1. Business Marketing Channel Participants

2. Business Marketing Channel Members
A set of independent companies
that form cooperative buyer-seller relationships
involving transactions (such as raw material, components, process materials, and finished goods for resale),
all leading to getting a particular product line to the final user.

3. Do Middlemen Cause Increases in Consumer prices?
Yes
If not adding value to product offering No
If adding value thru creation of utilities
Form
Time
Place
Possession

5. Functions of the Channel Intermediary
Buying:
An intermediary buys products for resale to other intermediaries or to final business users.
Selling:
An intermediary with a capable sales force supported by established warehouse distribution centers, which is already serving other product needs of a wide user customer base, would be a valuable channel addition.
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6. Functions of the Channel Intermediary
Storing:
An inventory commitment is composed of products to satisfy customer purchase requirements in a timely manner.
Transporting:
A vast array of transportation alternatives are available for intermediaries to use to manage the physical flow of the product to the business user.
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7. Functions of the Channel Intermediary
Sorting:
Most intermediaries buy in large quantities and then sort (breaking of bulk) shipments into smaller lots (often in combinations) for resale to business users.
Financing:
Intermediaries may invest in inventory, sell and deliver merchandise to business user, and provide credit terms, then finance the exchange process.
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8. Functions of the Channel Intermediary
Risk taking:
Because of obsolescence and deterioration, risk is inherent in the ownership of inventory; additional risk comes from uncollectable customer accounts.
Providing market information:
Importance of continuous and accurate flow of market information concerning final user needs, pricing conditions, competitive conditions, and user satisfaction is critical to the success of the channel.

9. Channel Alternatives Issues
1. Number of levels to be included in the channel.
2. Types of intermediaries to employ.
3. Number of channel intermediaries.
4. Number of channels to employ.

10. Basic Channel Options Direct Channel of Distribution
Producer sells directly to the user
Accounts for roughly 70% of all B2B transactions
Indirect Channel of Distribution
At least one intermediary (middleman) exists in the channel between the producer and the user

11. Repair and Maintenance Market
BMW
Direct distribution
Indirect distribution
Rockwell Automation Inc.
(car image courtesy of BMW USA)
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12. Direct Sales Approach is Viable When:
Customers are large & well defined.
The customers insist on direct sales.
Sales involve extensive negotiations.
Control of selling job is necessary
to ensure proper implementation of the total product package and
to guarantee a quick response to market conditions.

13. Indirect Distribution is Generally Found Where
Markets are fragmented and widely dispersed.
Low transaction amounts prevail.
Buyers typically purchase a number of items.

15. Distributors Full-service intermediaries
Take title to the products they sell
Perform full range of marketing functions
Compensated by their profit margins
Classification of Distributors
General-line Distributors
Cater to broad array of industrial needs
Stock extensive variety of products
Specialists
Focus on one line or a few related lines
Combination House
Operates in 2 markets: industrial and consumer

16. Manufacturers’ Representatives
Do not take title to the products
Do not hold inventory of the products
Usually limited to defined geographic areas
Typically represent several companies in the same geographic area
Sell noncompeting, but complementary products
Compensated on a commission basis

17. Sales Branches
Part of the manufacturer’s organization
Can be on-site or off
Typically do not carry inventory
Role is to sell the organization’s products

18. Do not take title to the products
Sales Agents & Brokers
Do not take title to the products
Do not hold inventory of the products
Usually no limit on geographic areas
May represent several companies in the same geographic area
Sell competing products
Compensated on commission basis

19. Channel Transaction Facilitators
Do not take title
Do not carry inventory
Provide services such as storage, transportation, or arranging of sales.
Includes
independent warehouses
Carriers
manufacturer’s representatives
Can be very important to success of the channel.

20. Channel Conflict
Channel conflict may result when channel members have mutually exclusive values, interests, or goals.
Manufacturers may want control of distribution channels for better execution of their marketing strategies.
Intermediaries may not see the manufacturer-determined strategies as in their best interest.
The Key to remember:
Channel conflict cannot be fully eliminated
It can be properly managed

21. Types of Channel Width Intensive distribution: Selective distribution:
Gain access to as many resellers as possible within a particular geographic area.
Selective distribution:
Distribute product to limited number of resellers in a particular geographic region; highly chosen based on distinctive capabilities and high-quality service.
Exclusive distribution:
Only one channel member can sell a manufacturer’s products in a given geographic area.