Channels of Distribution

Saudi teem – group 6

Presented by

Agendaactivities time

Ice breaking – Introduction 10:00 – 10:10

Definition of distribution channels – Direct / Indirect distribution 10:10 – 10:30

The function of distribution channel 10:30 – 10:50

Break 10:50 – 11:00

channel members 11:00 – 11:15

transportations system – conclusion 11:15 – 11:30

ICE BREAKING

Learning Objectives

Describe the distribution channels

Direct/Indirect distribution

The function of distribution channel

The kinds of channel members & Identify

factors to consider when choosing a

business location.

Determine a transportations system

Distribution or marketing channel comprises a set of interdependent institutions and agencies involved in the process of making a product or service available for consumption or use.

What Is Distribution Channel?

“Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption”

Philip Kotler

26

Channels of Distribution

“Systems” of interdependent organizations

that direct the flow of product

(title/possession) from producers to buyers.

Producers Intermediaries Customer

Channel Structure

Dr. Rosenbloom

Mfg. A Mfg. B Mfg. C

1 2 3 4 5 6 7 8

Without intermediaries

Channel Structure

Dr. Rosenbloom

Mfg. A Mfg. B Mfg. C

Intermediary

1 2 3 4 5 6 7 8

With intermediaries

How a Distributor Reduces the

Number of Channel Transactions

= Customer= Manufacturer

A. Number of contacts without a distributor

M x C = 3 X 3 = 9

1

32

456

789

How a Distributor Reduces the

Number of Channel Transactions

= Distributor= Customer= Manufacturer

B. Number of contacts with a distributorM x C = 3 + 3 = 6

Store

1

2

3

4

5

6

Consumer Marketing Channels

Consumer Marketing Channels

WholesalerWholesaler RetailerRetailer ConsumerConsumer

ConsumerConsumer

RetailerRetailer ConsumerConsumer

ManufacturerManufacturer

0-level channel

WholesalerWholesaler RetailerRetailer ConsumerConsumer ManufacturerManufacturer2-level channel

ManufacturerManufacturer

3-level channel

1-level channel

ManufacturerManufacturer

Agents

15 - 33

BUSINESS USERS

PRODUCERS OF BUSINESS GOODS

Merchant wholesalers(industrial distributors)

Agents Agents

Merchant wholesalers(industrial distributors)

Business Channels

15 - 34

ULTIMATE CONSUMERS OR BUSINESS USERS

PRODUCERS OF SERVICES

Agents

Service Channels

Direct Distribution

• Direct contact between producer and customer.• Most common in B2B markets.• Often found in the marketing of relatively expensive,

complex products that may require demonstrations. • Internet is helping companies distribute directly to

consumer market.

Distribution Channels Using Marketing Intermediaries

• Producers distribute products through wholesalers and retailers.

• Inexpensive products sold to thousands of consumers in widely scattered locations.

• Lowers costs of goods to consumers by creating market utility.

Distribution Channels

using Marketing

Intermediaries

Exhibit 8-1

Alternative Channels of Distribution

LO 1

videohttp://www.youtube.com/watch?v=rqXIwjD3Cso&feature=related

Distribution Channel FunctionsDistribution Channel Functions

MatchingMatching

CommunicationCommunicationTransferTransfer

NegotiationNegotiation

FinancingFinancing

Risk TakingRisk Taking

PhysicalDistribution

PhysicalDistribution

InformationInformation

InformationInformation

TransferTransfer

CommunicationCommunication

MatchingMatching

NegotiationNegotiation

PhysicalPhysical

Gathering and distributing marketing research about the environment

Gathering and distributing marketing research about the environment

all products must be moved by using several transportations

all products must be moved by using several transportations

Finding and communicating with prospective buyers and promotion

Finding and communicating with prospective buyers and promotion

Shaping and fitting the offer to the buyer’s needShaping and fitting the offer to the buyer’s need

Agreeing on price and terms of the offer so ownership or possession can be transferred

Agreeing on price and terms of the offer so ownership or possession can be transferred

Distribution: transporting and storing goodsDistribution: transporting and storing goods

FinancingFinancing Acquiring and using funds to cover the costs of channel work

Acquiring and using funds to cover the costs of channel work

Distribution Key Functions Channel

Risk TakingRisk Taking Assuming financial risks such as the inability to sell inventory at full margin or or stock holding

Assuming financial risks such as the inability to sell inventory at full margin or or stock holding

Distribution Channel Functions

Considerations in Channel Choice

Market Considerations: Type of market, concentration, potential customers, order size.Product Considerations: Consider unit value, perishability, technical nature of product.Intermediaries Considerations: Services offered, availability, attitude, dominance or control channel.Company Considerations: Desire for channel control, management, money and services seller can provide to support sales.

15 - 40

Products Direct Indirect Exercise

Products Direct Indirect

√

√

√

√

√

√

Exercise

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

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.

Channel Members

Agents– Intermediaries that bring buyers and sellers together.

– Independent Manufacturer’s RepresentativeWork with several related, but noncompeting manufacturer’s in a specific industry.

Paid commission on what they sell.

– BrokersNegotiate a sell, paid a commission, and look for new customers

Channel Members

Exercise What the important services provideing by

Wholesales to producer ? 1

Wholesales to retailer ? 2

Retailer to final costumer? 3

Dr. Rosenbloom

Almost all products must be moved by using several transportations such as train, airplane, ship, truck and pipeline

Transportation

Transportation Mode Considerations

Security CostSpeed of DeliveryAvailability CapabilityProduct natureMarket place

©2003 Prentice Hall, Inc 17-49

Exercise Comparison of Transport ModesMode Speed security Frequency

of Shipments

Locations quantity Cost

train Average

ship Very high

Very low

Truck High

Pipe High Very limited

Airplane Very fast

Low

Comparison of Transport ModesMode Speed security Frequency

of Shipments

Locations quantity Cost

train Average Average Low Low High Average

ship Very slow

Low Very low Limited Very high

Very low

Truck Fast Average High Very extensive

Average High

Pipe Slow High High Very limited

Very low Low

Airplane Very fast

High Average Average Low Very high

Questions

Evaluation

Copyright © 2001 by Harcourt, Inc. All rights reserved.

Thank you for you attention