the channels of distribution

7/30/2019 The Channels of Distribution

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The Channels of

Distribution


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What is distribution?

The process of

getting productsfrom production

to the consumer


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The Two Components of Distribution

1. Selecting, developing and managing distributionchannels

2. Physically distributing goods and servicesthrough those channels

Problems in doing these things:

- Which channel to select? Advantages andDisadvantages

- Logistics how does the product physically getthere


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Different options


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Distribution Policy

- Policy regarding how a business

wants its products distributed to

consumers

- There are four types


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Intensive Distribution

- try to get the product sold in as manydifferent places as possible

- Advantages- Increase sales- Increase recognition

- Disadvantages- Lack of control of retail locations

- Intensive competition

- Product examples: Coke, Gum, others?


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Selective Distribution

Try to control the distribution of

product but not exclusively

Advantages

Some control over where product is sold Can still cover a large area

Disadvantages

Legal implications purchase minimums

Missing out on possible sales Examples?


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Exclusive Distribution

Exclusive distribution contractswith one or two businesses in acertain area

Advantages Control over image

Favourable agreements

Disadvantages Can severly limit sales

Geographical problems

Examples?


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Integrated Distribution

When business owns both

distribution and manufacturing

Advantage

Total control of product

Keep sales revenue

Disadvantage

Handle all expenses Handle all difficulties

Examples?


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Types of Channels

Direct Channels Product goes directly from producer to the

consumer

Examples Trade Services Lemonade stand

Integrated distribution

Marketing agents


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Types of Channels

Indirect Channels Use distribution intermediaries who make a

profit off holding on to the product


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Indirect

Examples

Importers Foreign made product goes to

exclusive importer who sells to retailoutlets in a geographical area

Wholesaler Buy products from domestic

manufacturers and sell them to retailstores and other businesses

Retailers Sell product to consumers


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Advantages of the Wholesaler

for the Retailer Buy in bulk lower costs per unit

Warehousing hold on to greater amount of product in case needed

Risk bearing retailer has less risk for owning large quantitiy of a product withunknown or changing demand

Financingretailers dont have to borrow money to pay for extra stock, they can useprevious sales of smaller quantities to buy more

Buying saves the time and effort of f inding mulitple suppliers

Transporting Wholesalers usually deliver without charge (in the price of the product)

Managing Wholesalers will provide advice on inventory management and play amajor role in controlling inventory levels for their customers

Promoting wholesalers pass on free promotional materials

Providing market information they know whats hot, what not and what is on thehorizon


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Retailer success

The five Rights

The Right Merchandise

The Right Price

The Right Time The Right Place

The Right Quantities

Read pages 298-300 and defineeach of these


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Specialty Channels

Any distribution that does

involve a retail store


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Types of Specialty channels

Vending machines

The Internet

Catalogues

Telemarketing

Television Sales

Questions for you to answer

1. For each of the above, list one product that you couldsell effectively using that specialty channel

2. What is an advantage of each of the specialtychannels mentioned? What is a disadvantage?Discuss with a partner and use pages 301-306 to help.


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What to consider when selecting a

distribution channel

Each person in the class will be assigned one of thequestions from pages 308-310

read, summarize and report to the class next day

Is the channel directed at an industrial and/or institutionalconsumer?

What is the income level of the target market?

How large is the local market?

What are the buying habits of the consumers?

Will the selected channel reach a suffcient number of consumers?

Is it a seasonal or high fashion item?

Can the channel become a competitive advantage?

Is the product custom made?

Will the product spoil?

What is the unit value of the product?

How large or how heavy is the product?

Does the product come with a manufacturers warranty?Is the product price sensitive?


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Channel Captains

When one company controls the

relationship in the distrubtion

chain due to volume and/or

sales

Wal-mart example

the channels of distribution

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