notes

# Distribution Strategy

Distribution -> Activities required to get the right product to the right place at the right time.

Developing the most innovative product at the most competitive price means nothing if firms are not able to bring the products to the right outlets in sufficient quantities.

Manufacuters can sell their products to either wholesalers or retailers.

  • Wholesalers -> Firms who purchase goods from manufacturers and sell them to retailers.
  • Retailers -> Firms who sell products directly to consumers.

# Marketing Channels

# Types

  • Direct marketing channel -> When the manufacturer sells directly to the buyer.
  • Indirect marketing channel -> When one or more intermediaries work with the manufacturer to bring the product to the customer.

# Qualities of an Effective Channel

  • Efficient -> Reduces number of marketplace contacts
  • Sorts -> Matches consumer needs to manufacturer products
  • Facilitates -> Flow of products, information, promotion, payment, and ownership
  • Standardizes -> Makes transactions efficient and fair

# Choosing the Right Channel

  • Customer/Market factors
    • Expectations, geographic location/dispersion, average order size/quantity, service needs, etc.
  • Product factors
    • Perishability, complexity/customization, product type, distribution intensity
  • Organizational factors
    • Size and resources
    • Scope of product line
    • Desired level of control
  • Competitive factors

# Retail Partners

# Establishing Relationships with Retailers

  1. Choosing retail partners -> How likely is it that certain retailers will want to carry our products?
  2. Identifying types of retailers
  3. Developing a retail strategy -> Use 4Ps
  4. Managing an omnichannel strategy -> Selling products in more than one channel

# Choosing Retail Partners

When choosing retail partners, manufacturers look at several considerations:

  • Channel structure -> Difficulty in getting retailers to buy your product depends on the degree of vertical integration of the channel
    • Vertical integration -> How well known the brand is and how much market power the manufacturer and the retailer have
    • Typically more well known the brand -> easier time in getting retailers to purchase your product
  • Customer expectations -> Manufacturers need to place their products where customers would expect them to be
    • e.g. Customers purchasing luxury goods would expect to find the products in luxury retailers
  • Channel member characteristics -> Larger channel members are less likely to use channel intermediaries
  • Distribution intensity -> How many retailers should we use?
    • Intensive -> Place products in as many outlets as possible
    • Exclusive -> Grant exclusive distribution rights to one or very select few retailers
      • Helps maintain a particular brand image
      • Helps ensure inventory
      • Incentive for retailers to market/promote because no other retailer holds the brand
    • Selective -> Distributes to few retailers
      • Similar advantages to exclusive but not as specific

# Developing Retail Strategy

Retail strategy is developed with the four Ps marketing mix.

# Product

Retailers have to select the appropriate mix of products to tend to its target segment.

  • Having an assortment of goods allow customers to have a choice
  • Retailers provide a storage function because neither manufacturers nor customers like to keep inventory

Retailers can differentiate themselves through store brands and/or exclusive brands.

  • Store brands -> Products developed and marketed by a retailer and is only available at that retailer.
  • Exclusive brands -> Products developed in a partnership between a retailer and a manufacturer. The product is exclusive to that retailer.
    • Can only be sold by one retailer so market is limited
    • Retailers have to share profits with manufacturer

# Price

Manufacturers will consider those retailers whose image aligns with the intended price range.

  • High priced items at low-end retailers -> No buyers
  • Low priced items at high-end retailers -> Doubts on product quality

# Promotion

Effective promotion can mean the difference between flat sales and a growing consumer base.

  • Retailers are increasingly using coupons on their websites that allows consumers to immediately use in-store
  • As mobile use grows retailers are investing m-commerce -> product purchases through mobile devices
  • Manufacturer may work with retailers to develop advertising campaigns
    • Co-op advertising -> manufacturer pays all or most of advertising costs
  • Use displays and signs at strategic points to stimulate purchases of featured products
  • Increased investment in overall store experience -> more pleasant shopping experience generally leads to greater spending
  • Customer service representatives provide information to customers about product characteristics and availability
  • Use customer data and customer shopping habits for CRM (customer relationship management)
  • Attempt to increase share of wallet -> proportion of customer purchases made at that retailer

# Place

Most important factor -> location.

  • Customers choose stores on the basis of where they are location, so location could be a strong competitive advantage
  • Experimenting with different options:
    • Standalone stores provides option for drive-thru
    • Large retailers known for large standalone stores are opening smaller urban locations to better serve those markets

← Promotion Strategy →