Post on 14-Apr-2018
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The Channels of
Distribution
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What is distribution?
The process of
getting productsfrom production
to the consumer
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The Two Components of Distribution
1. Selecting, developing and managing distributionchannels
2. Physically distributing goods and servicesthrough those channels
Problems in doing these things:
- Which channel to select? Advantages andDisadvantages
- Logistics how does the product physically getthere
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Different options
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Distribution Policy
- Policy regarding how a business
wants its products distributed to
consumers
- There are four types
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Intensive Distribution
- try to get the product sold in as manydifferent places as possible
- Advantages- Increase sales- Increase recognition
- Disadvantages- Lack of control of retail locations
- Intensive competition
- Product examples: Coke, Gum, others?
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Selective Distribution
Try to control the distribution of
product but not exclusively
Advantages
Some control over where product is sold Can still cover a large area
Disadvantages
Legal implications purchase minimums
Missing out on possible sales Examples?
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Exclusive Distribution
Exclusive distribution contractswith one or two businesses in acertain area
Advantages Control over image
Favourable agreements
Disadvantages Can severly limit sales
Geographical problems
Examples?
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Integrated Distribution
When business owns both
distribution and manufacturing
Advantage
Total control of product
Keep sales revenue
Disadvantage
Handle all expenses Handle all difficulties
Examples?
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Types of Channels
Direct Channels Product goes directly from producer to the
consumer
Examples Trade Services Lemonade stand
Integrated distribution
Marketing agents
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Types of Channels
Indirect Channels Use distribution intermediaries who make a
profit off holding on to the product
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Indirect
Examples
Importers Foreign made product goes to
exclusive importer who sells to retailoutlets in a geographical area
Wholesaler Buy products from domestic
manufacturers and sell them to retailstores and other businesses
Retailers Sell product to consumers
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Advantages of the Wholesaler
for the Retailer Buy in bulk lower costs per unit
Warehousing hold on to greater amount of product in case needed
Risk bearing retailer has less risk for owning large quantitiy of a product withunknown or changing demand
Financingretailers dont have to borrow money to pay for extra stock, they can useprevious sales of smaller quantities to buy more
Buying saves the time and effort of f inding mulitple suppliers
Transporting Wholesalers usually deliver without charge (in the price of the product)
Managing Wholesalers will provide advice on inventory management and play amajor role in controlling inventory levels for their customers
Promoting wholesalers pass on free promotional materials
Providing market information they know whats hot, what not and what is on thehorizon
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Retailer success
The five Rights
The Right Merchandise
The Right Price
The Right Time The Right Place
The Right Quantities
Read pages 298-300 and defineeach of these
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Specialty Channels
Any distribution that does
involve a retail store
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Types of Specialty channels
Vending machines
The Internet
Catalogues
Telemarketing
Television Sales
Questions for you to answer
1. For each of the above, list one product that you couldsell effectively using that specialty channel
2. What is an advantage of each of the specialtychannels mentioned? What is a disadvantage?Discuss with a partner and use pages 301-306 to help.
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What to consider when selecting a
distribution channel
Each person in the class will be assigned one of thequestions from pages 308-310
read, summarize and report to the class next day
Is the channel directed at an industrial and/or institutionalconsumer?
What is the income level of the target market?
How large is the local market?
What are the buying habits of the consumers?
Will the selected channel reach a suffcient number of consumers?
Is it a seasonal or high fashion item?
Can the channel become a competitive advantage?
Is the product custom made?
Will the product spoil?
What is the unit value of the product?
How large or how heavy is the product?
Does the product come with a manufacturers warranty?Is the product price sensitive?
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Channel Captains
When one company controls the
relationship in the distrubtion
chain due to volume and/or
sales
Wal-mart example