week 1 lecture channel
DESCRIPTION
pptTRANSCRIPT
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Dr. Suleman Alvi
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What is a Channel
Supply chain consist of all parties and their activities that help a
manufacturer create and a marketer deliver the product to the final
customer. A marketer is mainly concerned with the front end i.e.
the Distribution Channels
All independent organizations and their activities that help move
the goods from manufacturer/marketer to the end user are
collectively called Distribution channel
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Channel Members
Marketer Marketing company / Supplier / Manufacturer
Specialist Organization:
Resellers take ownership of products from marketing company with the intention of selling to others
Retailers sell direct to end users
Wholesaler / Distributors buy from marketer and sell to retailers
Industrial Distributors B2B (buy from industrial suppliers)
Specialty Service Firms:
Agents & brokers bring suppliers and buyers together for a fee
Distribution Service Firms offer services aiding in the movement of products (assistance with transportation, storage and order processing)
Others provide additional service (e.g. insurance and routing)
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Channel Activities Ordering
Packaging
Handling
Shipping
Sorting
Storage
Display / Merchandising
Promotion
Bundling
Selling / Invoicing
Informing / Educating
Information feedback
After Sales Service
Others
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Why we need Channels ? Specialization
Reduce Time to reach customers
Convenience / add variety
Larger number of transactions with smaller denominations
(small value per transactions)
Increase reach and coverage
Sales creation
Information flow
Customer Service
Financial support
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Demand-Side factors Facilitation of Search
Addressing Assortment Discrepancy - natural miss-match between goods/service made by a manufacturer and good/service demanded by an end user. Manufacturer produce a large quantity of a small variety of goods, while end user require small quantities of larger variety
Sorting breaking down a heterogonous supply into separate stocks that are relatively homogenous
Accumulation bring together similar stocks from a number of manufactures into a homogenous supply
Allocation Breaking down a homogenous supply into smaller and smaller lots. Allocation at Wholesale level is terms as Breaking Bulk
Assorting building up an assortment of products for resale in association with each other
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Channel Development & Change
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Supply-Side factors
Routinization of transactions
Transactions are made routine to decrease cost and bring
Standardization in the process
Continuous Replenishment Program (CRP) is a classic example of
routinization process.
In CRP manufacturing and retailing partners share inventory and
stocking information to avoid under/over stock.
In CRP transactions are more frequent but smaller resulting in lower
turnaround time and lower inventories in the system
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Channel Development & Change
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Marketing Flows in Channels
Producer End- User
Retailer Whole-
saler
Physical possession
Ownership
Negotiation
Promotion
Financing
Risk taking
Ordering
Payment
Physical possession
Ownership
Negotiation
Promotion
Financing
Risk taking
Ordering
Payment
Physical possession
Ownership
Negotiation
Promotion
Financing
Risk taking
Ordering
Payment
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Identifying Channels
Industry / Sector
Manufacturer / Suppliers
Category Potential Members of Distribution channel
Pharmaceuticals GNC Vitamins (OTC) ?
Pharmaceuticals Abbott Antibiotics (on Prescription)
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FMCG Colgate Palmolive Oral Care (Toothpaste) ?
Information / Knowledge
Oxford University Press
Books Non Fiction
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Automobiles Indus Motors / Toyota
Sedan Corolla
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Chemicals BASF Dyes / colors for textiles ?
Insurance EFU Life Life assurance ?
Insurance EFU General Vehicle insurance ?
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Identifying Channels (2)
Industry / Sector
Manufacturer / Suppliers
Category Potential Members of Distribution channel
FMCG P&G Diapers ?
Natural elements ICI Soda Ash ?
Telecom Mobilink Pre-paid mobile phone packages
?
Print media Jang group National Daily / Newspaper
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Dairy products Nestle Low Fat Milk ?
Pest/Insect control
R&B Flying Insect Killer ?
Aviation Emirates Long Haul International Travel
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Computing Dell Laptops ?
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Channel length = number of levels in a distribution channel.
Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agent
2 level 3 level 4 level 5 level
Length of Channel
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Intensity of Channel
Channel intensity: the number of intermediaries at each level of the marketing channel.
All Possible Intermediaries
Relatively Few Intermediaries
Just One Intermediary
Intensive Exclusive Selective
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Technology and Channels
Technology has impacted the way channels are structured and
evaluated
Flow of good and information through Channels is now driven by
level of technology employed
Impact on speed and cost of transit
Internet / e-Commerce
Business Process Management
SAP / ORACLE