Deciding on a Distribution Channel

Deciding on a Distribution Channel Lesson Goals: Learn different methods of distribution Recognize continuous nature of marketing methods Explain the nature of sales of channels

Role Play Students receive roles and act out

Discuss the results of the role play Written response Notes

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

Direct Distribution (Sales) Deciding on a Distribution Channel Direct Distribution (Sales) Producer of product sells directly to the consumer Advantages: Less complicated Less expensive Eliminates cost of “middle man” Allows for market research

Direct Distribution (Sales) 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

Direct Distribution (Sales) Examples Deciding on a Distribution Channel Direct Distribution (Sales) Examples Person to Person Display booths at events Party-plan sales In-home demos

Additional Direct Distribution (Sales) Examples Deciding on a Distribution Channel Additional Direct Distribution (Sales) Examples Business trade shows Temp space in shopping malls Direct mail Mail order Telemarketing

Indirect Distribution Utilizes Middlemen Who Sell Advantages: Deciding on a Distribution Channel Indirect Distribution Utilizes Middlemen Who Sell Advantages: 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

Indirect Distribution Deciding on a Distribution Channel Indirect Distribution Disadvantages: Producer removed from consumers More expensive than direct distribution Less control over product

Indirect Distribution Examples Deciding on a Distribution Channel Indirect Distribution Examples Sales Representatives Wholesalers, Distributors, Jobbers Wholesale Trade Shows Wholesale to Retailers Consignment Mail Order

Indirect Distribution Channels Deciding on a Distribution Channel Indirect Distribution Channels Wholesalers D Distributors Jobbers

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

Build long lasting relationships 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

Selling Wholesale to Retailers Producer can make contact Deciding on a Distribution Channel Selling Wholesale to Retailers Producer can make contact Must know trade practices Need written agreements Cannot undercut retail price

Deciding on a Distribution Channel Consignment Contracting 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

Buy ad space in an established catalog, magazine, tabloid, etc. 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.

Need good mailing lists 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

Securing Mailing Lists 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

When Evaluating Mail-Order Media, Ask About: 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

Magazine Advertising Advantages: Deciding on a Distribution Channel Magazine Advertising Advantages: 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

Magazine Advertising Disadvantages: Deciding on a Distribution Channel Magazine Advertising Disadvantages: Longer lead from ad placement time to published ad High cost

Questions When Considering Catalogs 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.

Questions When Considering Catalogs 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?

Additional Indirect Distribution Examples Deciding on a Distribution Channel Additional Indirect Distribution Examples TV Marketing Computer Networks Vending Machines / Rack Merchandising Cooperatives Franchises Multilevel Marketing (MLM)

Telemarketing A sales approach conducted entirely by phone. Deciding on a Distribution Channel Telemarketing A sales approach conducted entirely by phone.

Cable network channels Infomercials Deciding on a Distribution Channel Television Marketing Cable network channels Infomercials

Deciding on a Distribution Channel Computer Networks Vast online information system that links businesses and potential customers all over the world.

Internet Marketing Web sites Social Marketing Internet Sales Deciding on a Distribution Channel Internet Marketing Web sites Social Marketing Internet Sales

Vending Machines & Rack Merchandising Deciding on a Distribution Channel Vending Machines & Rack Merchandising

Deciding on a Distribution Channel Cooperative A business formed by a group of people to market their products together

Owned and managed by self-employed business people 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

Deciding on a Distribution Channel Multi-Level / Network Marketing People sell at different levels in company hierarchy. Distributors recruit new people to join the program. The practice is sometimes called “sharing” business.

Possible Distribution Channels Deciding on a Distribution Channel Possible Distribution Channels Direct Channel: Producer > Consumer Single Channel (w/ middleman): Producer > Retailer > Consumer Double Channel (w/ middleman): Producer > Wholesaler > Retailer > Consumer Simultaneous Dual Channel: (Producer > Wholesaler > Retailer) and (Producer > Consumer)

Making Choices Consider: Deciding on a Distribution Channel Making Choices Consider: Opportunities available Appropriate for your business Delivery time frame Packaging for shipment Cost Keep up to date