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Deciding on a Distribution Channel

Deciding on a Distribution Channel. Deciding on a Distribution Channel. Lesson Goals: Learn different methods of distribution Recognize continuous nature of marketing methods Obtain information on additional resources View distribution as an integral role in a business plan.

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Deciding on a Distribution Channel

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  1. Deciding on a Distribution Channel

  2. Deciding on a Distribution Channel Lesson Goals: • Learn different methods of distribution • Recognize continuous nature of marketing methods • Obtain information on additional resources • View distribution as an integral role in a business plan

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

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

  5. 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

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

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

  8. Deciding on a Distribution Channel Indirect Distribution Utilizes Middlemen Who SellAdvantages: • 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

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

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

  11. Deciding on a Distribution Channel Indirect Distribution Channels

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

  13. 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

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

  15. Deciding on a Distribution Channel ConsignmentContracting with Retailers to Display and Sell ProductAdvantages: • 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

  16. 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.

  17. 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

  18. 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

  19. 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

  20. Deciding on a Distribution Channel Magazine AdvertisingAdvantages: • 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

  21. Deciding on a Distribution Channel Magazine AdvertisingDisadvantages: • Longer lead from ad placement time to published ad • High cost

  22. 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.

  23. 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?

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

  25. Deciding on a Distribution Channel TelemarketingA sales approach conductedentirely by phone.

  26. Deciding on a Distribution Channel Television Marketing • Cable network channels • Infomercials

  27. Deciding on a Distribution Channel Computer NetworksVast online information system thatlinks businesses and potential customers all over the world.

  28. Deciding on a Distribution Channel Internet Marketing • Web sites • Social Marketing • Internet Sales

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

  30. Deciding on a Distribution Channel CooperativeA business formed by a group of people to market their products together

  31. 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

  32. Deciding on a Distribution Channel Franchise Agreements May Include • Using the franchisor’s name • Help in finding a location • Store design and outfitting

  33. Deciding on a Distribution Channel Franchise Agreements May Include • Advertising • Acquiring Supplies • Management Training • Protected Territory

  34. Deciding on a Distribution Channel Franchise Agreements May Include • Financing • Marketing and Promotion • Record Keeping

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

  36. 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)

  37. Deciding on a Distribution Channel Making ChoicesConsider: • Opportunities available • Appropriate for your business • Delivery time frame • Packaging for shipment • Cost • Keep up to date

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