Distribution 9.00 Examine the process needed to move, store, locate, and/or transfer ownership of goods and services

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Distribution9.00 Examine the process needed to
move, store, locate, and/or transfer ownership of
goods and services

• 9.01 Examine the channels of distribution and the
  different channels used for consumer and
  industrial products

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Channel of Distribution

• The place decision - one of the 4 Ps of the
  marketing mix
• The path the product takes from producer or
  manufacturer to the final user
• The channel of distribution always starts with
  the producer or manufacturer
• The channel of distribution ends when the product
  changes form
• Example - the channel begins when a farmer grows
  oranges and ends when the farmer sells them to a
  juice maker. The channel begins again when the
  juice maker sells to someone else

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Channel Members

• Industrial User - when the product is purchased
  for use in a business
• Consumer - the final user (product purchased for
  personal use)

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Intermediaries

• Channel members that help move products from the
  producer or manufacturer to the final user
• Sometimes referred to as middlemen
• Intermediaries are classified on the basis of
  whether or not they take ownership to goods and
  services
• Classifications merchant intermediaries and
  agent intermediaries

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Merchant Intermediaries(take ownership of goods)

• Two major types - wholesalers and retailers
• Retailers include electronic retail outlets and
  vending service companies

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Wholesalers

• Buy large quantities of goods from manufacturers,
  store the goods, and resell them to other
  businesses.
• Customers include retailers, manufacturers,
  professional and commercial users, governments,
  etc.

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Retailers

• Traditional retailers sell goods/services to the
  ultimate consumer through their own stores
• Some large retailers may perform their own
  wholesaling function such as Sears, or Walmart

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Electronic Retail Outlets

• Sell goods to the ultimate consumer through
  special television programs or online services.
• Examples include QVC, Home Shopping Network,
  Macys.com, Belk.com, etc..
• Referred to as interactive shopping

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Vending Service Companies

• Buy manufacturers products and sell them through
  machines that dispense goods to consumers
• Place vending machines in stores, office
  buildings, restaurants, hospitals, schools, etc.
• Two large vending service companies include
  Canteen Corp and Service America

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Agents

• They negotiate the title (ownership) of goods
• They dont take title themselves, but arrange
  agreements between channel members
• Usually work strictly on commission
• Receive a certain percentage of the sales from
  the manufacturers they represent

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Nonchannel Members

• Transportation companies and independent storage
  warehouses
• Not considered part of the channel of
  distribution because they do not take title to
  the goods nor are they involved in negotiating
  the title
• Their job is to transport the product

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Direct Channel of Distribution

• Occurs when goods and services are sold from the
  producer directly to the final user
• No intermediaries are involved
• Services most often use a direct channel of
  distribution due to the nature of the business.
  For example getting your car repaired or going to
  the dentist

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Indirect Channel of Distribution

• Involves one or more intermediaries
• For example Manufacturer to Wholesaler to Retailer

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Distribution Channels for Consumer Products

• Channel A directly from Producer to Consumer
• Channel B (most common) Producer to Retailer to
  Consumer
• Channel C Producer to Wholesaler to Retailer to
  Consumer
• Channel D Producer to Agent to Wholesaler to
  Retailer to Consumer
• Channel E Producer to Agent to Retailer to
  Consumer (refer to page 312 in Marketing
  Essentials text)

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Distribution Channels for Industrial Products

• Channel A (most common) Producer to Industrial
  User
• Channel B Producer to Industrial Distributor to
  Industrial User
• Channel C Producer to Agent to Industrial
  Distributor to Industrial User
• Channel D Producer to Agent to Industrial
  User (refer to page 313 in the Marketing
  Essentials text)