4MD3 Business to Business Marketing Lecture 10

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4MD3 Business to Business MarketingLecture 10

• Steve Howse
• March 15, 2007

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PREVIEW OF DISTRIBUTION

• BM/CM differences 
• the basic distribution decision
• making that decision 
• middleman types for indirect channels
• finding middlemen 
• website-induced channel conflict

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BRIEF REVIEW OF CHANNEL TERMS

• direct channel
• indirect channel

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BM/CM DIFFERENCES - DISTRIBUTION

• direct channel dominant by dollar sales
• but not by other measures
• many middleman types unique to BM
• no retailers!

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THE BASIC DISTRIBUTION DECISION

• indirect channel or direct? 
• get the decision right, because ..
• it determines who does the critical PS 
• and its hard to reverse
• e.g. indirect channel to direct  
• e.g. direct channel to indirect

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FAVOUR THE DIRECT CHANNEL WHEN YOUR PRODUCTS ARE

• expensive  
• technical or complex  
• custom designed  
• new  to the market
• in need of strong support services  
• a high-risk purchase for your customer
• purchased at high level
• bulky or heavy  

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FAVOUR THE DIRECT CHANNEL WHEN YOUR CUSTOMERS ARE

• few, large or close together
• buying steadily year-round

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FAVOUR THE DIRECT CHANNEL WHEN YOUR OWN FIRM

• wants to control "customer interface"  
• wants focused sales attention  
• has wide product range  
• has necessary time and money 

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INDIRECT-CHANNEL TERMINOLOGY

•  
• principals
• wholesalers
• meaning
• always independent
• merchant and agent wholesalers

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MERCHANT WHOLESALERS

• AKA (industrial) distributors
• buy the manufacturers product
• and usually physically possess it too
• their reward is margin
• usually full function middlemen

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TYPES OF MERCHANT WHOLESALER AKA (INDUSTRIAL)
DISTRIBUTOR

• dealers  
• contractor-dealers  
• paper merchants  
• steel service centres  
• trading companies  
• drop shippers - AKA desk jobbers

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AGENT WHOLESALERS

• dont buy the manufacturers product
• and seldom physically possess it
• reward is commission plus expenses
• usually not full-function

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TYPES OF AGENT WHOLESALER

• manufacturers' agents AKA reps  
• selling agents  
• brokers
• export management companies
• commission merchants

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THE PROS OF DISTRIBUTORS VS. REPS 

• distributors are more locked in to you 
• are bigger and more stable
• are more likely to provide national coverage
• are best for "catalogued products"

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THE CONS OF DISTRIBUTORS VS. REPS

• distributors try to shave selling expenses  
• favour bigger, more-established customers
• and more-established products  
• have more channel control  than reps
• carry more product lines
• carry competing products  
• give inferior market feedback  

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FINDING MIDDLEMEN

• check directories
• run ads in trade publications  
• exhibit at or visit trade shows
• consult Canadian Trade Commissioners

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MINIMIZING WEBSITE INDUCED CHANNEL CONFLICT

• use Web for communication only
• alternatively..
• dont price lower on Web
• dont sell all products on the Web
• dont sell to all customers
• use different brand name for Web sales
• involve middleman in website

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Steves Tips

• Have a list
• Want to do / completed
• Big marathon, travel, marriage
• Small concerts, Stanley Cup final, Pebble Beach
• Timely sky diving (kids), rock climb (age)
• Look at it once per year
• Add and edit
• At 70 look back on your life