[MUSIC] Welcome to the distribution channel and retailing course. We start today a journey that we are going to enjoy. Why is having distribution channels so important? We will find out why. And also, how to design and manage them using the main intermediaries and logistic systems. An individual firm's success depends not only on how well it performs, but also on how well its entire marketing channel competes with competitor channels. Good distribution strategies can contribute strongly to customer value, and create a competitive advantage for a firm. Then, why are channels so important? Marketing channels perform the work of moving the product and services from producers to business users or final consumers. It overcomes the time, place and position gaps. One of their chief roles is to transform the assortment of products made by producers into assortments wanted by consumers. Channels must not just serve markets, they must also make markets. The chosen channel affects all other marketing decisions, and only a few producers sell their goods directly to final consumers. Most of them use intermediaries. And in managing the intermediaries, the firm must decide how much effort to devote to push, versus pull, marketing. A push strategy uses the manufacturer's sales force, trade promotion money and other means to induce intermediaries to carry, promote and serve the product or service to the end user. It is used when low brand loyalty, or there is also low brand recognition. In a pull strategy, the manufacturer uses advertising, promotion and other forms of communication to persuade consumers to demand the product from the intermediaries. And it's appropriate when you have a high brand loyalty. Which are the channel member functions? Through their contact, experience, specialization and a scale of operation, intermediaries make offerings widely available and accessible to target markets, usually providing their firm with more effectiveness and efficiency than can be achieved on its own. Some of the functions that the challenge performs help to complete transactions, like for example, gather information about potential and current customers or competitors. Promotion, then you develop communication to stimulate purchasing if the function is contact. Finding and communicating with perspective buyers. Matching means shaping and fitting the offer to the buyer's need. And negotiation is reaching an agreement on price and other terms of the offer, so that the ownership and possession can be transferred. And there is another group of functions that helps to fulfill the completed transactions. We can mention for example the physical distribution. An occasion would be here transportation and storing goods. Or financing, it means acquiring and using funds to cover the cost of the channel work. And of course, risk taking. It means assuming the risk of carrying on the channel work. And all these channel functions have also three things in common, they use scarce resources. They can often be performed better through a specialization, and these functions can be shifted among channel members. Now, I want to ask you a question. Do producers of services use distribution channels? The answer is yes. Traditionally, supply chains have been product focused, and producers of services and ideas also face the problem of making their output available and accessible to target populations. This would be the example of hospitals, banking, the entertainment industry. For example, we think about Kodak, they offer customers four ways to print their digital photos, through retail outlets, home printers, through their website and also self service kiosks. Or when we think about politicians, they use a mix of channels. In the presidential campaigns, they use a lot of mass media lately. We can see TV ads, direct mail, billboards, emails, blogs, websites, or social networking sites to deliver their message to their voters. So in this session, we have found out why distribution channels are so important. In the next one, we will learn to design a channel. What steps do we need to implement? [MUSIC]