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Channels of Distribution Channel Members

Channels of Distribution Channel Members. 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.

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Channels of Distribution Channel Members

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  1. Channels of DistributionChannel Members

  2. 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.

  3. Distribution • The process of deciding how to get goods in customer’s hands. • One of the 4 P’s of marketing-place.

  4. Distribution • Channels of Distribution- the path a product takes from its producer or manufacturer to the final user. • Industrial user-final user when a product purchased for business use • Consumer-final user when a product purchased for personal use

  5. Direct and Indirect Channels • Direct distribution: • When the producer sells goods or services directly to the customer, with no intermediaries. • Indirect distribution: • Involving one or more intermediaries.

  6. Channel Members • Intermediaries- (middlemen); businesses involved in sales transactions that move products from the manufacturer to the final user. • Reduces number of contacts required to reach the final user • Classified by whether they take ownership of goods and services

  7. Contact Efficiency MFG MFG MFG MFG MFG Consumer Consumer Consumer Consumer Consumer With no intermediaries 25 transactions needed.

  8. Contact Efficiency MFG MFG MFG MFG MFG Intermediary With 1 intermediary 10 transactions needed. Consumer Consumer Consumer Consumer Consumer

  9. Channel Members • 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. • 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.

  10. Channel Members • Retailers • Sell goods to final consumer for personal use. • Brick-and-mortar retailers-sell goods to the customer from their own physical stores. • Buy products from manufacturers or wholesalers. • Non-store retailers • Takes title for goods. • E-tailing-online retailing; selling products over the Internet

  11. 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

  12. Channels • Manufacturer Directly to Consumer • Selling products at the production site • Having a sales force call on consumers • Using catalogs or ads to generate sales • Using telemarketing • Using the internet to make online sales • Manufacturer to Retailer to Consumer • Used for merchandise that dates quickly or needs servicing

  13. Channels • 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 • Manufacturer to Agents to Wholesaler to Retailer to Consumer • For manufacturers who wish to concentrate on production and leave sales and distribution to others

  14. Channels • Manufacturer to Agents to Retailer to Consumer • Used by manufacturers who do not want to handle their own sales.

  15. Distribution Intensity • Exclusive Distribution: • Protected territories for distribution of a product in a given geographic area • Characteristics: prestige, image, channel control, and high profit margins • 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.

  16. 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

  17. Summary • Distribution • Channels of distribution • Channel Members • Direct/Indirect distribution • Distribution Intensities

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