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Distribution

Distribution. “SELLING IS MARKETING, BUT MARKETING IS NOT SELLING.”. Unit 4. How Does it Work?. Channel of Distribution. The path a product takes from its producer or manufacturer to the final user . (Remember the FORM UTILITY? PLACE UTILITY ?)

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Distribution

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  1. Distribution “SELLING IS MARKETING, BUT MARKETING IS NOT SELLING.” Unit 4

  2. How Does it Work?

  3. Channel of Distribution • The path a product takes from its producer or manufacturer to the final user. (Remember the FORM UTILITY? PLACE UTILITY?) “To make a place decision, marketers must decide on a channel of distribution.”

  4. Might look something like this:

  5. That process… • Is called the Channels of Distribution • Each step along the way is called a intermediary (sometimes called middlemen) • Orange grower, manufacturer, salesperson, grocery store, and YOU, the consumer • The more middlemen, the more expensive the product • Everyone has to be paid along the way

  6. Trader Joe’s • “We buy direct from suppliers whenever possible, we bargain hard to get the best price, and then pass the savings on to you.”

  7. Channels of Distribution • Interview with NIKE • “Through what channels does Nike currently sell its shoes?” • “Primarily through a combination of retail accounts, NIKE-owned retail stores, independent distributors and licensees, in the United States and over 160 countries worldwide. The biggest retail account is FootLocker, Inc., which accounts for 10% of Nike’s sales worldwide. Nike also has its own Internet store, www.niketown.com.“

  8. Channels of Distribution • Think about the pair of jeans/shorts you are wearing right now. • Starting with you purchasing the jeans and working backwards listthe steps of how the jeans to your hands

  9. Channel Members: Intermediaries: Businesses involved in sales transactions that move products from the manufacturer to the final user, “middlemen.” • Wholesalers: Businesses that buy large quantities, store the goods, and then resell them to retailers, also called distributors. • Retailers: Sell goods to the final consumer for personal use. “Brick-and-mortar retailers”, online retailing (e-tailing), direct mail, catalog, TV home shopping, etc.

  10. Channel Members cont.: • Agents: do not own the goods they sell, act as intermediaries by bringing buyers and sellers together. • Independent manufacturers’ representatives: work with several related (but noncompeting) manufacturers in a specific industry. They are not on any payroll, they work on commission. • Brokers: bring buyers and sellers together in order for a sale to take place, they don’t have a continued relationship with either party. They negotiate the deal, receive a commission and move on.

  11. Understanding Distribution Planning

  12. Multiple Channels • Multiple Channels: A producer uses multiple channels when its product fits the needs of both industrial and consumer markets. • Control vs. Costs: All manufacturers and producers must weigh the control they want to have over the distribution of their products versus their costs and profitability.

  13. Nontraditional and Multiple channels of Distribution • Businesses do not always follow the traditional channels of distribution • Example: L’eggs Products, a division of Hanes, revolutionized the panty hose industry by putting L’eggs in grocery stores, where women were most often. • 3M did the same thing by putting its office supplies in grocery outlets. • Multiple channels are used when a product fits the needs of multiple consumers. • Greenfield Healthy Foods produces Fat free cookies. Right now they sell primarily to supermarkets. They are looking to expand into schools and hospitals.

  14. Multiple Channels Levi’s Jeans Costco Fred Meyer Macy’s One Channel Kirkland brand Costco

  15. Distribution Intensity • Distribution Intensity has to do with how widely a product will be distributed.

  16. Intensive Distribution: • the object is complete market coverage-get your product out everywhere • Flowers to plant in the yard are sold at: Home Depot, Rite Aid, Safeway, Winco, Nurseries, all over

  17. Selective distribution: • a limited number of outlets in a given area are used to sell the product • When distributing this way, a company (the distributor) can focus on the retail outlets that sell the most and/or are the most willing to sell the product • Retailers face less competition if they carry a product that is selectively distributed. • Often times this is how products begin • Tim’s Cascade Chips

  18. Exclusive Distribution: • involves protected territories for distribution in a given geographic location • Dealers/retailers are assured that they are the ONLY one selling the product in a designated area • In this situation, the retailer is usually tied through a contract.

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