Distribution

Objectives

Define distribution Explain the concept of a channel of

distribution Identify channel members Distinguish between direct and indirect

channels Explain distribution channels for consumer

products and services Describe distribution intensities

Distribution

The process of deciding how to get goods in customer’s hands

One of the 4 P’s of marketing - Place

Importance of Distribution

To earn a profit, companies have to distribute their products and services

Reach the target market Manage costs

Video on Distribution

http://videos.howstuffworks.com/hsw/23138-economics-distribution-channels-video.htm

Distribution

Channels of Distribution - the path a product takes from its producer or manufacturer to the final user.

Industrial: when a product purchased for business use

Consumer: when a product purchased for personal use

Direct and Indirect Channels

Direct distribution: When the producer sells goods or services

directly to the customer

Indirect distribution: Involving one or more intermediaries (middlemen)

Which of these channels is a direct channel?

Channel Members

Intermediaries - (middlemen); businesses involved in sales transactions that move products from the manufacturer to the final user

Manufacturer Final User

Efficiency

With no intermediaries 25 transactions needed

MFG MFG MFG MFG MFG

Consumer Consumer Consumer Consumer Consumer

Contact Efficiency

With 1 intermediary 10 transactions needed

MFG MFG MFG MFG MFG

Consumer Consumer Consumer Consumer Consumer

Intermediary

Channel Members: Intermediaries

Wholesalers Businesses that buy large quantities of goods

from manufacturers, store the goods, and then resell them to other businesses.

Take title to goods they buy for resale.

Channel Members: Intermediaries

Wholesalers - specific types Rack jobbers - wholesalers who manage

inventory and merchandising for retailers by counting stock, filling it in when needed and maintaining store displays.

Drop shippers - own the goods they sell but do not physically handle the actual products.

Rack Jobber

Drop Shipper

Channel Members: Intermediaries

Retailers Buy products from manufacturers or wholesalers Sell goods to final consumer for personal use Takes title for goods “Brick and Mortar”

Channel Members: Intermediaries

E-Retailers Non-store retailers Buy products from manufacturers or wholesalers Sell goods to final consumer for personal use Online purchase and mail delivery

Channel Members

Agents Intermediaries that bring buyers and sellers together

Independent Manufacturer’s Representative Work with several related, but noncompeting

manufacturer’s in a specific industry Paid commission on what they sell

Brokers Negotiate a sell, paid a commission, and look for new

customers

Channel Path

Manufacturer directly to Consumer Selling products at the production site (factory) Having a sales force call on consumers Catalogs Online sales

ManufacturerManufacturer ConsumerConsumer

Channel Path

Manufacturer to Retailer to Consumer Used for merchandise that dates quickly or needs

servicing

ManufacturerManufacturer ConsumerConsumerRetailerRetailer

Channel Path

Manufacturer to Wholesaler to Retailer to Consumer Most commonly used for staple goods, which are

items that are always carried in stock and whose styles do not change frequently

ManufacturerManufacturer ConsumerConsumerRetailerRetailerWholesalerWholesaler

Channel Path

Manufacturer to Agents to Wholesaler to Retailer to Consumer For manufacturers who wish to concentrate on

production and leave sales and distribution to others

ManufacturerManufacturer ConsumerConsumerRetailerRetailerWholesalerWholesalerAgentsAgents

Channel Path

Manufacturer to Agents to Retailer to Consumer Used by manufacturers who do not want to

handle their own sales.

ManufacturerManufacturer ConsumerConsumerRetailerRetailerAgentsAgents

Distribution Intensity

Intensity - how widely a product will be distributed

Exclusive Distribution: Protected territories for distribution of a product in

a given geographic area Characteristics: prestige, image, channel control,

and high profit margins

Distribution Intensity

Selective Distribution: A limited number of outlets in a given geographic

area are used to sell the product Select channel members that maintain the image

of the product and are good credit risks, aggressive marketers, and good inventory planners.

Distribution Intensity

Intensive Distribution The use of all suitable outlets to sell a product Objective/Goal: complete market coverage and to

sell to as many customers as possible

What’s the Intensity?(exclusive, selective, or intensive)

Kraft Macaroni & Cheese Seven for all Mankind Jeans Apple Macbook Pepsi Toyota Porsche Nike Running Shoes

Selecting a Distribution Channel

Factors to consider: Type of product Structure and geography of the Market Complexity of the product Quantity and price of a product

Activity

Diagram 5 scenarios of channels of distribution

Draw, use clipart on computer, or art supplies from closet and magazine pictures