Channels of Distribution Channel Members

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Channels of DistributionChannel Members
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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.

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Distribution

• The process of deciding how to get goods in
  customers hands.
• One of the 4 Ps of marketing-place.

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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

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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.

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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

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Contact Efficiency
MFG
MFG
MFG
MFG
MFG
Consumer
Consumer
Consumer
Consumer
Consumer

• With no intermediaries 25 transactions needed.

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Contact Efficiency
MFG
MFG
MFG
MFG
MFG
Intermediary
Consumer
Consumer
Consumer
Consumer
Consumer

• With 1 intermediary 10 transactions needed.

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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.

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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

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Channel Members

• Agents
• Intermediaries that bring buyers and sellers
  together.
• Independent Manufacturers Representative
• Work with several related, but noncompeting
  manufacturers in a specific industry.
• Paid commission on what they sell.
• Brokers
• Negotiate a sell, paid a commission, and look for
  new customers

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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

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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

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Channels

• Manufacturer to Agents to Retailer to Consumer
• Used by manufacturers who do not want to handle
  their own sales.

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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.

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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

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Summary

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