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Distribution Channels Dr. Vesselin Blagoev

Distribution Channels Dr. Vesselin Blagoev. Channels of Distribution. We call Channels of Distribution any series of firms or individuals who participate in the flow of products from producer to final user or consumer. Distribution Channel Functions.

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Distribution Channels Dr. Vesselin Blagoev

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  1. Distribution ChannelsDr. Vesselin Blagoev

  2. Channels of Distribution We callChannels of Distributionany series of firms or individuals who participate in the flow of products from producer to final user or consumer

  3. Distribution Channel Functions • Research: gathering information needed for planning and aiding exchange • Promotion: developing and spreading persuasive information about an offer • Contact: finding and communicating with prospective buyers • Matching: shaping and fitting the offer to the buyer’s needs, incl. such activities as manufacturing, grading, assembling, and packaging

  4. Distribution Channel Functions • Negotiation: reaching an agreement on price and other terms of an offer so that ownership or possession can be transferred • Physical distribution: transporting and storing goods • Financing: acquiring and using funds to cover the costs of the channel work • Risk taking: assuming the risks of carrying out the channel work

  5. Type of channel Direct Indirect

  6. Direct & Indirect channels Direct-Marketing Channel Producer Producer Retailer Producer Wholesaler Retailer Producer Wholesaler Jobber Retailer

  7. Consumer Channels • Direct-marketing channels do not have intermediary levels • With more intermediary levels a channel of distribution has higher level of complexity • Multi-level marketing: a network of distributors, each one joined to the distributor who introduced him

  8. Traditional marketing Multi-level marketing Manufacturer Seller Wholesalers Distributors Consumers Consumers Retailers Distributors Consumers Distributors

  9. Network marketing Manufacturer (or Retailer)

  10. Types of channels Consumer (end-user)channels

  11. Producer Own (Direct) channel Buyers Производител Електронна търговия Потребители Производител Потребители Мрежови маркетинг Producer Retailers Buyers Producer Regional wholesalers Retailers Buyers Producer National Wholesalers Regional wholesalers Retailers Buyers Производител Вносител дистрибутор Регионален търговец на едро Търговци на дребно Потребители Производител Нац.търго-вец на едро Агент (джобер) Търговци на дребно Потребители Classic channels

  12. Producer Own (Direct) channel Buyers роизводител Електронна търговия Потребители Producer Buyers Network marketing Producer Retailers Buyers Producer Regional wholesalers Retailers Buyers Producer National Wholesalers Regional wholesalers Retailers Buyers Производител Вносител дистрибутор Регионален търговец на едро Търговци на дребно Потребители Производител Нац.търго-вец на едро Агент (джобер) Търговци на дребно Потребители

  13. Producer Own (Direct) channel Buyers Производител Електронна търговия Потребители Producer Buyers Network marketing Producer Retailers Buyers Producer Regional wholesalers Retailers Buyers Producer National Wholesalers Regional wholesalers Retailers Buyers Производител Вносител дистрибутор Регионален търговец на едро Търговци на дребно Потребители Производител Нац.търго-вец на едро Агент (джобер) Търговци на дребно Потребители Buyers Producer Chains (METRO) Retailers Buyers Regional wholesalers Retailers Buyers

  14. Producer Own (Direct) channel Buyers Producer E-commerce Buyers Producer Buyers Network marketing Producer Retailers Buyers Producer Regional wholesalers Retailers Buyers Producer National Wholesalers Regional wholesalers Retailers Buyers Производител Вносител дистрибутор Регионален търговец на едро Търговци на дребно Потребители Производител Нац.търго-вец на едро Агент (джобер) Търговци на дребно Потребители Buyers Producer Chains (METRO) Retailers Buyers Regional wholesalers Retailers Buyers

  15. Industrial Channels Producer Industrial Customer Producer Industrial Distributor Industrial Customer Producer Producer’s Representative Industrial Distributor Industrial Customer Producer Producer’s Representative Industrial Distributor Industrial Customer

  16. Channel Conflict • Horizontal conflict: between firms at the same level of the channel (some dealers go out of their territories; some dealers reduce the quality) • Vertical conflict: between firm at different levels (GM came to conflict with some dealers by trying to enforce policies on service, pricing, and advertising.

  17. Conventional Marketing Channel Manufacturer Wholesaler Retailer Consumer A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business, seeking to maximize its own profit even at the expense of profits for the system as a whole

  18. Vertical Marketing System Manufacturer Wholesaler Retailer A distribution channel structure in which producers, wholesalers, and retailers act as unified system. Usually one of them owns the other, or has powerful contracts with them. Consumer

  19. Consumer Channels • Jobber: an intermediary which operates between a wholesaler and smaller retailers, who are not served by the wholesaler. Jobbers buy from the W. and sell to the retailers.

  20. Types of Middlemen Three types of middlemen (channel alternatives) are usually used: Expand the company’s salesforce. Assign salespeople to territories and have them contact all people in the area Company salesforce Higher independent firms, whose salesforce handle related products Manufacturer’s agency Find distributors in the different regions or industries who will buy and carry the new line Industrial distributors

  21. Number of Middlemen Three strategies are available: Intensive distribution Stocking the product in as many outlets as possible Limiting the number of middlemen, handling the product, sometimes to one Exclusive distribution Using more than one but less than all possible distributors Selective distribution

  22. Physical Distribution Order processing / customer service Transportation Warehousing Inventory carrying Other

  23. Direct Marketing Marketing through various advertising media that interact directly with consumers, generally calling for the consumer to make a direct response

  24. Direct Marketing • Direct-mailandCatalogue Marketing • Telemarketing(by phone) • Television marketing • e-commerce(e-shopping)

  25. Direct-mail Marketing Direct-mailmarketing involves single mailings that include letters, ads, samples, foldouts, and other sent to prospects on mailing lists. Mailing lists are developed from customer lists or obtained from mailing list companies, which provide names of people fitting different descriptions (heavy users, veterinarians, etc.)

  26. Direct Selling • Direct-mailandCatalogue Marketing with ORDER FORM • Telemarketing(by phone) • Television marketing • e-commerce(e-shopping) i.e. www.amazon.com, publibook.com

  27. e-commerce INTERNET SALES OF THE NOVEL L'APRES-MIDI EPHEMERE D'UNE LONGUE JOURNEE In FRANCE and other EU countries • http://www.publibook.com/boutique2006/detail-3484-18-6-1-PB.html • http://www.amazon.fr/Apr%C3%A8s-Midi-

  28. e-commerce • In FRANCE and other EU countries (cont.) • http://www4.fnac.com/Shelf/article.aspx?PRID=2059437&OrderInSession=1&Mn=1&SID=359cd744- • http://nouveautes.chapitre.com/Octobre-2007/LITTERATURE-ETRANGERE.html • http://www.cultura.com/8073/Livre/Litterature/Litterature-etrangere/Europeenne

  29. e-commerce • In CANADA • http://www.tonality.ca/index.php?cPath=37_258 • In JAPAN • http://bookweb.kinokuniya.co.jp/guest/cgi-bin/booksea.cgi?ISBN=2748338391

  30. e-commerce • In BULGARIA (in Bulgarian language) • http://navigator.idg.bg/index.php?type=2&p=2118&id=4514464 • http://books.balkanatolia.com/c/sl-b/p-l/cid-59/s-32/bylgarska-literatura.html • http://www.pe-bg.com/?cid=3&cat=5&p=19 • http://www.knigi.biz/?act=products&do=detailed&id=124565

  31. Wholesalers Company Owned Independent Merchant Agents/Brokers Auction Companies Brokers Commission Merchants Manufacturers Agents Selling Agents Import-Export Agents Full Function Limited Function Cash and Carry Drop Shippers Truck Jobbers Mail Order Rack Jobbers Rack Jobbers General Merchandise Single-line Specialty

  32. Merchant Wholesalers Merchant wholesalersare independent owned businesses that take title to the merchandise they handle. They are the largest single group of wholesalers, accounting for roughly 50% of all wholesaling.

  33. Full-Function (Full-Service) Full-service wholesalersprovide a full set of services such as: • carrying stock • using salesforce • offering credit • making deliveries • providing management assistance • getting market information • sorting and assorting

  34. Rack Jobbers Rack jobbersusually serve drug and grocery retailers, mostly in the nonfood sector. They send delivery trucks to stores and the delivery person sets up racks of newspapers and magazines, toys, sunglasses, hardware items, health and beauty aids, and other.They price the goods, keep them fresh, and bill the retailers for the sold items only.

  35. Cash-and-Carry Cash-and-carry wholesalers are characterized by: • They have a limited line of fast-moving goods • Sell to small retailers for cash • Normally they do not deliver Example: A small fish store buys several crates of fish from a cash-end-carry wholesaler and pays at the spot.

  36. Drop Shippers • Drop shippers operate in bulk industries such as coal, lumber, and heavy equipment. • They do not carry inventoryor handle the product • Once an order is received, theyfind a producerwho ships the goods directly to the customer • The drop shippers take the titleand the risk from the time the order is accepted to the time the goods are delivered to the customer • Their costs are lower

  37. Truck Jobbers Truck Jobbers (Truck Wholesalers): • Perform selling and delivery functions • They carry a limited line of products (milk, bread, wines, snack foods) • They sell for cash as they make their rounds to small retailers, supermarkets, restaurants, hospitals, factory cafe, hotels

  38. Mail-order Wholesalers Male-order wholesalerssend catalogs to retail, industrial and institutional customers offering cosmetics, special foods, jewelry and other small items.They do not have salesforce to call on customers. The orders are sent by mail, truck, or other means.

  39. Producer’s Cooperatives They are owned by farmer-members,assemble farm productsto sell in local markets. They often try toimprove the quality and promotethe coop brand name (Sunkist oranges, Diamond walnuts)

  40. Agents and Brokers Agents and Brokers differ from merchant wholesalers in two ways: • Theydo not take titleto goods (they do not own the products they sell) • They performa few functionsonly. Their main function is to aid in buying and selling • Theyearn commission on the selling price (1% to 6% usually)

  41. Agents • Agents are important in international trade. They are usually experts on local business customs and rules concerning imported products in their respective countries. In many cases they are experts on particular markets of interest. • Agents specialize by customer type or by product and product line.

  42. Manufacturers’ Agents • They sell similar productsfor several noncompeting producers (machinery and equipment, electronic items, automobile products, clothing and apparel accessories) • They sell for acommissionon what is actually sold (usually 10–15%) • They are independent; they often work almost as members of each company salesforce • They can add a new line forno costs to the producer • Specially useful for introducing new products

  43. Selling Agents • Selling agents take over the whole marketing function of the producers – not only the selling function • They can work for several producers, even competing producers • They have almost full control of pricing, selling, and advertising • They serve as marketing manager for the particular producers

  44. Commission Merchants • Commission merchants and export or import commission houses handle products shipped to them by sellers, complete the sale and send the money (minus their commission) to each seller • Used in agricultural markets where farmers must have someoneto handle the shipment (in the city) • They do not own the products they sell, but they have the right to sell ‘at market price’ (above some minimum)

  45. Brokers • Brokers bring buyers and sellers together Brokers usually have a temporary relationship with the Buyer and Seller while a particular deal is negotiated • Their product is information about what the Buyer needs and what supplies are available • They can aid in the negotiation process • If the transaction is completed they earn a commission from the party, which hired them

  46. Other Specialized Middlemen • Factors– wholesalers of credit. They provide their clients with working capital against accounts receivable, which they buy • Field warehousing– provide cash for products on hand. The producer retains title to the goods, but control of them passes to the field warehouser • Sales finance companiesdo floor planning – financing of display stocks for auto, appliance, and electronics retailers. Many auto dealers do not own the products they display and do it for commission

  47. Retailers Merchandize Line carried Method of operation Form of Ownership Location of Facilities Store Nonstore General merchandize Limited line Single line Independent Corporate chain Association of ind. Central business district Main business thoroughfare Secondary business district Neighborhood cluster Shopping center Scattered individual location Mail-order In-home Automatic vending machines Direct response merchandisers New technologies Retailer cooperative chains Wholesaler- sponsored voluntary chains Consumer cooperative Franchises Level of Service Self-service Self-selection Limited service Full service

  48. Personal (Direct) Selling By Personal Selling we understand • Door-to-Door retailing • Office-to-Office selling • Home-Sales Parties

  49. Personal Selling • Prospecting: find and cultivate new customers • Targeting: decide how to allocate their scarce time among prospects and customers • Communicating: Communicate information about company’s products and services • Selling: approaching, presenting, answering q • Servicing: consulting, arranging finance, etc. • Info gathering: fill-in call reports and other • Allocating: products to whom during shortages

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