{"id":140,"date":"2016-06-27T16:54:16","date_gmt":"2016-06-27T16:54:16","guid":{"rendered":"http:\/\/blogs.uww.edu\/prasad\/?page_id=140"},"modified":"2016-06-27T16:54:36","modified_gmt":"2016-06-27T16:54:36","slug":"selecting-channels-of-distribution-a-multi-stage-process","status":"publish","type":"page","link":"https:\/\/blogs.uww.edu\/prasad\/teaching\/independent-study\/selecting-channels-of-distribution-a-multi-stage-process\/","title":{"rendered":"Selecting Channels of Distribution: A Multi-Stage Process"},"content":{"rendered":"

Bruce Mallen<\/p>\n

International Journal of Physical Distribution & Logistics<\/p>\n

1996, Vol. 26, No. 5, pp. 5-21<\/p>\n

 <\/p>\n

1)\u00a0\u00a0\u00a0\u00a0\u00a0 Selecting channels of distribution is a 6-Stage process<\/p>\n

    \n
  1. a) Decision Areas<\/li>\n
  2. i) What degree of directness should the channel structure have?<\/li>\n<\/ol>\n

    (1)\u00a0\u00a0 Number of middlemen<\/p>\n

    (2)\u00a0\u00a0 Vertical integration<\/p>\n

    (3)\u00a0\u00a0 Economies of scale<\/p>\n

      \n
    1. ii) How selective should the distribution channel be?<\/li>\n<\/ol>\n

      (1)\u00a0\u00a0 Per level<\/p>\n

      (2)\u00a0\u00a0 Per geographic area<\/p>\n

      iii)\u00a0\u00a0\u00a0\u00a0 What type(s) of middlemen are to be selected? (3 groups)<\/p>\n

      (1)\u00a0\u00a0 wholesalers<\/p>\n

      (2)\u00a0\u00a0 retailers<\/p>\n

      (3)\u00a0\u00a0 facilitating intermediaries<\/p>\n

        \n
      1. iv) How many channels should be established for a given product?<\/li>\n<\/ol>\n

        (1)\u00a0\u00a0 Number of different patterns used for distribution<\/p>\n

          \n
        1. v) How shall the middlemen be selected?<\/li>\n<\/ol>\n

          (1)\u00a0\u00a0 Middlemen must fit into manufacturers total marketing strategy<\/p>\n

          (2)\u00a0\u00a0 Network should have little overlap and maximum coverage<\/p>\n

          (3)\u00a0\u00a0 Middlemen must have the necessary financial, human and physical resources<\/p>\n

          2)\u00a0\u00a0\u00a0\u00a0\u00a0 The guidelines<\/p>\n

            \n
          1. a) Objectives and their relationships (ito. Directness, selectivity, types of middlemen, number of channels and degree of cooperation)<\/li>\n
          2. i) Profit maximization<\/li>\n<\/ol>\n

            (1)\u00a0\u00a0 Maximize sales<\/p>\n

            (a)\u00a0\u00a0\u00a0 Shorter channels<\/p>\n

            (b)\u00a0\u00a0 More middlemen<\/p>\n

            (c)\u00a0\u00a0\u00a0 Multiple channels<\/p>\n

            (d)\u00a0\u00a0 Maximum cooperation between middlemen<\/p>\n

            (2)\u00a0\u00a0 Minimize costs<\/p>\n

            (a)\u00a0\u00a0\u00a0 Longer channels<\/p>\n

            (b)\u00a0\u00a0 Fewer middlemen<\/p>\n

            (c)\u00a0\u00a0\u00a0 More comprehensive middleman services<\/p>\n

            (d)\u00a0\u00a0 Single channel<\/p>\n

            (e)\u00a0\u00a0\u00a0 Minimum co-operation between middlemen<\/p>\n

              \n
            1. ii) Long-run profit maximization<\/li>\n<\/ol>\n

              (1)\u00a0\u00a0 Maximize channel goodwill<\/p>\n

              (a)\u00a0\u00a0\u00a0 Shorter channels<\/p>\n

              (b)\u00a0\u00a0 Fewer middlemen<\/p>\n

              (c)\u00a0\u00a0\u00a0 More comprehensive middlemen services<\/p>\n

              (d)\u00a0\u00a0 Single channel<\/p>\n

              (e)\u00a0\u00a0\u00a0 Maximum cooperation<\/p>\n

              (2)\u00a0\u00a0 Maximize channel control<\/p>\n

              (a)\u00a0\u00a0\u00a0 Shorter channels<\/p>\n

              (b)\u00a0\u00a0 Fewer middlemen<\/p>\n

              (c)\u00a0\u00a0\u00a0 Less comprehensive middlemen services<\/p>\n

              (d)\u00a0\u00a0 Single channel<\/p>\n

              (e)\u00a0\u00a0\u00a0 Maximum cooperation<\/p>\n

              3)\u00a0\u00a0\u00a0\u00a0\u00a0 The determinants<\/p>\n

                \n
              1. a) The market<\/li>\n
              2. i) Density ito number of consumers per unit of measure<\/li>\n<\/ol>\n

                (1)\u00a0\u00a0 Greater density<\/p>\n

                (a)\u00a0\u00a0\u00a0 Direct channel<\/p>\n

                (b)\u00a0\u00a0 Selective channel<\/p>\n

                  \n
                1. ii) Size ito total number of buying units<\/li>\n<\/ol>\n

                  (1)\u00a0\u00a0 Greater size<\/p>\n

                  (a)\u00a0\u00a0\u00a0 Direct channel<\/p>\n

                  (b)\u00a0\u00a0 Intensive channel<\/p>\n

                  (2)\u00a0\u00a0 Multiple channels<\/p>\n

                  iii)\u00a0\u00a0\u00a0\u00a0 Buying motives and habits<\/p>\n

                  (1)\u00a0\u00a0 Buying habits are a function of the market and the product<\/p>\n

                    \n
                  1. b) Consumer goods classification<\/li>\n
                  2. i) Classification of product<\/li>\n<\/ol>\n

                    (1)\u00a0\u00a0 Convenience goods<\/p>\n

                    (2)\u00a0\u00a0 Shopping goods<\/p>\n

                    (3)\u00a0\u00a0 Specialty goods<\/p>\n

                      \n
                    1. ii) Classification of oulet<\/li>\n<\/ol>\n

                      (1)\u00a0\u00a0 Convenience store<\/p>\n

                      (2)\u00a0\u00a0 Shopping store<\/p>\n

                      (3)\u00a0\u00a0 Specialty store<\/p>\n

                        \n
                      1. c) Marketing Mix<\/li>\n
                      2. i) Product<\/li>\n<\/ol>\n

                        (1)\u00a0\u00a0 Uses<\/p>\n

                        (2)\u00a0\u00a0 Frequency of purchase<\/p>\n

                        (a)\u00a0\u00a0\u00a0 Determining characteristic<\/p>\n

                        (i)\u00a0\u00a0\u00a0\u00a0\u00a0 Consumption period<\/p>\n

                        (ii)\u00a0\u00a0\u00a0 Search time<\/p>\n

                        (iii)\u00a0\u00a0 Replacement rate<\/p>\n

                        (b)\u00a0\u00a0 Higher frequency of purchase requires a more direct channel<\/p>\n

                        (3)\u00a0\u00a0 Perishability<\/p>\n

                        (a)\u00a0\u00a0\u00a0 Fashionable and perishable commodities require a more direct channel- they must get to the seller more quickly<\/p>\n

                        (4)\u00a0\u00a0 Service required<\/p>\n

                        (a)\u00a0\u00a0\u00a0 More service and technical items require a more direct and selective channel<\/p>\n

                        (5)\u00a0\u00a0 Value<\/p>\n

                        (a)\u00a0\u00a0\u00a0 Low unit value items and convenience goods may utilize a more indirect and intensive channel<\/p>\n

                        (6)\u00a0\u00a0 Bulk<\/p>\n

                        (a)\u00a0\u00a0\u00a0 More products produced can save through economies resulting from a direct channel<\/p>\n

                          \n
                        1. ii) Pricing: Methods used to control resale prices<\/li>\n<\/ol>\n

                          (1)\u00a0\u00a0 Direct distribution to consumers or retailers<\/p>\n

                          (2)\u00a0\u00a0 Use of fair trade legislation<\/p>\n

                          (3)\u00a0\u00a0 Sale go goods on consignment<\/p>\n

                          (4)\u00a0\u00a0 Refusal to sell to price cutters<\/p>\n

                          (5)\u00a0\u00a0 Distribution through small middlemen<\/p>\n

                          (6)\u00a0\u00a0 Granting only small trade discounts<\/p>\n

                          (7)\u00a0\u00a0 Advertising resale prices to consumers<\/p>\n

                          (8)\u00a0\u00a0 Suggested and quoted resale prices<\/p>\n

                          (9)\u00a0\u00a0 Pre-ticketing<\/p>\n

                          iii)\u00a0\u00a0\u00a0\u00a0 Promotion<\/p>\n

                          (1)\u00a0\u00a0 Promotion and channel selection are determinants of each other<\/p>\n

                          (a)\u00a0\u00a0\u00a0 Less advertising, less sales promotion and more personal selling<\/p>\n

                          (2)\u00a0\u00a0 Channel selection also impacts promotional budget dispursion<\/p>\n

                          (a)\u00a0\u00a0\u00a0 More indirect channels require more budget allocation toward middlemen, etc\u2026<\/p>\n

                            \n
                          1. iv) Physical Distribution<\/li>\n<\/ol>\n

                            (1)\u00a0\u00a0 Manufacturer must decide<\/p>\n

                            (a)\u00a0\u00a0\u00a0 Which functions to allocate to middlemen<\/p>\n

                            (b)\u00a0\u00a0 Which functions to do in-house<\/p>\n

                              \n
                            1. d) Resources<\/li>\n
                            2. i) Finances and marketing manpower<\/li>\n<\/ol>\n

                              (1)\u00a0\u00a0 Strong resources allow more direct marketing<\/p>\n

                              (2)\u00a0\u00a0 Weak finances may force companies to use financially strong middlemen<\/p>\n

                                \n
                              1. ii) Change in raw materials<\/li>\n<\/ol>\n

                                (1)\u00a0\u00a0 Depletion can alter the product and thus the channels<\/p>\n

                                iii)\u00a0\u00a0\u00a0\u00a0 Human resource policies<\/p>\n

                                (1)\u00a0\u00a0 Stable employment may result in higher inventories at times which may be passed to the middleman<\/p>\n

                                  \n
                                1. e) Environment<\/li>\n
                                2. i) 4 types of competition<\/li>\n<\/ol>\n

                                  (1)\u00a0\u00a0 between channel members<\/p>\n

                                  (a)\u00a0\u00a0\u00a0 wholesaler vs wholesaler<\/p>\n

                                  (b)\u00a0\u00a0 retailer vs retailer<\/p>\n

                                  (2)\u00a0\u00a0 among channel members<\/p>\n

                                  (a)\u00a0\u00a0\u00a0 wholesaler vs manufacturer<\/p>\n

                                  (b)\u00a0\u00a0 retailer vs wholesaler<\/p>\n

                                  (3)\u00a0\u00a0 between channel members for the use of channel members<\/p>\n

                                  (a)\u00a0\u00a0\u00a0 manufacturer vs manufacturer for the use of a wholesaler<\/p>\n

                                  (b)\u00a0\u00a0 wholesaler vs wholesaler for the use of a retailer<\/p>\n

                                  (4)\u00a0\u00a0 between channels<\/p>\n

                                  (a)\u00a0\u00a0\u00a0 manufacturer-wholesaler-retailer vs manufacturer-retailer<\/p>\n

                                    \n
                                  1. f) Business conditions and technology<\/li>\n
                                  2. i) Conditions can modify the numbers and types of middlemen available<\/li>\n
                                  3. g) International marketing<\/li>\n
                                  4. i) Manufacturers seek middlemen who focus in international trade<\/li>\n<\/ol>\n

                                    (1)\u00a0\u00a0 Importer-exporter merchants and agents<\/p>\n

                                      \n
                                    1. h) Social and ethical considerations<\/li>\n
                                    2. i) Black-market channels<\/li>\n
                                    3. ii) Discounters<\/li>\n
                                    4. i) Government and legal considerations<\/li>\n
                                    5. i) Government as a customer<\/li>\n<\/ol>\n

                                      (1)\u00a0\u00a0 Purchases on a bidding basis requiring more direct channels<\/p>\n

                                        \n
                                      1. ii) Regulation of peddler and solicitor selling<\/li>\n<\/ol>\n

                                        4)\u00a0\u00a0\u00a0\u00a0\u00a0 Quantifying the options<\/p>\n

                                          \n
                                        1. a) Process<\/li>\n
                                        2. i) Work back from the ultimate market to arrive at the contributions to profit and overhead<\/li>\n
                                        3. ii) Subtract total margins gained by middlemen from the total sales<\/li>\n<\/ol>\n

                                          iii)\u00a0\u00a0\u00a0\u00a0 Consider total distribution costs<\/p>\n

                                            \n
                                          1. iv) Consider channel control and channel good-will (non-quantifiable)<\/li>\n
                                          2. v) Select the option showing the highest contribution to profit and overhead, so long as channel goodwill and channel control meet the needs of the organization<\/li>\n
                                          3. vi) Consider the amount of investment required<\/li>\n<\/ol>\n

                                            5)\u00a0\u00a0\u00a0\u00a0\u00a0 Review and evaluation<\/p>\n

                                              \n
                                            1. a) Optimize basic channel objectives<\/li>\n
                                            2. i) Maximization sales<\/li>\n
                                            3. ii) Goodwill control<\/li>\n<\/ol>\n

                                              iii)\u00a0\u00a0\u00a0\u00a0 Minimization of costs<\/p>\n","protected":false},"excerpt":{"rendered":"

                                              Bruce Mallen International Journal of Physical Distribution & Logistics 1996, Vol. 26, No. 5, pp. 5-21   1)\u00a0\u00a0\u00a0\u00a0\u00a0 Selecting channels of distribution is a 6-Stage process a) Decision Areas i) What degree of directness should the channel structure have? (1)\u00a0\u00a0 Number of middlemen (2)\u00a0\u00a0 Vertical integration (3)\u00a0\u00a0 Economies of scale ii) How selective should the […]<\/p>\n","protected":false},"author":3916,"featured_media":0,"parent":118,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"class_list":["post-140","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/140","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/users\/3916"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/comments?post=140"}],"version-history":[{"count":1,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/140\/revisions"}],"predecessor-version":[{"id":141,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/140\/revisions\/141"}],"up":[{"embeddable":true,"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/pages\/118"}],"wp:attachment":[{"href":"https:\/\/blogs.uww.edu\/prasad\/wp-json\/wp\/v2\/media?parent=140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}