Channels of DistributionChannel Members

Objectives

Define distribution. Explain the concept of a channel of

distribution. Identify channel members. Distinguish between direct and indirect

channels. Explain distribution channels for consumer

products and services. Describe distribution intensities.

Distribution

The process of deciding how to get goods in customer’s hands.

One of the 4 P’s of marketing-place.

Distribution

Channels of Distribution- the path a product takes from its producer or manufacturer to the final user. Industrial user-final user when a product

purchased for business use Consumer-final user when a product

purchased for personal use

Direct and Indirect Channels

Direct distribution: When the producer sells goods or services

directly to the customer, with no intermediaries.

Indirect distribution: Involving one or more intermediaries.

Channel Members

Intermediaries- (middlemen); businesses involved in sales transactions that move products from the manufacturer to the final user. Reduces number of contacts required to reach

the final user Classified by whether they take ownership of

goods and services

Contact Efficiency

With no intermediaries 25 transactions needed.

MFG MFG MFG MFG MFG

Consumer Consumer Consumer Consumer Consumer

Contact Efficiency

With 1 intermediary 10 transactions needed.

MFG MFG MFG MFG MFG

Consumer Consumer Consumer Consumer Consumer

Intermediary

Channel Members

Wholesalers Businesses that buy large quantities of goods

from manufacturers, store the goods, and then resell them to other businesses.

Take title to goods they buy for resale. Rack jobbers-wholesalers who manage inventory

and merchandising for retailers by counting stock, filling it in when needed and maintaining store displays.

Drop shippers-own the goods they sell but do not physically handle the actual products.

Channel Members

Retailers Sell goods to final consumer for personal use. Brick-and-mortar retailers-sell goods to the

customer from their own physical stores. Buy products from manufacturers or wholesalers. Non-store retailers Takes title for goods. E-tailing-online retailing; selling products over the

Internet

Channel Members

Agents Intermediaries that bring buyers and sellers together.

Independent Manufacturer’s Representative Work with several related, but noncompeting

manufacturer’s in a specific industry. Paid commission on what they sell.

Brokers Negotiate a sell, paid a commission, and look for new

customers

Channels Manufacturer Directly to Consumer

Selling products at the production site Having a sales force call on consumers Using catalogs or ads to generate sales Using telemarketing Using the internet to make online sales

Manufacturer to Retailer to Consumer Used for merchandise that dates quickly or needs

servicing

Channels Manufacturer to Wholesaler to Retailer to Consumer

Most commonly used for staple goods, which are items that are always carried in stock and whose styles do not change frequently

Manufacturer to Agents to Wholesaler to Retailer to Consumer For manufacturers who wish to concentrate on

production and leave sales and distribution to others

Channels

Manufacturer to Agents to Retailer to Consumer Used by manufacturers who do not want to

handle their own sales.

Distribution Intensity

Exclusive Distribution: Protected territories for distribution of a product in a given

geographic area Characteristics: prestige, image, channel control, and high

profit margins

Selective Distribution: A limited number of outlets in a given geographic area are

used to sell the product Select channel members that maintain the image of the

product and are good credit risks, aggressive marketers, and good inventory planners.

Distribution Intensity

Intensive Distribution The use of all suitable outlets to sell a product Objective/Goal: complete market coverage and to

sell to as many customers as possible

Summary

Distribution Channels of distribution Channel Members Direct/Indirect distribution Distribution Intensities