Download Chapter 15

Chapter Fifteen
Wholesaling,
Retailing, and
Physical
Distribution
Channels of Distribution
• Channel of distribution (marketing channel)
– A sequence of marketing organizations that
directs a product from the producer to the
ultimate user
• Middleman (marketing intermediary)
– A marketing organization that links a producer
and user within a marketing channel
Direct Channel
• Producer to consumer
• No intermediaries
– Used by all services & by some consumer goods
– Producers can control quality and price, do not
have to pay for intermediaries, and can be close
to their customers
– Examples: Dell Computer, Mary Kay
Retailer Channel
• Producer to retailer to consumer
– Producers sell directly to retailers when retailers
(Wal-Mart) can buy in large quantities
– Used for bulky products where additional
handling would increase selling costs (furniture,
cars), and for perishable or high-fashion
products that must reach consumers quickly
Wholesaler Channel
• Producer to wholesaler to retailer to consumer
– The traditional channel
– Used when a producer’s products are carried by
so many retailers that the producer cannot deal
with them all
– Used when retailer’s order is small compared to
production’s economical output
Agent/Broker Channel
• Producer to agent to wholesaler to retailer to
consumer
– Agent - middlemen that do not take title to
products and are compensated by commissions
paid to the producers
– Often used for services,real estate, and by
producers that do not have their own sales forces
Channels for Consumer Products
A manufacturer may use multiple channels
1) To reach different market segments
• I.e.- same product is sold to consumers & businesses
2) To increase sales or capture more market share
• In store and online
Channels for Consumer Products
Direct
Retailer
Wholesaler
Agent/Broker
How do you choose which channels to use?
Market Factors
Customer Profiles
Consumer or Industrial
Customer
Market Factors
That Affect
Channel
Choices
Size of Market
Geographic Location
How do you choose which channels to use?
Product Factors
Product Complexity
Product Price
Product Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
Vertical Marketing Systems
• Vertical channel integration
– The combining of two or more stages of a
distribution channel under a single firm’s
management
• Lessens channel conflict
• Lowers overall costs
• Allows more control over the process
Function of Intermediaries
Specialization and
Division of Labor
Channels
Fulfill
Three
Important
Functions
Overcoming
DiscrepanciesTemporal, spatial,
assortment, quantity
Providing Contact
Efficiency
Contact Efficiency
Marketing Intermediaries: Retailers
• Retailers: The final link between producers
and consumers
• Approx 2.6 million retail firms in the U.S.
• 90% have sales of less than $1 million
Classes of In-Store Retailers
by Ownership
• Independent retailer
– A firm that operates only one retail outletone owner of one store
• Chain retailer
– A company that operates more than one
retail outlet -one owner of many stores
• Franchise
– A company that leases some of its retail
outlets - many owners of many stores
Classes of In-Store Retailers
by Merchandise
Type of Retailer
Service
Level
Product
assortment
Price
Department Store
Mod Hi-High
Broad
Mod-High
Specialty Store
High
Narrow
Mod-High
Supermarket
Low
Broad
Moderate
Convenience Store
Low
Med-Narrow
Mod High
Drugstore
Low-Mod
Medium
Moderate
Full-line Discounter
Mod-Low
Med-Broad
Mod Low
Restaurant
Low-High
Med-Narrow
Low-High
How many intermediaries do I use?
– Intensive distribution
• The use of all available outlets for a product to saturate the
market
• Objective-mass market selling of convenience goods
– Selective distribution
• The use of only a portion of the available outlets for a product in
each geographic area
• Objective – reduce access to raise brand image
– Exclusive distribution
• The use of only a single retail outlet for a product in a larger
geographic area
• Objective – use buyer desire to lessen distribution costs and
increase price
Market Coverage
Nonstore Retailing
• Purchase products without visiting a store
– Catalog marketing
• make selections & place orders by mail or telephone
– Online retailing
• Presenting and selling products through computer
connections
– Automatic vending
• The use of machines to dispense products
– Direct Selling
• Selling through face to face presentations