Channels of Distribution
Getting goods to the consumer
The 4 P’s
Product
Price
Place
Promotion
Also known as the
Marketing Mix
What is a Channel of
Distribution?
The path a
product takes
from the
producer to the
final user.
Channels of Distribution
Producer
Wholesaler
Agent
Retailer
Industrial Distribution
Consumer/Industrial User
Industrial Users
Market consisting of
all customers who
make purchases for
business purposes;
also called the
business-tobusiness market
Consumers
Those who
buy and
actually use
the product.
Intermediaries
Intermediaries are
channel members
that help move
products from the
producer or
manufacturer to the
final user.
“Middlemen”
Types of Intermediaries
Merchant
Intermediaries


Wholesalers
Retailers


Electronic Retail
Outlets
Vending Service
Companies
Agent
Intermediaries


Independent
Manufacturer’s
Agents
Brokers
Wholesalers & Retailers
Wholesalers

Buy large quantities
of goods from
manufacturers, store
the goods, and resell
them to other
businesses.
Retailers

Sell goods to the
ultimate consumer
through their own
stores.
Electronic Shopping
Internet
Shopping
Home
Shopping
Networks
Vending Service
Companies
Buy manufacturers’
products and sell
them through
machines that
dispense goods to
consumers.

Vending Machines
Agents
Independent
Manufacturers’
Agent –

Represent several
non-competing
manufacturers in a
specific industry
Broker


Sales Agent for
different
manufacturers
May merchandise
products as well as
sell.
Transportation
Companies & Storage
Warehouses
Not part of the
channel of
distribution because
they do not take title
to the goods nor are
they involved in
negotiating that title.
Direct vs. Indirect
Distribution
Direct - Goods or
services are sold
from the producer
directly to the final
user – no
intermediaries are
involved.
Indirect - Goods or
services are sold
through the use of
intermediaries.
5 Channels for
Consumer Products
A – Direct sales from
manufacturer to
consumer – Avon
B – Manufacturer to
Retailer to Consumer –
Mansour’s
C – Manufacturer to
Wholesaler to Retailer
to Consumer –
SuperValu
D – Manufacturer to
Agent to Wholesaler to
Retailer to Consumer –
Small Retailers
E – Manufacturer to
Agent to Retailer to
Consumer – Cookware,
Meat, Cosmetics,
Supermarkets
4 Channels for Industrial
Products
A – Manufacturer to
Industrial User –
Office Machine
Companies
B – Manufacturer to
Industrial Distributor
to Industrial User –
Loy’s Office
Supplies
C – Manufacturer to
Agent to Industrial
Distributor to
Industrial User –
Building Supplies
D – Manufacturer to
Agent to Industrial
User – Construction
Equipment
Computer Companies Go
Direct – A Case Study
Dell: manufacturer to consumer or
manufacturer to industrial user (both direct).
Big three: catalog sales – (same as Dell);
retail sales – manufacturer to retailer to
consumer or manufacturer to industrial
distributor to industrial user (indirect).
The big three feared the competition from
Dell, Gateway and similar companies who are
able to create custom-built computers at
competitive prices.
Could be either way – Is it a good idea?
Rack Jobbers
Manage inventory
and merchandising
by counting stock,
filling it in when
needed and
maintaining store
displays. – Grocery
Store
Considerations in
Distribution Planning
Decisions involving a
product’s physical
movement and transfer of
ownership from producer to
consumer
Distribution decisions affect
a firm’s marketing program
Nontraditional and multiple
channels, control vs. costs,
intensity of distribution
Nontraditional and
Multiple Channels
Selling in various
types of outlets

L’eggs
Selling both retail
and industrial –
Loy’s Office
Supplies, SAM’s
Control vs. Costs
Who Does the
Selling?


In-house sales force
Agents
Who Dictates the
Terms?


Mass Merchandisers
Small Retailers
Distribution Intensity
Intensive


Complete market coverage
All suitable outlets
Selective


Limited number of outlets
More control
Exclusive




Protected Territories
Franchises
Retail serviced line
Integrated Distribution
Distribution Planning in
Foreign Markets
Foreign Markets
Deliver Additional
Problems


Japan – Intensive
personal
relationships, saving
face, distribution
networks
Latin America –
Bribes, Lack of
Skills, Lack of
Financing