Distribution
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
Distribution


The process of deciding how to get goods in
customer’s hands
One of the 4 P’s of marketing - Place
Importance of Distribution



To earn a profit, companies have to distribute
their products and services
Reach the target market
Manage costs
Video on Distribution

http://videos.howstuffworks.com/hsw/23138economics-distribution-channels-video.htm
Distribution

Channels of Distribution - the path
a product takes from its producer or
manufacturer to the final user.

Industrial: when a product purchased
for business use

Consumer: when a product purchased
for personal use
Direct and Indirect Channels

Direct distribution:


When the producer sells goods or services
directly to the customer
Indirect distribution:

Involving one or more intermediaries (middlemen)
Which of these channels is a direct channel?
Channel Members

Intermediaries - (middlemen); businesses
involved in sales transactions that move
products from the manufacturer to the final
user
Manufacturer
Final User
Efficiency
MFG
Consumer
MFG
Consumer
MFG
Consumer
MFG
Consumer
MFG
Consumer
With no intermediaries 25 transactions needed
Contact Efficiency
MFG
MFG
MFG
MFG
MFG
Intermediary
Consumer
Consumer
Consumer
Consumer
Consumer
With 1 intermediary 10 transactions needed
Channel Members:
Intermediaries

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.
Channel Members:
Intermediaries

Wholesalers - specific types

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.
Rack Jobber
Drop Shipper
Channel Members:
Intermediaries

Retailers




Buy products from manufacturers or wholesalers
Sell goods to final consumer for personal use
Takes title for goods
“Brick and Mortar”
Channel Members:
Intermediaries

E-Retailers




Non-store retailers
Buy products from manufacturers or wholesalers
Sell goods to final consumer for personal use
Online purchase and mail delivery
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
Channel Path

Manufacturer directly to Consumer
 Selling products at the production site (factory)
 Having a sales force call on consumers
 Catalogs
 Online sales
Manufacturer
Consumer
Channel Path

Manufacturer to Retailer to Consumer
 Used for merchandise that dates quickly or needs
servicing
Manufacturer
Retailer
Consumer
Channel Path

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
Wholesaler
Retailer
Consumer
Channel Path

Manufacturer to Agents to Wholesaler to Retailer to
Consumer
 For manufacturers who wish to concentrate on
production and leave sales and distribution to others
Manufacturer
Agents
Wholesaler
Retailer
Consumer
Channel Path

Manufacturer to Agents to Retailer to
Consumer

Used by manufacturers who do not want to
handle their own sales.
Manufacturer
Agents
Retailer
Consumer
Distribution Intensity

Intensity - how widely a product will be
distributed

Exclusive Distribution:


Protected territories for distribution of a product in
a given geographic area
Characteristics: prestige, image, channel control,
and high profit margins
Distribution Intensity

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.
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
What’s the Intensity?
(exclusive, selective, or intensive)







Kraft Macaroni & Cheese
Seven for all Mankind Jeans
Apple Macbook
Pepsi
Toyota
Porsche
Nike Running Shoes
Selecting a Distribution
Channel

Factors to consider:




Type of product
Structure and geography of the Market
Complexity of the product
Quantity and price of a product
Activity


Diagram 5 scenarios of channels of
distribution
Draw, use clipart on computer, or art supplies
from closet and magazine pictures