Deciding on a Distribution Channel

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• Deciding on a Distribution Channel

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Deciding on a Distribution Channel

• Lesson Goals
• Learn different methods of distribution
• Recognize continuous nature of marketing methods
• Obtain information on additional resources
• View distribution as an integral role in a
  business plan

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Deciding on a Distribution Channel

• Distribution Channel
• The way a product reaches the consumer
• Two categories of distribution channels
• Direct
• Indirect

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Deciding on a Distribution Channel

• Direct Distribution (Sales)
• Producer of product sells directly to the
  consumerAdvantages
• Less complicated
• Less expensive
• Eliminates cost of middle man
• Allows for market research

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Deciding on a Distribution Channel

• Direct Distribution (Sales)
• Disadvantages
• Producers may not be good marketers
• Direct sales take time away from production
• Producers may not be objective in sales
• Allows for market research

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Deciding on a Distribution Channel

• Direct Distribution (Sales) Examples
• Person to Person
• Display booths at events
• Party-plan sales
• In-home demos

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Deciding on a Distribution Channel

• Additional Direct Distribution (Sales) Examples
• Business trade shows
• Temp space in shopping malls
• Direct mail
• Mail order
• Telemarketing

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Deciding on a Distribution Channel

• Indirect Distribution Utilizes Middlemen Who
  SellAdvantages
• Middlemen are sales professionals
• Useful when zoning prevents home sales
• Useful when location of home base is too far from
  consumers
• Greater sales volume potential
• Frees producer to focus on production

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Deciding on a Distribution Channel

• Indirect Distribution
• Disadvantages
• Producer removed from consumers
• More expensive than direct distribution
• Less control over product

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Deciding on a Distribution Channel

• Indirect Distribution Examples
• Sales Representatives
• Wholesalers, Distributors, Jobbers
• Wholesale Trade Shows
• Wholesale to Retailers
• Consignment
• Mail Order

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Deciding on a Distribution Channel

• Indirect Distribution Channels

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Deciding on a Distribution Channel

• Manufacturer or Sales Reps
• Move merchandise
• Call on retailers
• Handle marketing within a territory
• Get commission on orders

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Deciding on a Distribution Channel

• Wholesale Trade Shows
• Build long lasting relationships
• Good packaging and nice display are critical
• Quality business cards, brochures and/or free
  Sales literature and pre-determined pricing
  structure will help in attracting retail accounts

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Deciding on a Distribution Channel

• Selling Wholesale to Retailers
• Producer can make contact
• Must know trade practices
• Need written agreements
• Cannot undercut retail price

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Deciding on a Distribution Channel

• ConsignmentContracting with Retailers to Display
  and Sell Product Advantages
• Exposure without overhead expenses of utility and
  space
• Disadvantages .
• Money tied up in inventory with possibility of
  damage
• Merchandise may not be displayed to advantage
• Merchandise may not be aggressively marketed

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Deciding on a Distribution Channel

• Mail Order
• Producers may develop their own catalogs, fliers,
  or indirect distribution
• Buy ad space in an established catalog, magazine,
  tabloid, etc.

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Deciding on a Distribution Channel

• Mail Order
• Timing is important
• Knowledge of postal regulations, FTC rules, and
  tax laws in each state where merchandise is
  exchanging hands
• Need good mailing lists

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Deciding on a Distribution Channel

• Securing Mailing Lists
• Can be rented or purchased
• Need clear description of customer profile
• Check library for mailing list brokers
• Check listings in trade journals

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Deciding on a Distribution Channel

• When Evaluating Mail-Order Media, Ask About
• Demographics of readership (sex, age, ethnicity)
• Regional publications
• Number of ongoing advertisers
• Circulation numbers

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Deciding on a Distribution Channel

• Magazine AdvertisingAdvantages
• Longer shelf life than other ad media
• Often read cover to cover by different people
• Associates your product with prestige of magazine
• More sophisticated production process and better
  quality paper than newspapers and most catalogs

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Deciding on a Distribution Channel

• Magazine AdvertisingDisadvantages
• Longer lead from ad placement time to published
  ad
• High cost

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Deciding on a Distribution Channel

• Questions When Considering Catalogs
• Is there a fee to be included in the catalog or
  do you pay a percentage of the sales?
• Is there minimum inventory that must be
  available?
• What is your knowledge of laws and regulations?
• Is merchandise warehoused by catalog company or
  does producer drop ship.

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Deciding on a Distribution Channel

• Questions When Considering Catalogs
• How is merchandise evaluated actual product or
  photographs?
• What is the pricing structure?
• What is the time frame for catalog production and
  distribution?

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Deciding on a Distribution Channel

• Additional Indirect Distribution Examples
• TV Marketing
• Computer Networks
• Vending Machines / Rack Merchandising
• Cooperatives
• Franchises
• Multilevel Marketing (MLM)

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Deciding on a Distribution Channel

• TelemarketingA sales approach
  conductedentirely by phone.

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Deciding on a Distribution Channel

• Television Marketing
• Cable network channels
• Infomercials

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Deciding on a Distribution Channel

• Computer NetworksVast online information system
  thatlinks businesses and potential customers
  all over the world.

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Deciding on a Distribution Channel

• Internet Marketing
• Web sites
• Social Marketing
• Internet Sales

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Deciding on a Distribution Channel

• Vending MachinesRack Merchandising

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Deciding on a Distribution Channel

• CooperativeA business formed by a group of
  people to market their products together

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Deciding on a Distribution Channel

• Franchises
• Buying continuous direction and support from
  people who are experts in their field
• Owned and managed by self-employed business people

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Deciding on a Distribution Channel

• Franchise Agreements May Include
• Using the franchisors name
• Help in finding a location
• Store design and outfitting

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Deciding on a Distribution Channel

• Franchise Agreements May Include
• Advertising
• Acquiring Supplies
• Management Training
• Protected Territory

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Deciding on a Distribution Channel

• Franchise Agreements May Include
• Financing
• Marketing and Promotion
• Record Keeping

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Deciding on a Distribution Channel

• Multi-Level / Network MarketingPeople sell at
  different levels in company hierarchy.
  Distributors recruit new people to join the
  program. The practice is sometimes called
  sharing business.

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Deciding on a Distribution Channel

• Possible Distribution Channels
• Direct Channel Producer gt Consumer
• Single Channel (w/ middleman) Producer gt
  Retailer gt Consumer
• Double Channel (w/ middleman) Producer gt
  Wholesaler gt Retailer gt Consumer
• Simultaneous Dual Channel (Producer gt
  Wholesaler gt Retailer) and (Producer gt Consumer)

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Deciding on a Distribution Channel

• Making ChoicesConsider
• Opportunities available
• Appropriate for your business
• Delivery time frame
• Packaging for shipment
• Cost
• Keep up to date