1

Final draft:

Name: Era Ayman Kamal
ID: 123401
Mkt 306
Submitted to: Dr.Heba Samir
T.A: Noura





2

Distribution channel management: power considerations

Introduction

A Distribution channel is of interdependent organizations involved in the
process of making a product or service available for use or consumption. Distribution
channels are very important because channel is an important asset in the company's
overall marketing and positioning strategy. Channels usually prefer better if a party is in
charge, providing some level of leadership. Essentially, the purpose of this leadership is
to coordinate the goals and efforts of channel institutions. The style of leadership may
range from very negative, based on fear and punishment, to very positive, based on
encouragement and reward. In a given situation any of these leadership styles may prove
effective. Now I am going to talking about the role of power in the distribution channel
system and the factors which affect the way in which power is used.

The Role of power in Distribution Channels:

A channel of distribution is responsible for moving the product from the
producer to the consumer. The need some cooperation between the channels members
and coordination members in order to allow the individual organization plan effectively.
Sometimes there is a conflict in the channels because members dont have the goals,
Such as having different ideas and perceptions. The use of power may affect the decision
making and the behavior of one another, but some firms supposed that the leadership role
and make deliberate try to organize the channel. The main source of the meaning of the
power is the operations between individual channel members' activities are coordinated
so that the conflict will be controlled to some extent.
Sometimes using power by individual channels affects the decision making and
the behavior of one another. It is the tool that the channel is organized and weel-making
behavior well-kept. But it doesn't mean that organizations automatically set out
consciously to organize the channel, but that this organization of the channel arises out of
3

individual organizations regulating their behavior to one another in relation to the power
they each have and use.

Methods of using power:

There are two types: the setting up of rewards or positive sanctions for compliance;
and the setting up of punishments or negative sanctions for non-compliance.
The first type is the economic rewards such as increased sales or profits which they
are very important in the channel. Also Rewards or positive agreements may be in terms
of any resource appreciated by a firm. There is another way of rewards but indirect
through expertise as it may be able to give training to a producer, which allows the final
to improve performance and so gain rewards.
The Second type is punishments or negative authorizations also contains more than
economic penalties. In extreme form negative authorizations contain physical force
which is very unusual in the channel, but there could be pressures of displeasure or loss
prestige. Moreover, a negative authorization can be indirect.

Factors affecting the use of power by firms:

There are factors very important because it could affect at firm's decision such as
how it will use its power in some situations. Also it makes the firm control through it the
rewards firm notices it will gain and the costs it notices will be deserved. For example if
I will gain a lot of profit from my product I should minimize the cost of distribution in
order to gain the maximum net profit.
Expected Rewards: it always depends on the goals of the
influencer and the place of a specific influence in the organizing of
things.
Expect Costs: Costs can be direct and indirect. If there is setting
up or punishments; it should be direct cost to the influencer while
indirect costs contain opportunity costs. The use of power in one
direction may well prevent its use in another; if only because of the
4

limited extent of attention. So if the one firm tried to change its
behavior it will be balanced against the benefits to be gained from
using this power in another direction.
The Second form of indirect cost is that sometimes there is conflict that produced through
the use of power. For example if a firm is forces to do something it didnt plan to do, it
will affect the firm in the future situations.

The outcome of the use of power

It is talking about the degree of success which the firm will achieve through the
decision making or behavior of another in line with its wishes. It depends on two basic
variables.
The strength of the influence: it depends on the costs to the influence
of refusing to obey, as well as any negative sanctions forced for
noncompliance such as reduced business or respect and the value of
opportunities foregone but not obeying.
The resistance of the influence: it is talking about to what extent that
the firm can resists the demands of another can affect the outcome of
any effort to change its decision making or behavior.

Conclusion:

Finally, Power is our willingness to use force in a relationship. It is often the means
by which we are able to control or influence the behavior of another party. In the channel
mechanism, power refers to the capacity of the particular channel member to control or
influence the behavior of another channel member. For example, a large retailer may
want the manufacturer to modify the design of the product, or perhaps be required to
carry fewer inventories. Both parties may attempt to exert their power in an attempt to
influence the other's behavior. The ability of either of the parties to achieve this outcome
will depend upon the amount of power that each can bring to bear.

5

Develop a Framework for Selection of Intermediary in Marketing Channel

Introduction:

Marketing intermediaries refers to resellers, physical distribution firms, marketing
services agencies, and financial intermediaries. These are the people who help the company
promote, sell, and distribute its products to final buyers. Resellers are those who hold and sell the
companys product. They match the distribution to the customers and include places, such as
Wal-Mart, Target, and Best Buy. Physical distribution firms are places, such as warehouses, that
store and transport the companys product from its origin to its destination. Marketing services
agencies are companies that offer services, such as conducting marketing research, advertising,
and consulting. Financial intermediaries are institutions, such as banks, credit companies, and
insurance companies. Market channel means ways used by marketers to make products
available to consumers. Wholesalers, distributors, sales agents, retailers, and all other sources
used in getting the product to consumers are included in the category of marketing channels. This
article is talking about how a company can select the best intermediary for its Marketing
channels with minimum of criteria and time. Any Company is opening a new business its goal is
to satisfy the customer's needs and to gain profit. Satisfying customer is the most important and
difficult task for business.

The 4Ps:

There is something called "4Ps" (Product-Price-Promotion-Place).The First step of any
company should take it to understand the consumer behavior for the second step which is
organizing the plan for producing a new product and how to be attractive to the customers and
satisfy their needs. There are 4 parts should be organized well in order to satisfy the need of the
customer. First The Product it should be semi equal to what the customer want. Second The
Promotion such as advertisements and billboards. They can be costly high but in this case
they will attract the attention of the customer also they should contain information about the
product and it should be full of creativity and well designed. They can make free samples for the
customers. Third The Price the company should price the product correctly not too high and not
6

too low. The final part Distribution is the place element in market mix. Distribution means the
transferring the products from producer to the customer.
Drucker predicted that at that time most of companies dont sell their products directly
to the consumers which mean that there are intermediaries that transfer the products from the
producer to the consumer. So the company should take care while choosing the intermediaries.
A sustainable competitive advantage is a competitive edge that cant be quickly or easily copied
by competitors. In recent years, it has become far more difficult for companies to attain such an
advantage through product, price, and promotion strategies. Product strategy: rapid technology
transfer from one company to another and global competition have made it much easier for
competitors to achieve parity in product, design, features, and quality. Pricing strategy: in
todays global economy gaining a sustainable competitive advantage through price is even less
feasible through product strategy. The ability of more & more firms to operate production
facilities all over the world has created fierce price competition in many different product
categories and in services as well. Consequently, a company whose strategy emphasizes lower
prices than competitors is not likely to hold on to that advantage for very long. Another
company, domestic or foreign, manufacturing the same products somewhere around the globe is
virtually certain to match or undercut the price. Promotion strategy: the large quantity of
advertising and other forms of promotion to which consumers are exposed on a daily basis has
created enormous clutter, which reduces the impact of promotional messages. Hence, the effect
of the most creative and clever promotional messages are short-lived as thousands of messages
knock each other out of the target audiences mind. Place or marketing channel strategy: does
offer greater potential for gaining a competitive advantage than the others because it is more
difficult for competitors to copy. We should know that distribution became an important part of
marketing strategy. So the company should Find and select the right channel intermediaries in
order to achieve its goal which is satisfying the customer's needs.

A broad concept of an intermediary is that it covers all those firms placed between
the manufacturer and the customer. Historically, this referred to a traditional channel structure
with a vertically integrated manufacturer, a wholesaler, retailer and then the consumer (Alderson,
1965, Shaw, 1912).

7

The best way to select an intermediary in marketing channel .Your distribution should
be chosen based on your customer's habits. Things you need to know before moving forward
with your design are whether there is a market for your product, how large that market is and
how much the product will cost in terms of start-up. Kotler (2006) developed a model including
4 steps in CHANNEL DESIGN DECISION PROCESS. A-Analyzing consumers needs: For
maximum effectiveness channel analysis and decision making should be more determined. Do
consumers want to buy from nearby location? They willing to travel to more distant centralized
locations? Would they rather buy in person, over the phone, through mail or e-mail? Do
consumer want many add on services? B-Setting channel objectives: Targeted level of customer
services Decide which segment to solve and the best channel to use in each case Company wants
to minimize the total channel cost of meeting customer services requirement It also influenced by
the nature of company, its products, its marketing intermediaries, its competitors. C-Identifying
major alternative and evaluating them: Company sales force, Manufacturer agencies,
Industrial Distributor. Each alternative should be evaluated as: Economic (Cost, Sales, and
Profitability) Control (According to Situation) Adaptive Criteria (Flexible, It can adopt to the
environmental changes).

Designing a channel system calls for analyzing customer needs, establishing channel
objectives, objectives, & identifying & evaluating the major channel alternatives.

Conclusion:

Finally, Marketing intermediaries help the company promote, sell, and; distribute its
products to the final buyers. Company should select the intermediary carefully. The choice of the
most effective channel of distribution is an important aspect of marketing strategy. Finding and
selecting the right channel intermediaries is main reason for achieving success. Best management
of distribution channels is one of the factors providing the success of products sold by the
company in the market. Also a company should not forget about the appropriate upgrading of a
product over time to meet the expectations of customers and to be desired by them. Also
noteworthy and not to be underestimated is an offered potential by the growth of networks and
electronic commerce. It seems that the electronic channel of distribution will be soon one of the
8

most popular forms of distribution channel. A main advantage of this article is that it focuses on
an important intermediary firm that is well placed to effect economies across different
distribution systems.

9



Direct and Online Marketing Building Customer Relationships


Introduction

Direct marketing (A marketing channel without intermediaries) consists of Direct
Connections with Carefully Targeted Individual Consumers to Both Obtain an Immediate
Response and Cultivate Lasting Customer Relationships. Which means that it removes the
"middle man" from the promotion process, as a company's message is provided directly to a
potential customer. This type of marketing is typically used by companies with smaller
advertising budgets, since they cannot afford to pay for advertisements on television and
often do not have the brand recognition of larger firms.

What is the New Direct Marketing Model?

The New Direct Marketing Model Some firms use direct marketing as an extra
medium. For many companies, direct marketing - especially Internet and e-commerce
companies - creates a new and complete model for doing business. Some firms use the new
direct model as their only approach. Experts envision a day when all buying and selling will
involve direct connections between companies and their customers which mean a marketing
channel without intermediaries.

Benefits of Direct Marketing to Buyers:

For buyers, Direct Marketing provides convenience, easy to use, and private way
of interacting with Sellers. Buyers from the comfort of their homes or offices can browse mail
10

catalogs or company websites at any time of the day or night. Direct Marketing gives buyers
ready access to a wealth of products and information, at home and around the globe. Direct
Marketing is immediate and interactive buyers can interact with sellers by phone, chat or
emails or on the sellers website to create exactly the configuration of information, products, or
services they desire, and then order them on the spot. Also buying direct can mean dealing
strictly with the manufacturer without the intervention of a third-party retailer or distributor.
This eliminates the price markups added by a middleman, resulting in lower prices to the buyer.
So it may also provide the buyer the opportunity to negotiate price.


Benefits of Direct Marketing to Sellers:

For sellers, direct marketing is a great tool for building customer relationships.
Using customer databases and insight into customer data, marketers can target small groups or
individual consumers, tailor offers for individual needs, and promote these offers through
personalized communications. Direct Marketing can also be timed to reach prospects at just the
right moment. The internet is a great tool for direct marketing as it provides interactivity, one-to-
one communication, access to global markets and measurability.

Customer Databases and Direct Marketing:

Database marketing is a form of direct marketing using databases of customers or potential
customers to generate personalized communications in order to promote a product or service for
marketing purposes. The method of communication can be any addressable medium, as in direct
marketing.
The distinction between direct and database marketing stems primarily from the attention paid to
the analysis of data. Database marketing stresses the use of statistical techniques to develop
11

models of customer behavior, which are then used to select customers for communications. As a
consequence, database marketers also tend to be heavy users of data warehouses, because having
a greater amount of data about customers increases the likelihood that a more accurate model can
be built.
Consumer databases are organized collection of information about the consumer. These may
include a variety of data, including name and address, history of shopping and purchases,
demographics, and the history of past communications to and from customers. For larger
companies with millions of customers, such data warehouses can often be multiple terabytes in
size.
Forms of Direct Marketing:

1. Personal selling direct marketing
2. Direct-mail direct marketing
3. Catalog direct marketing
4. Telephone marketing
5. Direct-response television marketing
6. Kiosk marketing
7. Digital direct marketing
8. Online marketing






1) Direct-mail Marketing:

Direct mail contains a wide variety of marketing materials, including brochures,
catalogs, postcards, newsletters and sales letters. Major corporations know that direct-mail
12

advertising is one of the most effective and profitable ways to reach out to new and existing
clients. Direct mail lets you communicate one-on-one with your target audience. That allows you
to control who receives your message, when it's delivered, what's in the envelope and how many
people you reach.

2) Catalog direct marketing:

Catalog direct marketing involves printed and Web-based catalogs. Printed catalogs
became one of the best ways to drive online sales.

3) Telephone Marketing:

Another common form of direct marketing is telemarketing, in which marketers
contact customers by phone. The primary benefit to businesses is increased lead generation,
which helps businesses increase sales volume and customer base. The most successful
telemarketing service providers focus on generating more "qualified" leads that have a higher
probability of getting converted into actual sales. There two forms of telemarketing which the
first one is Outbound telephone marketing sells directly to consumers and businesses and the
Second is Inbound telephone marketing uses toll-free numbers to receive orders from television
and print ads, direct mail, and catalogs. It has many benefits such as purchasing convenience and
increased product and service information. Telemarketing also considered a major fund raising
tool for nonprofit and political groups.

4) Direct-Response Television Marketing:

It involves 60- to 120-second advertisements that describe products or give
customers a toll-free number or Web site to purchase and 30-minute infomercials such as home
13

shopping channels. Infomercials can be considered a form of direct marketing, since responses
are in the form of calls to telephone numbers given on-air. This allows marketers to reasonably
conclude that the calls are due to a particular campaign, and enables them to obtain customers'
phone numbers as targets for telemarketing. In modern years a number of large companies
started using infomercials to sell their products such as P&G, Disney, Apple, and Kodak.

5) Kiosk Marketing:

Kiosk Marketing involves placing information and ordering machines in stores,
airports, trade shows, and other locations. For example in store Kodak, Fuji and HP the
customers can transfer pictures from their mobile memory or any digital devices and the store
edit them and print. Red box runs more than 24,000 DVD rental kiosks in Max, Walmart, and
Walgreens that customers can make their selections easily on a touch screen.

6) Digital direct marketing Technologies:

Today, People are using the technologies devices more than anything so
Direct marketing through these devices become easily way to reach and interact with the
customers; Such as mobile phone marketing, podcasts, vodcasts and interactive TV.



A. Mobile Phone Marketing:

Marketing through cellphones' SMS (Short Message Service) became increasingly
popular in the early 2000s in Europe and some parts of Asia when businesses started to collect
14

mobile phone numbers and send off wanted (or unwanted) content. On average, SMS messages
are read within four minutes, making them highly convertible. Over the past few years SMS
marketing has become a legitimate advertising channel in some parts of the world. This is
because unlike email over the public internet, the carriers who police their own networks have
set guidelines and best practices for the mobile media industry (including mobile advertising).
Mobile marketing via SMS has expanded rapidly in Europe and Asia as a new channel to reach
the consumer. SMS firstly received negative media coverage in many parts of Europe for being a
new form of spam as some advertisers purchased lists and sent unsolicited content to consumer's
phones; however, as guidelines are put in place by the mobile operators, SMS has become the
most popular branch of the Mobile Marketing industry with several 100 million advertising SMS
sent out every month in Europe alone.

B. Podcasts and Vodcasts:

Contain the downloading of audio and video files via the Internet to a handheld
device such as a PDA or iPod and listening to them at the consumers convenience.Podcasting is
simply a new way of downloading and playing audio and video files over the internet. The key
difference being that it has a subscribe feature for automatically delivering your content to your
customers or listeners. Podcasting also has a Time Shift feature meaning that your customers
can view or hear your content whenever they want and where ever they want on a multitude of
platforms from PC's, iPods and enabled cellphones. Because your subscribers to the podcast
feed (your customers) will automatically receive new podcast episodes when they are published
you have a direct line of communication to them, an effective direct marketing channel to your
customers.




15

C. Interactive TV(iTV)

lets viewers interact with television programming and advertising using their
remote controls and provides marketers with an interactive and involving means to reach
targeted audiences.


Conclusion:

Online marketing is effective for a number of reasons. It costs very little for your
business to contact new customers and it is usually much faster and easier to create digital
advertisements than print ones. Direct marketing, however, offers many advantages that you
should consider as you decide upon an advertising plan for your business. Not only can you
target a small demographic, but you can also contact those prospective customers in a way that
may be more effective than traditional online marketing. Direct marketing allows you to mail
advertisements or broadcast commercials directly to the customers who are most likely to want
what you're selling. Marketing professional Dave Dolak points out that direct marketing appeals
to a customer's desire not to search extensively for the goods and services they want. If you own
a sushi restaurant, for example, you may benefit by only mailing your menus to locals who have
eaten at your restaurant before or have expressed an interest in spending an evening in a sushi
restaurant. Direct marketing allows you to add personal touches to your advertisements. Instead
of sending countless metered letters bearing address labels, this targeted approach means you can
hand-write the customer's addresses and demonstrate to the customer that they are being
contacted by an actual human instead of a computerized mail service. Direct marketing also
carries disadvantages. One of the main disadvantages of direct marketing is the demand from
consumers to end unsolicited contact from companies. Consumers do not appreciate privacy
intrusion or the sheer mass of communication, referred to as spam or junk mail, received on a
daily basis. Other disadvantages include generating poor quality leads and failing to bring a high
number of repeat customers.
16


Coca Colas distribution System :
Producer Customers

They are using direct Distribution by selling goods directly to the customer by deliver
supplies with Macdonald.

Producer Wholesalers Retailers Customers

The Coca-Cola Company sells its products to bottling and canning operations,
distributors, fountain wholesalers and some fountain retailers. These then distributes them
to retail outlets, milk bar and corner stores, restaurants, petrol stations and newsagents.
Thus we can cite different point of sales where Coca cola is generally available throughout the
Coca-Cola Company:
- Wholesalers/ distributors
- Retail/corner stores/supermarkets/Groceries
- Restaurants/cafs/night clubs
- Petrol stations
- Automated teller machines (AMTs)
Cokes distribution system is one of the most important and is very impressive compared
to all other drinks in the category. It has such an impact on consumers and is so
successful that even wholesalers and distributors need the product for their business
success. Cokes position on consumers mind makes it essential to retailers, wholesalers
and away-from-home market. They have achieved their goal thanks to this high visibility,
and to the availability of the products all over the world, even in remote places.



17






Reference

Kotler.Philip, Armstrong. Gary, Principles of Marketing .United States of America,
2012, 14 Edition.
Doyle, P. (1998). Marketing Management and Strategy (2nd ed.). Prentice Hall.
Bowersox, D. J., & Cooper, M. B. (1992). Strategic Marketing Channel Management.
McGraw-Hill
I.F Wilkinson. Distribution channel management: power considerations. Journal of Physical
Distribtuion,Vol.4 No1.1973,pp,4-15
Hamed R.|I, Kamran.S, Gholamreza.J. Develop a Framework for Selection of Intermediary
in Marketing Channel. Iranian Journal of Management Studies (IJMS) Vol.4, March 2011,
pp:25-42
18