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Marketing - Chapter 21 - Channels of Distribution

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Kevin Krizan

on 4 November 2014

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Transcript of Marketing - Chapter 21 - Channels of Distribution

Channels of Distribution
Distribution Planning
Channel Members
Channel of Distribution - the path a product takes from its producer or manufacturer to the final user
Intermediaries (middlemen)- businesses involved in sales transactions that move products from the manufacturer to the final user

Classified on the basis of whether they take title (ownership) of goods and services

Merchant intermediaries (take title)

Agent intermediaries (don't take title)
receive a commission
Merchant Intermediaries
Wholesalers - businesses that buy large quantities of goods from manufacturers and then resell them to retailers
Rack jobbers - manage inventory and merchandising for retailers by counting stock, filling shelves, and maintaining store displays
Drop shippers - own the goods they sell, but they do not physically handle the actual products (bulk goods like coal, chemicals that require special handling)
Retailers - sell goods to the final consumer for personal use
brick-and-mortar retailers - sell goods to customers from their own physical stores
e-tailing- retailers selling products over the
Internet to the customer
Agents - act as intermediaries by bringing buyers and sellers together (do not own the goods they sell)
Agents - act as intermediaries by bringing buyers and sellers together (do not own the goods they sell)
Independent manufacturers' representative - work with several related (but none competing) manufacturers in a specific industry
example: agent carry line of fishing rods from one manufacturer; lures from a 2nd manufacturer; nets from a 3rd manufacturer
Broker - bring buyers and sells together in order for a sale to take place
example: real estate broker - brings buyer and seller together
Direct Distribution - occurs when the producer sells goods or services directly to the customer with no intermediaries
Indirect Distribution - involves one or more intermediaries
Distribution Channels (Consumer Products)
Channel A: Manufacturer -- Consumer
Selling at production site
Direct sales force (AVON)
Online sales
TV infomercials
Channel B: Manufacturer -- Retailer -- Consumer
Most commonly used channel for merchandise that dates quickly or needs servicing
Channel C: Manufacturer -- Wholesaler -- Retailer -- Consumer
most often used staple goods which are always carried in stock and styles do not change
Channel D: Manufacturer -- Agent -- Wholesaler -- Retailer -- Consumers
Used by companies that wish to concentrate on production and not sales and distribution
Channel E: Manufacturer -- Agent -- Retailer -- Consumer
Businesses that do not want to handle their sales to retailers
(meat, cosmetics, many supermarket items)
Distribution Channels (Industrial Products)
Channel A: Manufacturer -- Industrial User
Most often used by major equipment used in manufacturing (copy machine)
Channel B: Manufacturer -- Industrial Distributor -- Industrial User
Most often used for small standardized parts and supplies
Channel C: Manufacturer -- Agent -- Industrial Distributor -- Industrial User
Small manufacturers often prefer this channel
Channel D: Manufacturer -- Agent -- Industrial User
Used by producers that can not afford or want a sales force
Multiple Channels
Producers use multiple channels when the product fits the needs of both industrial and consumer markets
Distribution Intensity
Exclusive Distribution - distributing a product in protected territories in a geographic area
(prestige, image, channel control)
high profit margin (example: John Deere)
Integrated Distribution - manufacturer owns and runs their own retail operations (GAP, Sherwin-Williams)
Selective Distribution - limited number of outlets in a geographic area sell a product
manufacturer select channel members than can maintain the image of the product (examples: Vera Wang; Armani)
Intensive Distribution - use of all suitable outlets to sell a product
complete market coverage (examples: gum; soft drinks)
E-Commerce - electronic commerce
Online distribution still growing dramatically
Much more efficient
B2B growing also
Distribution planning for Foreign Markets
Foreign market environments require that businesses adjust their distribution systems
In France, Reebok distributes its shoes thru traditional retail shoe outlets instead of sporting good stores (sales doubled)
Henry "Box" Brown
Unusual Distribution Examples
-path a product/service takes
from its manufacturer to the final user
Henry "Box" Brown
was a Virginia slave that spent $86 to ship himself to freedom in 1849. During the 27 hour journey his distribution path included - wagon, railroad, steamboat, wagon again, railroad, ferry, railroad, and finally delivery wagon. Brown became a well-known anti-slavery speaker after gaining his freedom.
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