Chapter 10- Distribution Strategy

Channels of Distribution

- Direct channels: selling directly to the market. Also called direct marketing. - Indirect channels: Channels with one or more intermediaries.

What does distribution coverage require?

- Intensive distribution: Manufacturers want to reach as many wholesalers and retailers as possible. - Selective distribution: Manufacturers only choose the best intermediaries in a geographic area. - Exclusive distribution: Manufacturers limit distribution while giving intermediaries exclusive rights in a certain territory.

What are the types of marketing intermediaries?

- Middleman - Merchant middleman - Agent - Wholesaler - Retailer - Broker - Manufacturer's agent - Distributor - Jobber - Facilitating agent

Major Functions performed in Channels of Distribution

- Transactional functions: buying, selling, risk taking. - Logistical functions: assorting, storing, sorting, transporting. - Facilitating functions: financing, grading, marketing information and research.

Facilitating agent

A business firm that assists in the performance of distribution tasks other than buying, selling, and transferring title.

Agent

A business unit that negotiates purchases, sales, or both but does not take title to the goods in which it deals.

Forward integration

A manufacturer's purchase of wholesalers or retailers who distribute its products

Wholesaler

A merchant establishment operated by a concern that is primarily engaged in: buying, taking title, storing and physically handling goods in large quantities, reselling goods to retailers or to organizational buyers.

Retailer

A merchant middle man who is engaged primarily in selling to ultimate consumers.

Merchant middleman

A middle man who buys the goods altogether and claim the goods to be his.

Broker

A middle man who serves as a go- between for the buyer or seller.

Jobber

A middleman who buys from manufactures and sells to retailers.

Distributor

A wholesale middleman especially in lines where selective or exclusive distribution is common.

Manufacturer's agent

An agent, who operates on an extended contractual basis, sells within an exclusive territory, handles noncompeting goods, and possesses limited authority.

Nonstore Retailing

Catalogs and direct mail Vending machines Television home shopping Direct sales Electronic exchange and multichannel marketing

Channel of distribution

Combination of institutions through which a seller markets products to the users or ultimate consumer

Specialty stores

Handle deep assortments in a limited number of product categories. They are limited-line stores, single line stores, and category killers.

Contractual system

Independent production and distribution companies enter into formal contracts.

What is relationship marketing?

It is marketing with conscious aim to develop and manage long term and trusting relationships with customers, distributors, suppliers, or other parties in the marketing environment.

What is Channel flexibility?

It relates to ability of the manufacturer to adapt to changing conditions.

Mass merchandisers

Large retailers that carry broad product assortments based on selection and price.

What are total distribution costs?

Major distribution costs to be minimized are: transportation, order processing, cost of lost business.

What is vertical marketing system?

Members depend on each other and they develop long-term relationships to improve efficiency and effectiveness.

Middleman

Operates as a link between producers and ultimate consumers or organizational buyers.

Electronic Commerce: Advantages

Reduces the need for stores, paper catalogs, and salespeople; can be cost efficient Allows products to be offered globally in an efficient manner Fosters the development of one-on-one, interactive relationships with customers.

Convenience stores

Retailers whose primary advantages are location convenience, close-in parking, and easy entry and exit.

Corporate systems

Single ownership of 2 or more levels of a channel. Ex- manuf owns wholesale corp

What are inventory carrying costs?

Storage-space charges, cost of capital invested, taxes, insurance, obsolescence and deterioration, packaging, and materials handling.

Administered system

Strong channel leader. Higher degree of interorganizational planning and management than in a conventional channel.

Electronic Commerce: Disadvantages

Strong price competition online often squeezes profit margins Less effective and efficient in business-to-consumer markets than in business-to-business markets.

What does desired degree of control mean?

The seller must decide how much level of control desired over the marketing of the firm's products. The degree of control achieved by the seller is proportionate to the directness of the channel.

What happens when no traditional channel exist?

Various types of middlemen become available.

Backward integration

Wholesalers or retailers purchase channel members above them

What is Store retailing?

retailers are different in the types of merchandise they carry; the breadth and depth of their product assortments, also the amount of service they provide.