checkstand program - how to decide a distribution channel
TRANSCRIPT
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Lesson Goals:• Learn different methods of distribution• Recognize continuous nature of marketing
methods• Obtain information on additional resources• View distribution as an integral role in a business
plan
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Distribution Channel
The way a product reaches the consumer
Two categories of distribution channels:• Direct• Indirect
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Direct Distribution (Sales)
Producer of product sells directly to the consumer
Advantages:• Less complicated• Less expensive• Eliminates cost of “middle man”• Allows for market research
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Direct Distribution (Sales)
Producer of product sells directly
to the consumer
Advantages:• Less complicated• Less expensive• Eliminates cost of “middle man”• Allows for market research
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Direct Distribution (Sales)
Disadvantages:• Producers may not be good marketers• Direct sales take time away from production• Producers may not be objective in sales• Allows for market research
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Direct Distribution (Sales) Examples
• Person to Person• Display booths at events• Party-plan sales• In-home demos
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Additional Direct Distribution (Sales) Examples
• Business trade shows• Temp space in shopping malls• Direct mail• Mail order• Telemarketing
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Indirect Distribution Utilizes Middlemen Who Sell
Advantages:• Middlemen are sales professionals• Useful when zoning prevents home sales• Useful when location of home base is too far
from consumers• Greater sales volume potential• Frees producer to focus on production
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Indirect Distribution
Disadvantages:• Producer removed from consumers• More expensive than direct distribution• Less control over product
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Indirect Distribution Examples
• Sales Representatives• Wholesalers, Distributors, Jobbers• Wholesale Trade Shows• Wholesale to Retailers• Consignment• Mail Order
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Indirect Distribution Channels
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Manufacturer or Sales Reps
• Move merchandise• Call on retailers• Handle marketing within a territory• Get commission on orders
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Wholesale Trade Shows
• Build long lasting relationships• Good packaging and nice display are critical• Quality business cards, brochures and/or free
Sales literature and pre-determined pricing structure will help in attracting retail accounts
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Selling Wholesale to Retailers
• Producer can make contact• Must know trade practices• Need written agreements• Cannot undercut retail price
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
ConsignmentContracting with Retailers to Display and Sell Product
Advantages:
• Exposure without overhead expenses of utility and space
Disadvantages: .• Money tied up in inventory with possibility of damage
• Merchandise may not be displayed to advantage
• Merchandise may not be aggressively marketed
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Mail Order
• Producers may develop their own catalogs, fliers, or indirect distribution
• Buy ad space in an established catalog, magazine, tabloid, etc.
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Mail Order
• Timing is important• Knowledge of postal regulations, FTC
rules, and tax laws in each state where merchandise is exchanging hands
• Need good mailing lists
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Securing Mailing Lists
• Can be rented or purchased• Need clear description of customer profile• Check library for mailing list brokers• Check listings in trade journals
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
When Evaluating Mail-Order Media, Ask About:
• Demographics of readership (sex, age, ethnicity)
• Regional publications
• Number of ongoing advertisers• Circulation numbers
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Magazine Advertising
Advantages:• Longer shelf life than other ad media
• Often read cover to cover by different people• Associates your product with prestige of magazine• More sophisticated production process and better
quality paper than newspapers and most catalogs
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Magazine Advertising
Disadvantages:• Longer lead from ad placement
time to published ad• High cost
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Questions When Considering Catalogs
• Is there a fee to be included in the catalog or do you pay a percentage of the sales?
• Is there minimum inventory that must be available?• What is your knowledge of laws and regulations?
• Is merchandise warehoused by catalog company or does producer drop ship.
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Questions When Considering Catalogs
• How is merchandise evaluated – actual product or photographs?
• What is the pricing structure?• What is the time frame for catalog
production and distribution?
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Additional Indirect Distribution Examples
• TV Marketing• Computer Networks• Vending Machines / Rack
Merchandising• Cooperatives• Franchises• Multilevel Marketing (MLM)
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Telemarketing
A sales approach conducted
entirely by phone.
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Television Marketing
• Cable network channels
• Infomercials
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Computer Networks
Vast online information system thatlinks businesses and potential customers all over the world.
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Internet Marketing
• Web sites• Social Marketing• Internet Sales
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Vending Machines&
Rack Merchandising
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Cooperative
A business formed by a group of people to market their products together
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Franchises
• Buying continuous direction and support from people who are experts in their field
• Owned and managed by self-employed business people
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Franchise Agreements May Include
• Using the franchisor’s name• Help in finding a location• Store design and outfitting
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Franchise Agreements May Include
• Advertising• Acquiring Supplies• Management Training• Protected Territory
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Franchise Agreements May Include
• Financing• Marketing and Promotion• Record Keeping
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Multi-Level / Network Marketing
People sell at different levels in company hierarchy. Distributors recruit new people to join the program. The practice is sometimes called
“sharing” business.
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Possible Distribution Channels
• Direct Channel: Producer > Consumer
• Single Channel (w/ middleman): Producer > Retailer > Consumer
• Double Channel (w/ middleman): Producer > Wholesaler > Retailer > Consumer
• Simultaneous Dual Channel: (Producer > Wholesaler > Retailer) and (Producer > Consumer)
Deciding on a Distribution Channel
CHECKSTAND PROGRAM
Making Choices
Consider:• Opportunities available• Appropriate for your business• Delivery time frame• Packaging for shipment• Cost• Keep up to date
Deciding on a Distribution Channel
CHECKSTAND PROGRAM