Download Deciding on a Distribution Channel

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
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