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Distribution

Distribution. Objectives . Define distribution Explain the concept of a channel of distribution Identify channel members Distinguish between direct and indirect channels Explain distribution channels for consumer products and services Describe distribution intensities. Distribution .

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Distribution

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  1. Distribution

  2. Objectives • Define distribution • Explain the concept of a channel of distribution • Identify channel members • Distinguish between direct and indirect channels • Explain distribution channels for consumer products and services • Describe distribution intensities

  3. Distribution • The process of deciding how to get goods in customer’s hands • One of the 4 P’s of marketing - Place

  4. Importance of Distribution • To earn a profit, companies have to distribute their products and services • Reach the target market • Manage costs

  5. Video on Distribution • http://videos.howstuffworks.com/hsw/23138-economics-distribution-channels-video.htm

  6. Distribution • Channels of Distribution - the path a product takes from its producer or manufacturer to the final user. • Industrial: when a product purchased for business use • Consumer: when a product purchased for personal use

  7. Direct and Indirect Channels • Direct distribution: • When the producer sells goods or services directly to the customer • Indirect distribution: • Involving one or more intermediaries (middlemen)

  8. Which of these channels is a direct channel?

  9. Channel Members • Intermediaries - (middlemen); businesses involved in sales transactions that move products from the manufacturer to the final user Final User Manufacturer

  10. Efficiency MFG MFG MFG MFG MFG Consumer Consumer Consumer Consumer Consumer With no intermediaries 25 transactions needed

  11. Contact Efficiency MFG MFG MFG MFG MFG Intermediary With 1 intermediary 10 transactions needed Consumer Consumer Consumer Consumer Consumer

  12. Channel Members: Intermediaries • Wholesalers • Businesses that buy large quantities of goods from manufacturers, store the goods, and then resell them to other businesses. • Take title to goods they buy for resale.

  13. Channel Members: Intermediaries Wholesalers - specific types Rack jobbers - wholesalers who manage inventory and merchandising for retailers by counting stock, filling it in when needed and maintaining store displays. Drop shippers - own the goods they sell but do not physically handle the actual products.

  14. Rack Jobber

  15. Drop Shipper

  16. Channel Members: Intermediaries • Retailers • Buy products from manufacturers or wholesalers • Sell goods to final consumer for personal use • Takes title for goods • “Brick and Mortar”

  17. Channel Members: Intermediaries E-Retailers Non-store retailers Buy products from manufacturers or wholesalers Sell goods to final consumer for personal use Online purchase and mail delivery

  18. Channel Members • Agents • Intermediaries that bring buyers and sellers together • Independent Manufacturer’s Representative • Work with several related, but noncompeting manufacturer’s in a specific industry • Paid commission on what they sell • Brokers • Negotiate a sell, paid a commission, and look for new customers

  19. Channel Path • Manufacturer directly to Consumer • Selling products at the production site (factory) • Having a sales force call on consumers • Catalogs • Online sales Manufacturer Consumer

  20. Channel Path Manufacturer Retailer Consumer • Manufacturer to Retailer to Consumer • Used for merchandise that dates quickly or needs servicing

  21. Channel Path • Manufacturer to Wholesaler to Retailer to Consumer • Most commonly used for staple goods, which are items that are always carried in stock and whose styles do not change frequently Manufacturer Wholesaler Retailer Consumer

  22. Channel Path Wholesaler Agents Consumer Manufacturer Retailer • Manufacturer to Agents to Wholesaler to Retailer to Consumer • For manufacturers who wish to concentrate on production and leave sales and distribution to others

  23. Channel Path • Manufacturer to Agents to Retailer to Consumer • Used by manufacturers who do not want to handle their own sales. Manufacturer Agents Retailer Consumer

  24. Distribution Intensity • Intensity - how widely a product will be distributed • Exclusive Distribution: • Protected territories for distribution of a product in a given geographic area • Characteristics: prestige, image, channel control, and high profit margins

  25. Distribution Intensity Selective Distribution: A limited number of outlets in a given geographic area are used to sell the product Select channel members that maintain the image of the product and are good credit risks, aggressive marketers, and good inventory planners.

  26. Distribution Intensity • Intensive Distribution • The use of all suitable outlets to sell a product • Objective/Goal: complete market coverage and to sell to as many customers as possible

  27. What’s the Intensity?(exclusive, selective, or intensive) • Kraft Macaroni & Cheese • Seven for all Mankind Jeans • Apple Macbook • Pepsi • Toyota • Porsche • Nike Running Shoes

  28. Selecting a Distribution Channel • Factors to consider: • Type of product • Structure and geography of the Market • Complexity of the product • Quantity and price of a product

  29. Activity • Diagram 5 scenarios of channels of distribution • Draw, use clipart on computer, or art supplies from closet and magazine pictures

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