail: cost and fuel efficient (useful for carrying goods like food grain, coal, lumber, automobiles, chemicals etc).

·        Air: most expensive (fresh flowers, perishable foods, technical instruments, emergency parts etc)

·        Truck: most flexible (clothing, paper goods, computers, fresh fruits, vegetables, livestock etc)

·        Water: least costly, slowest and least dependable, plus only cities with ports can be served. (petroleum, chemicals, iron ore etc).

·        Pipeline: Major products shipped via pipelines are oil, natural gas, etc.

n  Warehousing – The receiving, storing and shipping activities involved in the physical distribution of goods-

·        Private warehouse: privately owned and operated to distribute own products.

·        Public warehouse: provide storage on a rental basis.

n  Order Processing – The receipt and preparation of an order for shipment. Firms need to have efficient an order processing system.

n  Materials Management – The physical handling of products during transportation and warehousing. E.g. Containerization, Freight Forwarders etc.

n  Inventory Management – The process of developing and maintaining stocks of products that customers need and want.