Channel Functions & Decisions in Marketing Logistics
Channel Functions
Channel functions encompass various activities, including gathering information, developing and disseminating persuasive communications, reaching agreements on price and conditions, securing funds to finance inventories and risk-taking, facilitating storage, offering buyers payment clearance, monitoring the transfer of ownership, managing physical possession, and promoting the forward flow of activity from the company to customers and the backward flow of customer activity to the company.
Decisions on Channel Design
Channel design involves analyzing customer needs, establishing channel objectives, identifying and evaluating the most important channel alternatives.
Vertical Distribution Channels: Types
Corporate SDV: Combines successive stages of production and distribution under single ownership.
Administered SDV: Coordinates successive stages of production and distribution through the size and power of one channel member. This system can program the distribution: a well-designed and operated vertical marketing system meets the needs of both manufacturers and distributors. To achieve this, the manufacturer will have a planning department for distributor relations.
Contractual SDV:
- Sponsored Voluntary Chains (Wholesaler): Wholesalers organize voluntary chains of independent retailers to help them compete with large chains (e.g., master-chain, IGA).
- Retailer Cooperatives: Retailers organize as a legal entity to make bulk purchases and, in some cases, produce some products (e.g., UNIDE).
- Franchises: A channel member (franchisor) joins several successive stages of the production-distribution process (e.g., Benetton).
Channel Classification
By Position and Role: Wholesale, retail, other (agent, broker, representative), degree of integration (e.g., traveling salesperson).
By Integration: Independent trade, spatial association, partner trade, integrated trade.
By Sales Method: Setting-sale (correspondence, telephone, online, television, vending), home sales, mobile sales.
Other Criteria: Size, sedentary.
Forms of Retail Organization
Corporate retailers, voluntary chains, retailer cooperatives, consumer cooperatives, franchises, sales conglomerates.
New Models of Successful Retail
Large stores with strong brands, concept stores.
Decisions in Retail Marketing
Target market, product assortment, procurement, services and store atmosphere, shopping activities and experience, price, communication, location.
Trends in Retail
- New formats and retail combinations (e.g., library with cafeteria).
- Increased intertype competition (different retail formats compete for customers by offering the same products).
- Competition between large-scale retailers (they have great purchasing power, information and logistics systems, providing good service and high-volume products).
- Decline of retailers that cater to intermediate segments (adoption of the hourglass shape of the retail sector – concentration at the ends).
- Increased investment in technology.
- Presence of leading international retailers.
Functions of Wholesalers
Sales and promotion, purchasing and product range training, bulk breaking, storage, transportation, financing, risk-taking, market information, management and accessory services.
Types of Wholesalers
Full-Service Wholesalers: Provide a complete range of services.
Limited Service Wholesalers:
- Cash and Carry
- Truck Wholesalers
- Drop Shippers
- Rack Jobbers
- Mail Order Wholesalers
- Cooperatives
Brokers and Agents
Brokers: Facilitate transactions between buyers and sellers.
Agents: Represent either buyers or sellers on a more permanent basis.
Branches and Offices of Manufacturers and Distributors
Manufacturers and distributors may establish their own branches and offices to handle sales and distribution.
Trends in Wholesale Distribution
- Adaptation of services to suppliers and customers.
- Strengthening key operational efficiency.
- Expansion into global markets.
- Investments in technology (barcodes and automated scanners, warehouse management systems, EDI systems and information technologies).
- Commitment to total quality.
- Marketing support philosophy.
Market Logistics
Market logistics involves planning the structure needed to meet demand, implementing and controlling the physical flow of materials and finished products from source to points of use, to meet consumer needs in exchange for a profit.
Phases of Market Logistics
- Decide the value proposition offered by the company to its customers.
- Design the best channel and network strategy for reaching customers.
- Develop operational excellence in sales forecasting, warehouse management, transportation management, and materials management.
- Implement solutions that include improved information systems, better machinery, and best policies and procedures.
Decisions in Market Logistics
Order processing, warehousing, inventory management, transportation.