Distribution Channels Lesson 4.1 The Distribution Function “Marketing” relatively new term…only used in last 50 – 60 years. Prior to “marketing,” companies focused on distribution when they wanted to improve exchange process. Today, distribution is just one of many marketing activities. The Distribution Function Distribution involves determining the best methods and procedures to use so prospective customers can locate, obtain, and use a business’s products and services. Reducing Discrepancies The goal of marketing is the successful exchange of products and services between businesses and their customers. Reducing Discrepancies Several discrepancies exist: Producers produce LOTS of a FEW products. Producers manufacture products at a specific time and place. Consumers want FEW of a LOT of products. Consumers’ time and location do not match producers. Direct and Indirect Distribution Channels of Distribution are the routes products follow in moving from the producer to the consumer, including all related activities and participating organizations. May be short and simple OR long and complex Direct Distribution – when producers sell directly to the consumer Indirect Distribution – when distribution involves other businesses besides the producer. Direct and Indirect Distribution ++ Adding businesses to the channel makes it more complex and difficult to control However, using specific businesses with expertise in transportation, product handling, or other distribution activities may result in improved distribution or actual cost savings. $$$$$ Direct Channels Direct distribution (direct marketing) – producer sells and distributes its product to consumers. May include: salespeople warehouses trucks order-processing procedures customer service Indirect Channels Indirect Channel – when producers cannot or choose not to perform all marketing activities. What if you had to locate and contact each manufacturer, agree on a price, and find a way to get the product from the business to your home? TOO MUCH TIME! Most common business with indirect channels: Wholesalers (ex, Costco) and Retailers (ex, Belk) Distribution Activities Where will the customer want to be able to obtain the product? Where will the customer use the product? Are there special requirements to transport, store, or display the product? When should distribution occur? Who should be responsible for each type of distribution activity? Select a Channel of Distribution Producers generally prefer to use as few channels and channel members as possible. 1, 2, 3… Select a Channel of Distribution Factors to Consider Distance – if customers are located very close to producer, there is less need for channel members. Perishability – products that require rapid and careful handling (seafood, fresh fruit, flowers) Select a Channel of Distribution Factors to Consider (continued) Special Handling – if product is delicate or easily damaged, likely to pass through as few channels as possible (medical equipment) Number of customers – greater the number of customers, the more channel members there usually will be (and vice versa) Transportation Businesses must determine how to physically transport products from producer to consumer. Factors to Consider Size of goods Shape of goods Weight of goods Cost Product Handling Product handling is important in order to avoid delayed, lost, or damaged shipments. Most products are handled several times on their way from producer to consumer. Businesses need efficiency in packaging, packing and unpacking, handling and storing products. KEEPING TRACK OF THE PRODUCT IS IMPORTANT! Storage Consumers typically do not buy products as soon as they are produced. Warehouses and distribution centers are needed. More chance for damage Expensive Companies now use mechanical equipment and robots to handle products. Order Processing Customers place orders in a number of ways… retail store salesperson mail telephone online fax Most companies now have automated order processing.