DISTRIBUTIO
N
STRATEGY
CHANNEL OF DISTRIBUTION
❑A distribution channel (marketing channel) is a
set of independent organizations involved in the
process of making a product or service available to
the consumer or business user
❑Used to move the customer towards the product
Distribution Channel (PLACE)
Manufacturer
Retailer
Business
Structure
Distributor Consumers
MARKETING INTERMEDIARIES
❑The organizations that the product flows through on
its way to the consumer.
FUNCTIONS PERFORMED BY MARKETING
INTERMEDIARIES
Why are there Marketing
Intermediaries?
❑Marketing intermediaries allow for the smooth flow of products
and product information from the manufacturer to the
consumer.
❑Intermediaries help manufactures distribute their products, and
help consumers easily find and obtain the products that they need
to buy.
❑Intermediaries reduce the number of contacts necessary in order
to make a sale thereby facilitating the marketing process.
Importance of Marketing Channels
Producers
Without intermediaries
16 transactions
Consumers
Channels reduce number of transactions
Producers
With intermediaries
Intermediaries
Supermarket
8 transactions
Consumers
Importance of Marketing Channels
DISTRIBUTION CHANNEL
FUNCTIONS
❑Information: gathering and distributing marketing
research and intelligence information about the
marketing environment
❑Promotion: developing and spreading persuasive
communications about an offer
❑Contact: finding and communicating with prospective
buyers
❑Matching: shaping and fitting the offer to the buyer’s needs,
including such activities as manufacturing, grading, assembling,
and packaging
❑Negotiation: agreeing on price and other terms of the offer so that
ownership or possession can be transferred
❑Physical distribution: transporting and storing goods
❑Financing: acquiring and using funds to cover the costs of
channel work
❑Risk taking: assuming financial risks such as the inability to
sell inventory at full margin
Direct Channels vs. Indirect
Channels
❑Marketing channel where there is no intermediary levels
between manufacturer and consumer-- These are known
as Direct Channels
❑Some marketing channels are relatively long with many
intermediaries -- These are known as Indirect Channels
Direct Channel Indirect Channels
Retailer Wholesaler Agent/Broker
Channel Channel
Channel
Producer Producer Producer Producer
Alternative
Channels Agents or
Brokers
of
Distributio Wholesalers Wholesalers
n Retailers or Retailers or Retailers or
Distributor Distributor
Distributor
Consumers Consumers Consumers Consumers
or User or User or User or User
CHANNEL LEVELS
Exclusive
Distribution
Selective
Distribution
Intensive
Distribution
RETAILIN
G
Retailing includes all the activities in selling products or services
directly to final consumers for their personal, non-business use
Retailers are businesses whose sales come primarily from retailing
*Retailing can be done in stores (store retailing) or out of a store (non-
store)
Non-store retailing includes selling to final consumers
through:
❑ Direct mail
❑ Catalogs
❑ Telephone
❑ Internet
❑ TV shopping
❑ Home and office parties
❑ Door-to-door sales
❑ Vending machines
TYPES OF RETAILERS
Amount of service
❑Self-service
❑Limited service
❑Full service
Types of Retailers
Product Line
Types of Retailers
Relative Prices
Types of Retailers
Organizational Approach
Types of Retailers
Organizational Approach
Corporate chains are two or more outlets that are commonly
owned and controlled
❑ Size allows them to buy in large quantities at lower prices and
gain promotional economies
Voluntary chains are wholesale-sponsored groups of
independent retailers that engage in group buying and
common merchandising
Types of Retailers
Organizational Approach
Retailer cooperatives is a group of independent retailers that band
together to set up a joint-owned, central wholesale operation and
conduct joint merchandising and promotion effort
❑ Ace Hardware
Franchise organizations are based on some unique product or
service; on a method of doing business; or on the trade name, good
will, or patent that the franchisor has developed
Types of Retailers
Organizational Approach
Merchandising conglomerates are corporations that
combine several retailing forms under central ownership
Retailer Marketing Decisions
Segmentation, targeting, differentiation, and
positioning involves the definition and profile of
the market so the other retail marketing decisions
can be made
Retailer Marketing Decisions
Product Assortment and Service
Product assortment and service decisions
include:
❑ Product assortment
❑ Services mix
❑ Store atmosphere
Retailer Marketing Decisions
Price Decision
Price policy must fit the target market and
positioning, product and service assortment,
and competition
❑ High markup on lower volume
❑ Low markup on higher volume
Retailer Marketing Decisions
Price Decision
High-low pricing involves charging higher prices on an everyday
basis, coupled with frequent sales and other price promotions
Everyday low price (EDLP) involves charging constant,
everyday low prices with few sales or discounts
Retailer Marketing Decisions
Promotion Decision
Retailer Marketing Decisions
Place Decision
Central business districts are located in cities and
include department and specialty stores, banks, and movie theaters
Shopping center is a group of retail businesses planned, developed,
owned, and managed as a unit
❑ Regional shopping centers
❑ Community shopping centers
❑ Neighborhood shopping centers
❑ Power center
❑ Lifestyle centers
WHOLESALING
Wholesaling includes all activities involved in
selling goods and services to those buying for
resale or business use
❑ Wholesalers are used because they are often better at
performing the following channel functions than other
channel:
Wholesaling
Selling and promoting involves the wholesaler’s sales
force helping the manufacturer reach many smaller
customers at lower cost
Buying assortment building involves the selection of items
and building of assortments needed by their customers,
saving the customers work
Wholesaling
Bulk breaking involves the wholesaler buying in larger
quantity and breaking into smaller lots for its customers
Warehousing involves the wholesaler holding inventory,
reducing its customers’ inventory cost and risk
Wholesaling
Transportation involves the wholesaler providing quick
delivery due to its proximity to the buyer
Financing involves the wholesaler providing credit and
financing suppliers by ordering earlier and paying on
time
Wholesaling
Risk bearing involves the wholesaler absorbing risk by
taking title and bearing the cost of theft, damage,
spoilage, and obsolescence
Market information involves the wholesaler providing
information to suppliers and customers about
competitors, new products, and price developments
Wholesaling
Management services and advice involves
wholesalers helping retailers train their sales clerks,
improve store layouts, and set up accounting and
inventory control systems
TYPES OF WHOLESALERS
Types of Wholesalers
W h o l e s a le rs
Merchant wh ole s a l er s is th e
largest group of wholesalers and include:
❑Full-service wholesalers who provide a full set of
services
❑Limited service wholesalers who provide few
services and specialized functions
Types of Wholesalers
Brokers and agents do not take title, perform a few
functions, and specialize by product line or customer
type
❑ Brokers bring buyers and sellers together and assist in
negotiations
❑ Agents represent buyers or sellers
Manufacturers’ sales branches and offices is a form of
wholesaling by sellers or buyers themselves rather than
through independent wholesalers
WHOLESALER MARKETING
DECISIONS
Target market and positioning decisions
❑ Size of customer
❑ Type of customer
❑ Need for service
Wholesaler Marketing Decisions
Marketing mix decisions
❑ Product
❑ Price
❑ Promotion
❑ Place