Channels of Distribution

1. Channels of Distribution Getting goods to the consumer

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

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

4. Channels of Distribution • Producer • Wholesaler • Agent • Retailer • Industrial Distribution • Consumer/Industrial User

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

6. Consumers • Those who buy and actually use the product.

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

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

9. Wholesalers 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. Wholesalers & Retailers

10. Electronic Shopping • Internet Shopping • Home Shopping Networks

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

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

13. 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.

14. 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. Direct vs. Indirect Distribution

15. 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 5 Channels for Consumer Products

16. 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 4 Channels for Industrial Products

17. 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?

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

19. 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

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

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

22. 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

23. 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