CONTENTS:
The Concept of Distribution, Channels of Distribution, Lodging Distribution Systems
(The Need for Distribution in Lodging, Reservation Systems in Lodging, The Future of
Reservations, Lodging Channels of Distribution), Distribution in Foodservice
(Franchising in Foodservice, Intensive Distribution: Intercept Marketing, Intermediaries)
Introduction to Distribution
In the marketing mix, “place” refers to the distribution strategy a company uses to make its products or services available to customers. It involves selecting the right locations, channels, and methods to ensure that the target market can easily access and purchase the product, whether through physical stores, online platforms, or intermediaries like wholesalers and retailers.
Distribution can be defined as the process of delivering various product or services from manufacturer or producer to end user or customer. It involves various activities like transportation, warehousing, inventory management and also the use of intermediaries (like wholesaler or retailer) to ensure goods reaches the target market efficiently in a smooth way and good condition.
During the distribution system, not only the product or services flow from one to another member but money and communication also flows together from one channel member to another.
Distribution focuses mainly on delivering the right product or service to right place at right time to right person through right channel with minimum chances of loss or damage. Hence, distribution transfers ownership from seller to buyer.
Concept of Distribution Strategy and its types
Distribution refers to the place strategy, which involves ensuring a presence or representation in essential markets to make products or services easily accessible to customers.
Distribution refers to the “place” strategy in the marketing mix, which focuses on ensuring that a company’s products or services are available in key markets where customers can easily access and purchase them. This involves choosing the right distribution channels (like retailers, wholesalers, or e-commerce platforms) and strategically positioning the product to maximize its reach and availability to the target audience.
Types of distribution strategies
- Intensive Distribution: This strategy aims to make products available as widely as possible, targeting maximum market coverage by distributing through numerous channels.
This type of strategy is good for ‘convenience goods’ because the customer themselves don’t want to put much efforts to buy such products or services.
(Noodles, coke, toothpaste, etc किन्न को लागि कोहि पनि एक घण्टा टाडाबाट समान किन्न खोज्दैन, सक्दो नजिक भएको राम्रो हुन्छ so intensive distribution is used here)
Example: Consumer goods like toothpaste or snacks or cold drinks are often distributed intensively to ensure availability in various retail outlets. - Selective Distribution: A strategy where a company limits the number of outlets that can carry its product to maintain a certain level of control and exclusivity.
In this strategy, customers are willing to put some efforts to buy or utilize the products and services.
For example: If you want to go fine dine restaurant with you boyfriend / girlfriend in your anniversary, you would feel okay to go in the restaurant which will be bit far from your home. - Exclusive Distribution: A product is distributed through a single or very few channels, often granting exclusive rights to a particular retailer or distributor in a specific area.
Example: Luxury brands like Rolex or high-end car manufacturers like Ferrari often use exclusive distribution.
Channels of Distribution
Channels of distribution refer to the pathways or routes or network through which products or services move from the manufacturer or producer to the final end-user consumer.
These channels involve various intermediaries such as wholesalers, retailers, agents, or direct selling platforms that help in the transfer, promotion, and sale of products. The choice of distribution channels impacts the availability, cost, and overall success of a product in the market.
The types of distribution channels are :
- Direct Distribution Channel:
Definition: The producer sells directly to the consumer without intermediaries.
Example: Online stores, company-owned outlets, or direct sales through catalogs. - Indirect Distribution Channels:
Involves one or more intermediaries between the producer and the consumers- One Level Channel: Involves one intermediary, usually a retailer. Example: A manufacturer selling goods to a retailer, who then sells them to consumers.
| Producer → Wholesaler / Retailer → Consumer |
- Two Level Channel: Involves two intermediaries, typically a wholesaler and a retailer. Example: A manufacturer sells to a wholesaler, who then sells to a retailer, who sells to consumers.
| Producer → Wholesaler → Retailer → Consumer |
- Three Level Channel: Involves three intermediaries, usually an agent, wholesaler, and retailer. Example: A manufacturer uses an agent to sell goods to a wholesaler, who distributes them to retailers.
| Producer → Agent → Wholesaler → Retailer → Consumer |
Other major systems include:
- Franchise System: A franchise system is a business model where an individual or entity (the franchisee) is granted the rights to operate a business under the brand name, business model, and guidelines of an established company (the franchisor). The franchisee pays an initial fee and ongoing royalties to the franchisor in exchange for using the brand, products, operational processes, and marketing strategies.
- Hybrid or Mixed Distribution Channels: A company uses more than one distribution channel simultaneously. For example, a company may sell through both direct sales and retailers.
- Dual Distribution: Companies might use both direct and indirect channels to reach different customer segments or regions.
Needs of Distribution in Lodging
- Market Reach: Expands hotel visibility to a larger, global audience.
- Revenue Optimization: Enables dynamic pricing and better revenue management.
- Accessibility: Provides real-time booking availability and convenience for guests.
- Operational Efficiency: Streamlines operations through centralized management and automation.
- Competitive Advantage: Enhances market presence and facilitates to diverse guest preferences.
- Data Insights: Offers valuable analytics for strategic decision-making.
- Risk Management: Reduces reliance on single channels and mitigates booking conflicts.
- Customer Experience: Allows for personalized services and varied booking options.
- Brand Awareness: Increases exposure and marketing opportunities.
- Global Reach: Facilitates international bookings with multi-language and currency support.
Reservation Systems in Lodging
- Central Reservation System (CRS)
Function: Manages room inventory and bookings across multiple channels.
Advantages: Streamlines processes, ensures consistent availability and pricing. - Property Management System (PMS)
Function: Handles daily operations like check-ins, check-outs, and guest management.
Advantages: Integrates with CRS, improves operational efficiency and guest experience. - Global Distribution System (GDS)
Function: Connects hotels with travel agents and global booking platforms.
Advantages: Expands market reach, facilitates international bookings. - Online Booking Engine
Function: Allows direct bookings through the hotel’s website.
Advantages: Reduces reliance on third-party sites, enhances brand control.
With the rise of the internet, online booking engines have become increasingly important. Lodging establishments set up their websites with integrated booking systems, allowing guests to make reservations directly online. These systems provide real-time availability, room details, pricing, and secure payment processing.
For example: ‘Booking.com’, ResNexus - Channel Manager System
Function: Synchronizes availability and rates across multiple distribution channels.
Advantages: Automates updates, maintains rate parity.
Channel Management Systems help lodging establishments manage their presence on various online platforms and travel websites. These systems ensure that room availability and rates are consistent across different booking channels to avoid overbooking or rate disparities - Revenue Management System (RMS)
Function: Optimizes pricing and inventory based on data analysis.
Advantages: Enhances revenue through dynamic pricing and market insights.
Future of Reservation
- AI Integration: Personalized recommendations and predictive analytics.
- Mobile Booking: Increased use of mobile apps and digital keys.
- Voice Technology: Voice-activated reservations and inquiries.
- Blockchain: Secure, transparent transactions and smart contracts.
- Data Integration: Unified guest data for personalized experiences.
- Sustainability: Focus on eco-friendly options and certifications.
- Augmented Reality (AR): Virtual tours and interactive property previews.
- Direct Booking Incentives: Loyalty programs and exclusive offers for direct bookings.
- Automation: Streamlined reservation processes and real-time updates.
Intensive Marketing
Intercept Marketing
Intercept marketing is a strategy that targets consumers at the point of their decision-making or purchasing process.
Methods:
- In-Person Interactions: Engaging with potential customers in high-traffic areas or at events.
- Digital Ads: Targeted online advertising based on user behavior and interests.
- Promotions: Offering special deals or incentives to capture attention and drive immediate bookings.
Objective: To capture consumer interest at the moment it is highest and influence their decision in favor of the product or service.
Intermediaries
Definition: Third parties that help distribute products or services between producers and consumers.
Types:
- Wholesaler: These intermediaries purchase large quantities of goods from manufacturers and sell them in smaller quantities to retailers or other businesses. They help in distributing products widely and efficiently.
- Retailers: Retailers buy products from wholesalers or manufacturers and sell them directly to the end consumers. They operate stores or online platforms where customers can purchase goods.
- Distributors: Distributors act as intermediaries between manufacturers and retailers or other businesses. They handle the logistics of getting products to market and often have exclusive rights to sell certain products in specific regions
- Agents and Brokers: These intermediaries do not take possession of the goods. Instead, they facilitate transactions between buyers and sellers, earning a commission or fee for their services. Agents usually represent one party, while brokers work with both parties.
- Marketing Service Agencies: These agencies provide specialized services such as advertising, market research, and public relations to help businesses reach their target audiences and enhance their marketing efforts.