Channels of Distribution Getting goods to the consumer

The 4 P’s Place Product Price Promotion Also known as the Marketing Mix

What is a Channel of Distribution? The path a product takes from the producer to the final user.

Channels of Distribution Producer Wholesaler Agent Retailer Industrial Distribution Consumer/Industrial User

Industrial Users Market consisting of all customers who make purchases for business purposes; also called the business-to-business market

Consumers Those who buy and actually use the product.

Intermediaries Intermediaries are channel members that help move products from the producer or manufacturer to the final user. “Middlemen”

Types of Intermediaries Merchant Intermediaries Wholesalers Retailers Electronic Retail Outlets Vending Service Companies Agent Intermediaries Independent Manufacturer’s Agents Brokers

Wholesalers & Retailers Buy large quantities of goods from manufacturers, store the goods, and resell them to other businesses. Retailers Sell goods to the ultimate consumer through their own stores.

Electronic Shopping Internet Shopping Home Shopping Networks

Vending Service Companies Buy manufacturers’ products and sell them through machines that dispense goods to consumers. Vending Machines

Agents Independent Manufacturers’ Agent – Broker Represent several non-competing manufacturers in a specific industry Broker Sales Agent for different manufacturers May merchandise products as well as sell.

Transportation Companies & Storage Warehouses Not part of the channel of distribution because they do not take title to the goods nor are they involved in negotiating that title.

Direct vs. Indirect Distribution Direct - Goods or services are sold from the producer directly to the final user – no intermediaries are involved. Indirect - Goods or services are sold through the use of intermediaries.

5 Channels for Consumer Products A – Direct sales from manufacturer to consumer – Avon B – Manufacturer to Retailer to Consumer – Mansour’s C – Manufacturer to Wholesaler to Retailer to Consumer – SuperValu D – Manufacturer to Agent to Wholesaler to Retailer to Consumer – Small Retailers E – Manufacturer to Agent to Retailer to Consumer – Cookware, Meat, Cosmetics, Supermarkets

4 Channels for Industrial Products A – Manufacturer to Industrial User – Office Machine Companies B – Manufacturer to Industrial Distributor to Industrial User – Loy’s Office Supplies C – Manufacturer to Agent to Industrial Distributor to Industrial User – Building Supplies D – Manufacturer to Agent to Industrial User – Construction Equipment

Computer Companies Go Direct – A Case Study Dell: manufacturer to consumer or manufacturer to industrial user (both direct). Big three: catalog sales – (same as Dell); retail sales – manufacturer to retailer to consumer or manufacturer to industrial distributor to industrial user (indirect). The big three feared the competition from Dell, Gateway and similar companies who are able to create custom-built computers at competitive prices. Could be either way – Is it a good idea?

Rack Jobbers Manage inventory and merchandising by counting stock, filling it in when needed and maintaining store displays. – Grocery Store

Considerations in Distribution Planning Decisions involving a product’s physical movement and transfer of ownership from producer to consumer Distribution decisions affect a firm’s marketing program Nontraditional and multiple channels, control vs. costs, intensity of distribution

Nontraditional and Multiple Channels Selling in various types of outlets L’eggs Selling both retail and industrial – Loy’s Office Supplies, SAM’s

Control vs. Costs Who Does the Selling? Who Dictates the Terms? In-house sales force Agents Who Dictates the Terms? Mass Merchandisers Small Retailers

Distribution Intensity Intensive Complete market coverage All suitable outlets Selective Limited number of outlets More control Exclusive Protected Territories Franchises Retail serviced line Integrated Distribution

Distribution Planning in Foreign Markets Foreign Markets Deliver Additional Problems Japan – Intensive personal relationships, saving face, distribution networks Latin America – Bribes, Lack of Skills, Lack of Financing