Directorate of distance education

Legal & Ethical Issues in Channel Relations
➢ Exclusive dealing
➢ Exclusive territories

---

Notes
33
➢ Tying agreements
➢ Dealers’ rights
Buying a computer in the post, petrol at a supermarket, mortgages 
over the phone and phones themselves from vending machines are just 
some innovations in distribution which create competitive advantage 
as customers are offered newer, faster, cheaper, safer and easier ways of 
buying products and services. 
Without distribution even the best product or service fails. Author 
Jean-Jacques Lambin believes a marketer has two roles: 
(1) To organize exchange through distribution and 
(2) To organize communication. 
Physical distribution, or Place, must integrate with the other ‘P’s 
in the marketing mix. For example, the design of product packaging must 
fit onto a pallet, into a truck and onto a shelf; prices are often determined 
by distribution channels; and the image of the channel must fit in with 
the supplier’s required ‘positioning’. You can see how Coca Cola further 
integrate the timing of distribution and promotion in the Hall Of Fame 
later. In fact, they see distribution as one of their “core competencies”. 
Distribution is Important Because
Firstly, it affects sales - if it’s not available it can’t be sold. Most 
customers won’t wait. 
Secondly, distribution affects profits and competitiveness since it 
can contribute up to 50 percent of the final selling price of some goods. 
This affects cost competitiveness as well as profits since margins are 
squeezed by distribution costs. Thirdly, delivery is seen as part of the 
product influencing customer satisfaction. Distribution and its associated 
customer service play a big part in relationship marketing. 
Decisions about physical distribution are key strategic decisions. 
They are not short term. Increasingly it involves strategic alliances 
and partnerships which are founded on trust and mutual benefits. We 
are seeing the birth of strategic distribution alliances. Channels change 

---

Notes
34
throughout a product’s life cycle. Changing lifestyles, aspirations and 
expectations along with the IT explosion offer new opportunities of using 
distribution to create a competitive edge. Controlling the flow of products 
and services from producer to customer requires careful consideration. It 
can determine success or failure in the market place. The choice of channel 
includes choosing among and between distributors, agents, retailers, 
franchisees, direct marketing and a sales force. Deciding between blanket 
coverage or selective distribution, vertical systems or multi-channel 
networks, strategic alliances or solo sales forces, requires strong strategic 
thinking. Decisions about levels of stock, minimum order quantities, 
delivery methods, delivery frequency and warehouse locations have major 
cash flow implications as well as customer satisfaction implications. 
****

---

Notes
35