Distribution

March 03, 2010

Chapter1414

McGraw-Hill/Irwin ©2007 by the McGraw-Hill Companies, Inc. All rights reserved.

Channels of Distribution

Marketing channelsMarketing channels

Marketing Channels are sets of interdependent organizations involved in the process of making a product available for use or consumption.

MiddlemenMiddlemen

MiddlemenMiddlemen A business firm thatrenders services directly

related to the sale/purchaseof a product as it flows through

from producer to consumer

A business firm thatrenders services directly

related to the sale/purchaseof a product as it flows through

from producer to consumer

You can eliminate middlemen, but not the essential distribution activities they

perform

You can eliminate middlemen, but not the essential distribution activities they

perform

Middleman ActivitiesMiddleman Activities

Middleman ActivitiesMiddleman Activities

Distribution ChannelsDistribution Channels

DISTRIBUTION CHANNELS

People and firms involvedin the transfer of title to a product

as the product moves from producer to ultimate consumer or business user

DISTRIBUTION CHANNELS

People and firms involvedin the transfer of title to a product

as the product moves from producer to ultimate consumer or business user

Producers Middlemen

Final Consumer

OrBusiness

User

Major Channels of DistributionMajor Channels of Distribution

Vertical Marketing SystemsVertical Marketing Systems

Choice of Channels: MarketChoice of Channels: Market

Type of

Market

Geographic concentration

Number ofpotential

customers

Ordersize

Choice of Channels: MiddlemanChoice of Channels: Middleman

Services provided by middlemen

Services provided by middlemen

Availability of desired middlemen

Availability of desired middlemen

Producer’s and middlemen’s policies

Producer’s and middlemen’s policies

Choice of Channels: CompanyChoice of Channels: Company

Desire for channel control

Services provided by seller

Ability of management

Financial resources

Intensity of DistributionIntensity of Distribution

Conflict in ChannelsConflict in Channels

HorizontalHorizontal

Middlemen of the same type

Middlemen of the same type

Different types of middlemen

on the same level

Different types of middlemen

on the same level

RetailerRetailer Retailer Retailer

Conflict in ChannelsConflict in Channels

VerticalVertical

Producervs.

Wholesaler

Producervs.

Retailers

Who Controls the Channels?Who Controls the Channels?

Expertise

Sanctions

Rewards

Channel as PartnershipChannel as Partnership

Cooperation Collaboration

RelationshipMarketing

Coordination

Legal ConsiderationsLegal Considerations

Exclusivedealing

Tyingcontracts

Refusalto deal

Exclusiveterritory