1. 4.08 CHANNEL MANAGEMENT & ITS ROLE IN MARKETING

2. Definitions
Channel of distribution – path a product takes from producer (or manufacturer) to final user (consumer)
Producer – maker of the product
Ultimate consumer – individual or group who actually uses a good or service
Industrial user – individual or group who uses a good or service within a business setting

3. Definitions cont’d
Middlemen/intermediaries – firm or person who acts as a link between parties in a business deal
Retailers – A business that sells goods to a consumer. Can be large or small. For example, Target or a family run diner.
Wholesaler – buy large quantities of goods from manufacturers then resell them to other businesses

4. Definitions cont’d
Agent – party that has express or implied permission to act on the behalf of another. For example a real estate agent acts on behalf of their client negotiating terms of the sale/purchase of property
Direct channel – producer supplies directly to the ultimate consumer
Indirect channel – involves one or more intermediaries

5. Types of channel members
Wholesalers
Retailers
Rack jobbers – manage inventory and merchandising for retailers by counting stock, filling in when needed, and maintaining store displays.
Drop shippers – own the good they sell but don’t physically handle the products
Brick-and-mortar – sell goods to customers from their physical stores
Automatic retailer – vending machines
Direct mail, catalog, home shopping networks, & e-tailing

6. Types cont’d Agents Independent Manufacturers’ Representative Broker
Work with several related, noncompeting, manufacturers in a specific industry. They are paid commission based on what they sell.
For example, may carry fishing rods, hunting gear, or outdoor shirts all from different manufacturers
Broker
Purpose is to bring buyers and sellers together in order for a sale to take place. The relationship is temporary

7. Importance of channel members
Cost savings in specialization – these people know what they’re doing and can often perform tasks better and at lower costs
Reduce exchange time – in other words faster product delivery. Imagine if every manufacturer delivered their products!
Customers want convenience and variety.
Resellers sell small quantities

8. Importance cont’d
Create sales – retailers use creative means to drive customers into their stores
Offer financial support – allow customers options in purchasing products. i.e. payment programs
Provide information

9. DISTRIBUTION CHANNEL OPTIONS
Retail outlets – owned by YOU or an independent chain
Wholesale outlets –Sale of goods, generally in large quantity, to a retailer for resale purposes.
- Examples: Wholesalers buys goods in bulk quantities from either manufacturers or importers, then sells in smaller quantity to retail stores.
Sales force – compensated by salary, commission, or both
Direct mail – via YOUR own catalog or flyer
Telemarketing – on YOUR own or contract out
Cybermarketing – Internet based promotion through websites, banners, , etc.
TV and cable – direct and home shopping channels

10. Factors that affect the choice of distribution
Perishability of the product – require rapid delivery and careful handling. Include items such as bread, fresh flowers, and ice cream.
Geographic distance between producer and consumer – As the distance between producer and consumer increases so does the number of channel members
Need for special handling of the product – for example gasoline or large computer systems. Will either have few handlers or go directly to the user

11. Cont’d
Number of users – the greater the number of users, the more channels members there probably will be.
Number of types of products manufactured – for example, pottery, probably sell directly to a wholesaler. Electrical products probably sell to large retailers.
Financial strength and interests of the producer – large companies who are strong are better able to perform marketing activities required to move goods through the least number of channel members

12. Selecting YOUR distribution channel
Choose a single channel or a limited number of distribution channels that offer:
Identify what competitors are doing
Analyze your SWOT
The greatest ease of entry against the competition
Lowest costs of entry compared to the competition
Least financial risk and commitment to the trade
Sufficient volume potential to reach short-term goals