The Channels of Distribution What is distribution The

The Channels of Distribution

What is distribution? The process of getting products from production to the consumer

The Two Components of Distribution 1. Selecting, developing and managing distribution channels 2. Physically distributing goods and services through those channels Problems in doing these things: - Which channel to select? Advantages and Disadvantages Logistics – how does the product physically get there

Different options

Distribution Policy - - Policy regarding how a business wants its products distributed to consumers There are four types

Intensive Distribution - try to get the product sold in as many different places as possible - Advantages - - Disadvantages - - Increase sales Increase recognition Lack of control of retail locations Intensive competition Product examples: Coke, Gum, others?

Selective Distribution n Try to control the distribution of product but not exclusively l Advantages n n l Disadvantages n n l Some control over where product is sold Can still cover a large area Legal implications – purchase minimums Missing out on possible sales Examples?

Exclusive Distribution n Exclusive distribution contracts with one or two businesses in a certain area l Advantages n Control over image n Favourable agreements l Disadvantages n Can severly limit sales n Geographical problems l Examples?

Integrated Distribution n When business owns both distribution and manufacturing l Advantage n Total control of product n Keep sales revenue l Disadvantage n Handle all expenses n Handle all difficulties l Examples?

Types of Channels n Direct Channels l n Product goes directly from producer to the consumer Examples l l Trade Services “Lemonade stand” Integrated distribution Marketing agents

Types of Channels n Indirect Channels l Use distribution intermediaries who make a profit off holding on to the product

Indirect n Examples l Importers n Foreign made product goes to exclusive importer who sells to retail outlets in a geographical area l Wholesaler n Buy products from domestic manufacturers and sell them to retail stores and other businesses l Retailers n Sell product to consumers

Advantages of the Wholesaler for the Retailer n Buy in bulk – lower costs per unit n Warehousing – hold on to greater amount of product in case needed n Risk bearing – retailer has less risk for owning large quantitiy of a product with unknown or changing demand n Financing – retailers don’t have to borrow money to pay for extra stock, they can use previous sales of smaller quantities to buy more n Buying – saves the time and effort of finding mulitple suppliers n Transporting – Wholesalers usually deliver without charge (in the price of the product) n Managing – Wholesalers will provide advice on inventory management and play a major role in controlling inventory levels for their customers n Promoting – wholesalers pass on free promotional materials n Providing market information – they know whats hot, what not and what is on the horizon

Specialty Channels n Any distribution that does involve a retail store

Types of Specialty channels n n n Vending machines The Internet Catalogues Telemarketing Television Sales Questions for you to answer 1. For each of the above, list one product that you could sell effectively using that specialty channel 2. What is an advantage of each of the specialty channels mentioned? What is a disadvantage? Discuss with a partner and use pages 301 -306 to help.

Channel Captains When one company controls the relationship in the distrubtion chain due to volume and/or sales n Wal-mart example n