ORGANIZINGTHECHANNEL 267
MARKETING CAPSULE 1 - "
1.Producers/manufacturersmakeorassemblethe finalprod-
uctprovidedtotheconsumer.
2.Retailinginvolvesallactivitiesrequiredtomarketconsumer
goodsandservicetoultimateconsumers'vhoaremoti-
vatedtobuyinordertosatisfyindividualorfamilyneeds
incontrasttobusiness,institutional,orindustrialuse.The
varioustypesofretailersinclude:
a. Departmentstores
b. Chainstores
c. Supermarkets
d.Discounthouses
e. Warehouseretailing
f. Franchises
g.Plannedshoppingcenters
h. Nonstoreretailing
3.Wholesalingincludesallactivitiesrequiredtomarketgoods
andservicestobusinesses,institutions,orindustrialusers
whoaremotivatedtobuyforresaleortoproduceandmar-
ketotherproducts/services.Thevarious typesofwhole-
salersinclude:
a. Full-servicemerchandisewholesalers
b. Limited-servicemerchantwholesalers
c. Agentsandbrokers
d.Manufacturers'salesrepresentatives
e. Facilitators
AsyoucanseeinFigure10.5,successfulmanagementoftheflowofgoodsfroma
sourceofsupply(rawmaterials)tothefinalcustomerinvolveseffectiveplanning,imple-
mentation,andcontrolofmanydistributionactivities.Theseinvolverawmaterial,in-process
inventories(partiallycompletedproductsnotreadyforresale),andfinishedproducts.Effec-
tivephysicaldistributionmanagementresultsinitiallyintheadditionoftime,place,and
possessionutilityofproducts;andultimately,theefficientmovementofproductstocus-
tomerandtheenhancementofthefinn'smarketingefforts.
Physicaldistributionrepresentsbotha costcomponentanda marketingtoolforthe
purposeofstimulatingcustomerdemand.Themajorcostsofphysicaldistributioninclude
transportation,warehousing,carryinginventory,receivingandshipping,packaging,admin-
istration,andorderprocessing.Thetotalcostofphysicaldistributionactivitiesrepresents
13.6%forresellercompanies.Poorlymanagedphysicaldistributionresultsinexcessively
highcosts,butsubstantialsavingscanoccurviapropermanagement.
Physicaldistributionalsorepresentsa valuablemarketingtooltostimulateconsumer
demand.Physicaldistributionimprovementsthatlowerpricesorprovidebetterserviceare
attractivetopotentialcustomers.Similarly,iffinishedproductsarenotsuppliedat theright
timeorintherightplaces,firmsruntheriskoflosingcustomers.
ORGANIZING THECHANNEL
Eitherthrougha plannedprocessorthrougha naturalevolution,channelsofdistribution
reflectanobservableorganizationstructure.Threetypesaremostcommon:conventional
channels,verticalmarketingsystems,andhorizontalchannelsystems.
ConventionalChannels
Theconventionalchannelofdistributioncouldbedescribedasa groupofindependentbusi-
nesses,eachmotivatedbyprofit,andhavinglittleconcernaboutanyothermemberofthe
distributionsequence.Therearenoall-inclusivegoals,andinmanyinstances,theassign-
mentoftasksandtheevaluationprocessaretotallyinformal.Consequently,channelframe-
worksmightbeworkingagainst oneanother,tasksmaygoundone,andineffectivechannel
