Why is it necessary to use the distribution

channels?

1. MARKETING OF LOCAL AND TYPICAL

PRODUCTS

1.5. Place

Objectives

TEST ….

MTTM

The nature of distribution channels

Distribution channels move products and services from businesses to consumers and to other businesses.

Also known as marketing channels, channels of distribution consist of a set of interdependent organizations—such as wholesalers, retailers, and sales agents—involved in making a product or service available for use or consumption.

When starting a business, the marketing department is looking for distribution channels.

The experience of many businesses shows that the most efficient channel of distribution is the distribution made by intermediaries.

There are four traditional elements in the market mix. Distribution (or “Place”) is, after Product, Price and Promotion, the fourth one.

But they do it also because the intermediaries have the contacts, the experience and the scale of operations. Another distribution channel is the direct sale. This is the case of the traditional products, which have an exclusive market, where customers prefer the direct trade with the producer.

Which are the benefits of selling our products by

intermediaries?

Who controls how our products are sold and to

whom?

Understand the importance of the distribution for a business

Learn how to choose the best distribution channel for a farm business

Keep in mind the importance of the customers

Module 1

Choosing the best distribution

channel assures the success of the

best sales

The most important function of a distribution channel is to provide a link between production and consumtion. There are several important key functions that must be undertaken in a market:

1. INFORMATION: the market research 2. PROMOTION: offers must be promoted 3. CONTACT: communication with prospective buyers 4. MATCHING: offer must fit buyer’s needs (taste, grading,

assembling, packaging) 5. NEGOTIATING: adjusting the price 6. PHYSICAL DISTRIBUTION: transporting and storing goods 7. FINANCING: the funds must cover the costs of the

distribution channel 8. RISK TAKING: the commercial risks must be assumed by

the operating channel To find the right place for marketing is part of the so called operational marketing objectives. These consist in the marketing mix that shows four separate elements: the product policy, the price policy, the distribution policy and the promotion policy.

Operational marketing objectives V

Marketing mix v v v v

Product Price Distribution Promotion Behind each of these factors are many individual marketing instruments. There also must be a strategy how to combine them most effectively. They have to be adjusted and adapted to the operational marketing objectives. The objectives have to change periodically as the market is permanently changing.

Pa

“Distribution” is a very important

part of the marketing process.

Julian Dent: ”Distribution channels”-2008 OMIaRD 2004

The Function of a Distribution C

The Distribution-Channel Strategy Module 1

How does your product find the

way to a consumer?

PaAs Howard J. Weiss and Mark E. Gershon noted in Production and Operations Management, a basic distribution network consists of two parts: 1) a set of locations that store, ship, or receive materials (such as factories, warehouses, retail outlets); and 2) a set of routes (land, sea, air, satellite, cable, Internet) that connect these locations.

Howard J.Weiss & Mark E. Gershon –

Production and Operations

Management”

There are many factors that influence the choice of a distribution channel – the so called “STRATEGY”: 1. The market factors: a) buyer behaviour; b) buyer needs c) intermediary costs. 2. The producer factors: a) has the producer the resource to

perform the function of the channel? b) the wish of the producer to have controle over how, to whom and at what price a product is sold.

3. Product factors: a) some products are supplied directly

to customers b) some products need short distribution channels.

It is also important to choose how intensive the distribution is made. In this case we have three broad options to distribute our products: - intensive distribution (saturation of the market) - selective distribution (the use of limited number of outlets in a geographical area to sell products) - exclusive distribution (is an extreme form of selective distribution, in which only one wholesaler, retailer or distributor is used in a specific geographical area to sell products).

It is not a war, but in order to win, the chosen strategy is the key of the success!

Analyse the market demand

Adjust the products in accordance with customers’ needs

Always choose the right strategy

COOPERATION Module Pa

A marketing co-operation or marketing cooperation is a partnership of at least two companies on the value chain level of marketing with the objective to tap the full potential of a market by bundling specific competences or resources. Other terms for marketing co-operation are marketing alliance, marketing partnership, co-marketing, and cross-marketing.

Marketing co-operations are sensible, when the marketing goals of two companies can be combined with a concrete performance measure for the end consumer. Successful marketing co-operations generate “win-win-win” situations that offer value not only to both partnering companies, but also to their customers.

Marketing co-operations extend the perspective of marketing. While marketing measures deal with the optimal organization of the relationship between a company and its existing and potential customers, marketing co-operations audit to what extent the integration of a partner can contribute to improving the relationship between companies and customers.

For example:

To sell noodles and ketchup together

You must understand the

needs of all players in order to achieve

a win-win-win situation

Cooperation Producer-Consumer

An interesting way of cooperative distribution is the consumer driven marketing. This model is known in the USA. A group of consumers pay a certain sum to a farmer in advance, and he must deliver goods to the consumers during the year. Carlo Petrini, President of Slow Food gave this a name when he said: As a consumer, I am the co-producer of my food. I have the same responsibility as the farmer has. The production and the processing of food need a climate of understanding and trust between producer and consumer.

Do you want to meet your final client? Go for direct marketing!

Find the place of marketing

Objectives

TEST YOUR

Marketing products means to transfer products from the producer to the consumer.

Each of the different ways of marketing has some advantages or can be useful for a certain product, or it can be nonsense for another type of product.

Small rural producers of regional and niche products or organic food producers often prefer the most direct way of marketing shown in the vertical line.

These are

. direct selling on the farm

. selling in a farm shop The following figure shows the general principles of the distribution of goods.

. delivery to the customer’s house (e.g. green box)

. farmers markets P R O D U C E R Examples of these direct marketing systems are wide spread. Many family farms exist with one or a mix of these ways.

AGENT | |

PROCESSOR | |

WHOLESALER | |

RETAILER | Direct marketing can be an appropriate way of distribution.

C O N S U M E R

Design your products as appropriate for direct consumption

Check your possibilities to meet your client directly (availability of time, means of transport etc.)

Check the number of clients you need

Develop a way for your client to understand your method of production (information, advertising, etc.)

Specific direct sale Module Pa

The business idea, the vision to enter the market with new products has to be linked to the overall objective, to the background of the business. There should be a clear relation. The objectives of the company or initiative have to have a strong influence to the strategic marketing objectives and clearly influence the opreational marketing objective. If these do not fit together, the marketing will fail. Direct sail makes it happen that the client does not see only the product, but also the personality of the producer and he gets an impression of his background. Here the producer has the incomparable chance to open the heart of his client. FARMERS MARKET – EXAMPLE OF INSTALLATION Regular food market places in countries like Romania are open 6 days per week from morning till evening. This fact makes it impossible for producers to choose these markets as places of distribution. Only professional traders have access to those markets. Therefore, special farmers markets must be installed to allow direct contact between a producer and a consumer. This was achieved in Bucharest starting December 2007. The drive was given by an English foundation ADEPT, focussing on rural economic development by respecting traditions, ecology and preserving natural habitats.

Your image must be congruous to your philosophy

Marketing

transports the message of your

business

You can open the heart of your client

How to start a farmers market

ADEPT could find interested persons (e.g. The Bucharest Farmers Museum) and sponsors (a bank, a television post, a daily newspaper , a mobile telephone company), and official support (the town hall) to open the first farmers market integrated in an existing permanent market place right in the center of the capital. The farmers were very welcome and they were offered cheap places to stay during nights. The square has a surface of 600 m2 with a number of tables, rafts and umbrellas sufficient for about 40 stalls. Sometimes, two farmers share one stall. There is a central water supply and electricity. The price for a stall is 30 Euro per weekend. The market is open Saturday 10-17, Sunday 9-14. The main condition is, that the vendor is a small producer or processor.

Module 1

Find partners to

create a “farmers market”

Pa

The Bucharest farmers market was frequented by as many as 10,000 persons per day. Many vendors run out of goods in the first day. The product range in the order of sold product quantity during a winter day can be given as follows:

- Meat products, saussages -Traditional cheese - Wine - Bread, cakes and cookies - Honey - Strong alcoholic drinks - Fresh vegetables - Jam and pickles - Smoked fish - Teas, herbs, spices - Arts and crafts

THE GREEN BOX Direct delivery to the consumers house can be done with the “green box system”. It is a way to contact the client and to market regional seasonal products. The system is well working in many countries, but was without success in some cases, like Budapest. It must be tested well beforehand its introduction.

Farmers markets give a chance to everyone. This is a real test of your standing face to face with the clients and in

competition with your collegues. Do not miss this experience.

The market creates personal contacts between producers an consumers

A feeling of trust for the consumer , a feeling of pride and courage for the producer,

Producers learn from each other e.g. labelling

BUT

High travel costs for the producers

Some uncertainty about legal problems

“Quoting” – Bibliographic

resources

FCE 2007 ADEPT 2007

Typical products on farmers

Module 1

Can you find partners to

organize a food festival?

Pa

Traditional local food can be celebrated with a food festival. This is a single event with a lot of publicity at a special place in the centre of the town. Like the Bucharest Food Festival in 2008. The festival was presented by a wine company and a meat processing company. The main sponsor was a dishwashing agent company. The festival was fostered by the Town Hall, promoted by two TV stations and a radio station. Nine partners managed the festival together with 10 media partners and two technical organizers. The organization Bioromania was invited to participate with their members, fifteen organic producers and processors of organic food. There was music and dance. The highlight was the cities longest cake. Another type of food festival is the Turda Fair. The fair includes horse riding and other sports events, information about ecology and social development organized by The Ratiu Foundation Turda. The “Slow Food” organization is one of the most famous organizer of those festivals. Producers of genuine local products are always welcome. Food festivals can not be a consistent element of marketing, but they may have an important role of publicity for organic,

local, regional or niche products.

Check who might be interested in organizing a food festival

Go for sponsors and partners

Involve cultural or sports events

Invite your collegues to participate

“Quoting” – Bibliographic

resources

BIOROMANIA 2008

The Ratiu

Foundation 2007/2008

www.slowfood.it

Food festivals

Module 1

I will deal with a

wholesaler – can I do alone or better

with partners?

Pa

Larger agricultural production units, with products that have to be processed e.g. wheat, and especially, if located far from markets, need to deal with wholesalers. The same situation is given for processors, e.g. flour, noodles etc., who need a large number of clients, impossible for direct marketing. Important preconditions for entering the large distribution however are: - availability of large quantities of a defined product - a guaranty for a long term production steadiness - meeting specific quality standards - the acceptance of a significantly lower price. In this situation a group or an association of producers has a much better standing and is highly recommended. Three examples will underline the statements: Petrasbio is a company for organic cereal products like flour, musli and noodles. After a start up phase of about 2 years the production was stabilized as sufficient in terms of quantity and quality to go for the large distribution channels. The Demeter-vegetable producer Willmann started his own wholesale company when he felt he spent too much time for marketing. He integrated a wide range of organic products like oranges from Sicily and non food products. Nowadays, fresh vegetables represent just 4% of the turnover. Demeter-Felderzeugnisse was founded in 1971 as a farmers association. The initial scope was storage of potatoes and other products for prolonged sales. In 1992, it was modified into a wholesale company dealing with a wide range of products, including frozen food and organic fish.

A network succeeds with a strong idea of a symbiotic regional economy, supported by a society aware in the issues

ecology and cultural integrity.

Farmers Network: Case study: BIOCOOP Sibiu Organic farming: Case study: Ferma Ecologica Topa)

)

In case of big quantities and good quality, large distribution channels are appropriate.

Check out, whether with partners you will have a better standing

Wholesalers are oriented toward the producer, which is an advantage.

The step from direct marketing to the wholesaler means to accept a considerably lower price

Bibliographic resources

www.petrasbio

.ro

www. Handelskontor–

Willmann.de

www.demeter-felderzeugnisse.

de

To enter in the large distribution