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4MD3 Business to Business Marketing
Lecture 10
Steve Howse
March 9, 2009
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Wilson’s Social Style Matrix
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PREVIEW OF DISTRIBUTION• BM/CM differences
• the basic distribution decision• making that decision • middleman types for indirect channels• finding middlemen • website-induced channel conflict
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BRIEF REVIEW OF CHANNEL TERMS
• direct channel
• indirect channel
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BM/CM DIFFERENCES - DISTRIBUTION
• direct channel dominant by dollar sales
• but not by other measures • many middleman types unique to BM• no retailers!
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THE BASIC DISTRIBUTION DECISION
• indirect channel or direct?
• get the decision right, because ..• it determines who does the critical PS • and it’s hard to reverse…
o e.g. indirect channel to direct o e.g. direct channel to indirect
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FAVOUR THE DIRECT CHANNEL WHEN YOUR
PRODUCTS ARE…• expensive • technical or complex • custom designed • new to the market• in need of strong support services • a high-risk purchase for your customer• purchased at high level • bulky or heavy
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FAVOUR THE DIRECT CHANNEL WHEN YOUR
CUSTOMERS ARE…
• few, large or close together• buying steadily year-round
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FAVOUR THE DIRECT CHANNEL WHEN YOUR
OWN FIRM…
• wants to control "customer interface"
• wants focused sales attention • has wide product range • has necessary time and money
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INDIRECT-CHANNEL TERMINOLOGY
• principals
• wholesalers omeaningoalways independentomerchant and agent wholesalers
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MERCHANT WHOLESALERS
• AKA (industrial) distributors • buy the manufacturer’s product• and usually physically possess it
too• their reward is margin• usually “full function” middlemen
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TYPES OF MERCHANT WHOLESALER
AKA (INDUSTRIAL) DISTRIBUTOR
odealers ocontractor-dealers opaper merchants osteel service centres otrading companies
odrop shippers - AKA desk jobbers
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AGENT WHOLESALERS
• don’t buy the manufacturer’s product
• and seldom physically possess it• reward is commission plus
expenses• usually not “full-function”
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TYPES OF AGENT WHOLESALER
o manufacturers' agents AKA reps o selling agents o brokerso export management companies
o commission merchants
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THE PROS OF DISTRIBUTORS VS. REPS
• distributors are more “locked in” to you
• are bigger and more stable• are more likely to provide national
coverage• are best for "catalogued products"
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THE CONS OF DISTRIBUTORS VS. REPS
• distributors try to shave selling expenses • favour bigger, more-established customers• and more-established products • have more channel control than reps• carry more product lines• carry competing products • give inferior market feedback
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FINDING MIDDLEMEN
• check directories • run ads in trade publications • exhibit at or visit trade shows• consult Canadian Trade Commissioners
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MINIMIZING WEBSITE INDUCED CHANNEL CONFLICT
• use Web for communication only• alternatively..
o don’t price lower on Webo don’t sell all products on the Webo don’t sell to all customerso use different brand name for Web saleso involve middleman in website