Deciding on a Distribution Channel Deciding on a

Deciding on a Distribution Channel

Deciding on a Distribution Channel • • Lesson Goals: Learn different methods of distribution Recognize continuous nature of marketing methods Obtain information on additional resources View distribution as an integral role in a business plan

Deciding on a Distribution Channel The way a product reaches the consumer Two categories of distribution channels: • Direct • Indirect

Deciding on a Distribution Channel Direct Distribution (Sales) Producer of product sells directly to the consumer • • Advantages: Less complicated Less expensive Eliminates cost of “middle man” Allows for market research

Deciding on a Distribution Channel Direct Distribution (Sales) • • Disadvantages: Producers may not be good marketers Direct sales take time away from production Producers may not be objective in sales Allows for market research

Deciding on a Distribution Channel Direct Distribution (Sales) Examples • • Person to Person Display booths at events Party-plan sales In-home demos

Deciding on a Distribution Channel Additional Direct Distribution (Sales) Examples • Business trade shows • Temp space in shopping malls • Direct mail • Mail order • Telemarketing

Deciding on a Distribution Channel Indirect Distribution Utilizes Middlemen Who Sell • • • Advantages: Middlemen are sales professionals Useful when zoning prevents home sales Useful when location of home base is too far from consumers Greater sales volume potential Frees producer to focus on production

Deciding on a Distribution Channel Indirect Distribution Disadvantages: • Producer removed from consumers • More expensive than direct distribution • Less control over product

Deciding on a Distribution Channel Indirect Distribution Examples • Sales Representatives • Wholesalers, Distributors, Jobbers • Wholesale Trade Shows • Wholesale to Retailers • Consignment • Mail Order

Deciding on a Distribution Channel D Indirect Distribution Channels Wholesalers Distributors Jobbers

Deciding on a Distribution Channel Manufacturer or Sales Reps • Move merchandise • Call on retailers • Handle marketing within a territory • Get commission on orders

Deciding on a Distribution Channel Wholesale Trade Shows • Build long lasting relationships • Good packaging and nice display are critical • Quality business cards, brochures and/or free Sales literature and pre-determined pricing structure will help in attracting retail accounts

Deciding on a Distribution Channel Selling Wholesale to Retailers • Producer can make contact • Must know trade practices • Need written agreements • Cannot undercut retail price

Deciding on a Distribution Channel Consignment Contracting with Retailers to Display and Sell Product Advantages: • Exposure without overhead expenses of utility and space Disadvantages: . • Money tied up in inventory with possibility of damage • Merchandise may not be displayed to advantage • Merchandise may not be aggressively marketed

Deciding on a Distribution Channel Mail Order • Producers may develop their own catalogs, fliers, or indirect distribution • Buy ad space in an established catalog, magazine, tabloid, etc.

Deciding on a Distribution Channel Mail Order • Timing is important • Knowledge of postal regulations, FTC rules, and tax laws in each state where merchandise is exchanging hands • Need good mailing lists

Deciding on a Distribution Channel Securing Mailing Lists • Can be rented or purchased • Need clear description of customer profile • Check library for mailing list brokers • Check listings in trade journals

Deciding on a Distribution Channel When Evaluating Mail-Order Media, Ask About: • • Demographics of readership (sex, age, ethnicity) Regional publications Number of ongoing advertisers Circulation numbers

Deciding on a Distribution Channel Magazine Advertising Advantages: • • Longer shelf life than other ad media Often read cover to cover by different people Associates your product with prestige of magazine More sophisticated production process and better quality paper than newspapers and most catalogs

Deciding on a Distribution Channel Magazine Advertising Disadvantages: • Longer lead from ad placement time to published ad • High cost

Deciding on a Distribution Channel Questions When Considering Catalogs • Is there a fee to be included in the catalog or do you pay a percentage of the sales? • Is there minimum inventory that must be available? • What is your knowledge of laws and regulations? • Is merchandise warehoused by catalog company or does producer drop ship.

Deciding on a Distribution Channel Questions When Considering Catalogs • How is merchandise evaluated – actual product or photographs? • What is the pricing structure? • What is the time frame for catalog production and distribution?

Deciding on a Distribution Channel Additional Indirect Distribution Examples • TV Marketing • Computer Networks • Vending Machines / Rack Merchandising • Cooperatives • Franchises • Multilevel Marketing (MLM)

Deciding on a Distribution Channel Telemarketing A sales approach conducted entirely by phone.

Deciding on a Distribution Channel Television Marketing • Cable network channels • Infomercials

Deciding on a Distribution Channel Computer Networks Vast online information system that links businesses and potential customers all over the world.

Deciding on a Distribution Channel Internet Marketing • Web sites • Social Marketing • Internet Sales

Deciding on a Distribution Channel Vending Machines & Rack Merchandising

Deciding on a Distribution Channel Cooperative A business formed by a group of people to market their products together

Deciding on a Distribution Channel Franchises • Buying continuous direction and support from people who are experts in their field • Owned and managed by self-employed business people

Deciding on a Distribution Channel Franchise Agreements May Include • Using the franchisor’s name • Help in finding a location • Store design and outfitting

Deciding on a Distribution Channel Franchise Agreements May Include • Advertising • Acquiring Supplies • Management Training • Protected Territory

Deciding on a Distribution Channel Franchise Agreements May Include • Financing • Marketing and Promotion • Record Keeping

Deciding on a Distribution Channel Multi-Level / Network Marketing People sell at different levels in company hierarchy. Distributors recruit new people to join the program. The practice is sometimes called “sharing” business.

Deciding on a Distribution Channel Possible Distribution Channels • Direct Channel: Producer > Consumer • Single Channel (w/ middleman): Producer > Retailer > Consumer • Double Channel (w/ middleman): Producer > Wholesaler > Retailer > Consumer • Simultaneous Dual Channel: (Producer > Wholesaler > Retailer) and (Producer > Consumer)

Deciding on a Distribution Channel Making Choices Consider: • Opportunities available • Appropriate for your business • Delivery time frame • Packaging for shipment • Cost • Keep up to date