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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.