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Chapter Fifteen

Chapter Fifteen. Wholesaling, Retailing, and Physical Distribution. Channels of Distribution. Channel of distribution (marketing channel) A sequence of marketing organizations that directs a product from the producer to the ultimate user Middleman (marketing intermediary)

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Chapter Fifteen

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  1. Chapter Fifteen Wholesaling, Retailing, and Physical Distribution

  2. Channels of Distribution • Channel of distribution (marketing channel) • A sequence of marketing organizations that directs a product from the producer to the ultimate user • Middleman (marketing intermediary) • A marketing organization that links a producer and user within a marketing channel

  3. Direct Channel • Producer to consumer • No intermediaries • Used by all services & by some consumer goods • Producers can control quality and price, do not have to pay for intermediaries, and can be close to their customers • Examples: Dell Computer, Mary Kay

  4. Retailer Channel • Producer to retailer to consumer • Producers sell directly to retailers when retailers (Wal-Mart) can buy in large quantities • Used for bulky products where additional handling would increase selling costs (furniture, cars), and for perishable or high-fashion products that must reach consumers quickly

  5. Wholesaler Channel • Producer to wholesaler to retailer to consumer • The traditional channel • Used when a producer’s products are carried by so many retailers that the producer cannot deal with them all • Used when retailer’s order is small compared to production’s economical output

  6. Agent/Broker Channel • Producer to agent to wholesaler to retailer to consumer • Agent - middlemen that do not take title to products and are compensated by commissions paid to the producers • Often used for services,real estate, and by producers that do not have their own sales forces

  7. Channels for Consumer Products A manufacturer may use multiple channels 1) To reach different market segments • I.e.- same product is sold to consumers & businesses 2) To increase sales or capture more market share • In store and online

  8. Channels for Consumer Products Direct Retailer Wholesaler Agent/Broker

  9. How do you choose which channels to use?Market Factors Market FactorsThat Affect ChannelChoices Customer Profiles Consumer or Industrial Customer Size of Market Geographic Location

  10. How do you choose which channels to use? Product Factors Product FactorsThat Affect ChannelChoices Product Complexity Product Price Product Life Cycle Product Delicacy

  11. Vertical Marketing Systems • Vertical channel integration • The combining of two or more stages of a distribution channel under a single firm’s management • Lessens channel conflict • Lowers overall costs • Allows more control over the process

  12. Function of Intermediaries Specialization and Division of Labor Channels Fulfill Three Important Functions Overcoming Discrepancies- Temporal, spatial, assortment, quantity Providing Contact Efficiency

  13. Contact Efficiency

  14. Marketing Intermediaries: Retailers • Retailers: The final link between producers and consumers • Approx 2.6 million retail firms in the U.S. • 90% have sales of less than $1 million

  15. Classes of In-Store Retailers by Ownership • Independent retailer • A firm that operates only one retail outlet- one owner of one store • Chain retailer • A company that operates more than one retail outlet -one owner of many stores • Franchise • A company that leases some of its retail outlets - many owners of many stores

  16. Type of Retailer Service Level Product assort- ment Price Department Store Mod Hi-High Broad Mod-High Specialty Store High Narrow Mod-High Supermarket Low Broad Moderate Convenience Store Low Med-Narrow Mod High Drugstore Low-Mod Medium Moderate Full-line Discounter Mod-Low Med-Broad Mod Low Restaurant Low-High Med-Narrow Low-High Classes of In-Store Retailers by Merchandise

  17. How many intermediaries do I use? • Intensive distribution • The use of all available outlets for a product to saturate the market • Objective-mass market selling of convenience goods • Selective distribution • The use of only a portion of the available outlets for a product in each geographic area • Objective – reduce access to raise brand image • Exclusive distribution • The use of only a single retail outlet for a product in a larger geographic area • Objective – use buyer desire to lessen distribution costs and increase price

  18. Market Coverage

  19. Nonstore Retailing • Purchase products without visiting a store • Catalog marketing • make selections & place orders by mail or telephone • Online retailing • Presenting and selling products through computer connections • Automatic vending • The use of machines to dispense products • Direct Selling • Selling through face to face presentations

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