Chapter 14. Managing
Business Marketing Channels
(PLACE TWO)
“YOU FRANCHISE TO GAIN DISTRIBUTION,
YOU DO IT YOURSELF FOR GREATER
CONTROL”
BA 303-B2B MARKETING
LINDELL PHILLIP CHEW
The Business Marketing Channel
Chapter Objectives
To define INDUSTRIAL DISTRIBUTION and show its
importance
To describe the three broad categories of industrial
distribution (manufacturer/service provider,
merchant, and agents, reps and brokers) and the
specific types of firms within each category
To examine recent trends in industrial distribution
(wholesaling)
Copyright Atomic Dog Publishing, 2002
The Domain of Industrial
Distribution (Wholesaling)
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Industrial distribution (wholesaling) encompasses the
buying and/or handling of goods and services and their
subsequent resale to organizational users, retailers, and/or
other wholesalers—but not the sale of significant volume to
final consumers.
Manufacturers and service providers sometimes act as their
own wholesalers; other times, independent firms are
employed.
Independents may or may not take title to or possession of
products, depending on the type of wholesaling.
Industrial, commercial, and government institutions are
wholesalers’ leading customers, followed closely by
retailers. Sales from one wholesaler to another also
represent a significant proportion of wholesaling activity.
Copyright Atomic Dog Publishing, 2002
The Diversity of Industrial Distribution
(Wholesaling) Transactions
Industrial Distribution (Wholesaling) includes:
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Sales of goods and services to manufacturers, service
providers, oil refiners, railroads, public utilities, and
government departments.
Sales of office or laboratory equipment, supplies, and
services to professionals such as doctors, chiropractors,
and dentists.
Sales of materials and services to builders of offices and
homes.
Sales to grocery stores, restaurants, hotels, apparel stores,
stationery stores, and all other retailers.
Manufacturer/service provider sales to wholesalers, and
wholesaler sales to other wholesalers.
Copyright Atomic Dog Publishing, 2002
The Functions of Industrial
Distributors (Wholesalers)
Provide a
trained
sales force
Provide
marketing &
research support
Gather
assortments
for customers
Facilitate
local
distribution
Process
returns
Industrial
Distributors
(Wholesalers)
provide some or all
of these functions
Take
responsibility
for inventory
obsolescence
Handle
financial
records
Provide
Purchase
warehousing & Offer financing
large quantities
delivery facilities
Copyright Atomic Dog Publishing, 2002
Industrial Distributors (Wholesalers)
Selling To vs. Selling Through the
Wholesaler
Selling To the Wholesaler
Manufacturer/
Service Provider
Wholesaler
Retailer
The wholesaler is viewed as a customer who is
researched and satisfied.
Selling Through the Wholesaler
Manufacturer/
Service Provider
Wholesaler
Retailer
The retailer (or final consumer) is the object of the manufacturer’s/
service provider’s interests. The needs of the wholesaler are
considered unimportant.
Copyright Atomic Dog Publishing, 2002
The Broad Categories of B2B
Industrial Distributors (Wholesalers)
There are three broad
categories of wholesalers:
 Manufacturer/Service
Provider Wholesaling
 Merchant Wholesaling
 Agents and Brokers
Wholesalers have
obligations to both suppliers
and customers.
Copyright Atomic Dog Publishing, 2002
B2B Industrial Distributors
(Wholesalers), Owned - Franchised
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Direct distribution
Manufacturer has full
responsibility to perform all
channel tasks
May be required as a
result of customer needs,
control over the selling job,
size of customers, and
extensive negotiation
Copyright Atomic Dog Publishing, 2002
B2B Industrial Distributors
(Wholesalers), Owned - Franchised
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Indirect distribution
Use of middlemen in the channel
Business channels involve
relatively few alternatives
Manufacturer's representatives
and distributors are most
prevalent
Distributors perform full range of
tasks
Reps focus on the selling job
Copyright Atomic Dog Publishing, 2002
Degree of Directness
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1. Greater tendency for
direct distribution in business
markets
2. Indirect often required for
repetitively purchased
items bought in large
quantities
3. More than one channel
required to reach all market
segments
Customer size and different
purchasing processes
require different channels
Copyright Atomic Dog Publishing, 2002
B2B Industrial Distributors
(Wholesalers), Owned - Franchised
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E-channels now
used by business
marketers
Information platform
Transactional platform
Managing customer
relationships
Remember CISCO
Copyright Atomic Dog Publishing, 2002
OWNED-Manufacturer/Service Provider Wholesaling
Control/
Functions
The manufacturer/service provider controls
wholesaling and performs all functions.
Ownership
The manufacturer/service provider owns
products until they are bought by retailers or
other organizational consumers.
Cash Flow
The manufacturer/service provider does not
receive payment until the retailer or other
customer buys products.
Best Use(s)
The manufacturer/service provider deals
with a small group of large and
geographically concentrated customers;
rapid expansion is not a goal.
Copyright Atomic Dog Publishing, 2002
FRANCHISED-Merchant Wholesaling
Control/
Functions
Ownership
Cash Flow
Best Use(s)
The wholesaler controls wholesaling and
performs many or all functions.
The wholesaler buys products from the
manufacturer/service provider and resells
them.
The manufacturer/service provider is paid
when the wholesaler purchases products.
The manufacturer/service provider has a
large product line that is sold through many
small and geographically dispersed
customers; expansion is a goal.
Copyright Atomic Dog Publishing, 2002
FRANCHISED-Agents and Brokers
Control/
Functions
Ownership
Cash Flow
Best Use(s)
The manufacturer/service provider and
wholesaler each have some control and
perform some functions.
The manufacturer/service provider owns the
products and pays the wholesaler a fee/
commission.
The manufacturer/service provider does not
receive payment until products are sold.
The manufacturer/service provider is
small, has little marketing expertise, and is
relatively unknown to potential customers;
expansion is a goal.
Copyright Atomic Dog Publishing, 2002
FRANCHISED-Full-Service
Industrial Distributors (Merchant
Wholesalers)
1. General Merchandise–Carries nearly all items a customer usually needs
2. Specialty Merchandise–Focuses in a narrow product range, extensive
assortment
3. Rack Jobber–Furnishes racks and shelves, consignment sales
4. Franchise–Uses a common business format, extensive management
services
5A. Producer-Owned Cooperative –
Farmer controlled, profits divided
among members
5B. Voluntary Wholesaler &
Retailer-Owned Cooperative–
Supervalu & AG
Copyright Atomic Dog Publishing, 2002
FRANCHISED-Limited Service
Industrial Distributors
(Merchant Wholesalers)
1. Cash and Carry–No outside sales force, wholesale store for
business needs
2. Drop Shipper–Ships items without physically handling them
3. Truck/Wagon–Sales and delivery on same call
4. Mail Order–Catalogs used as sole promotion tool
Copyright Atomic Dog Publishing, 2002
FRANCHISEDAgents and Brokers
1. Manufacturers’ (Service Providers’) Agent–Sells selected items for
several firms
2. Selling Agent–Markets all the items of a firm
3. Commission (Factor) Merchant–Handles items on a consignment
basis
1. Food Broker–Brings together buyers and sellers
2. Stock Broker–Brings together buyers and sellers
Copyright Atomic Dog Publishing, 2002
B2B Chapter 14
Summary
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The chapter defines industrial
distributing (wholesaling) and shows
its importance.
It describes the three broad categories
of wholesaling (manufacturer/service
provider wholesaling, merchant
wholesaling, and agents and brokers)
and the specific types of firms within
each category.
It examines recent trends in industrial
distributing (wholesaling) .
Copyright Atomic Dog Publishing, 2002