Transcript FY Mktg Mix DISTRIBUTION

Distribution
Channels
Dr. Vesselin Blagoev
17/07/2015
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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
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Distribution Channel
Functions


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
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,
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and
packaging
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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
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carrying out the channel work
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Type of channel
Direct
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Indirect
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Direct & Indirect channels
Direct-Marketing Channel
Producer
Producer
Retailer
Producer
Producer
Retailer
Wholesaler
Wholesaler
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Jobber
Retailer
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Consumer Channels

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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
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Traditional
marketing
Multi-level
marketing
Manufacturer
Seller
Wholesalers
Distributors
Retailers
Distributors
Consumers
Distributors
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Network marketing
Manufacturer
(or Retailer)
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Types of channels
Consumer (end-user)
channels
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Producer
Own (Direct) channel
Buyers
Електронна
търговия
Производител
Мрежови маркетинг
Производител
Producer
Producer
Производител
National
Wholesalers
Вносител
дистрибутор
Производител
Потребители
Retailers
Producer
Regional
wholesalers
Retailers
Regional
wholesalers
Retailers
Регионален
търговец на
едро
Търговци на
дребно
Classic channels
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Нац.търговец на едро
Агент
(джобер)
Потребители
Търговци на
дребно
Buyers
Buyers
Buyers
Потребители
Потребители
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Producer
Own (Direct) channel
Електронна
търговия
роизводител
Producer
Buyers
Network marketing
Потребители
Buyers
Retailers
Producer
Buyers
Regional
wholesalers
Retailers
Producer
National
Wholesalers
Regional
wholesalers
Retailers
Производител
Вносител
дистрибутор
Регионален
търговец на
едро
Търговци на
дребно
Потребители
Производител
Нац.търговец на едро
Агент
(джобер)
Търговци на
дребно
Потребители
Producer
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Buyers
Buyers
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Producer
Own (Direct) channel
Електронна
търговия
Производител
Producer
Buyers
Network marketing
Buyers
Retailers
Producer
Regional
wholesalers
Retailers
Producer
National
Wholesalers
Regional
wholesalers
Retailers
Производител
Вносител
дистрибутор
Търговци на
дребно
Producer
Регионален
търговец на
едро
Chains (METRO)
Производител
Нац.търговец на едро
Producer
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Потребители
Retailers
Търговци на
Агент
Regional
дребно
(джобер)
Retailers
wholesalers
Buyers
Buyers
Buyers
Buyers
Потребители
Buyers
Потребители
Buyers
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Producer
Own (Direct) channel
Producer
Producer
Buyers
E-commerce
Buyers
Network marketing
Buyers
Retailers
Producer
Regional
wholesalers
Retailers
Producer
National
Wholesalers
Regional
wholesalers
Retailers
Производител
Вносител
дистрибутор
Търговци на
дребно
Producer
Регионален
търговец на
едро
Chains (METRO)
Производител
Нац.търговец на едро
Агент
Regional
(джобер)
Търговци на
дребно
Retailers
Producer
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wholesalers
Retailers
Buyers
Buyers
Buyers
Buyers
Потребители
Buyers
Потребители
Buyers
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Industrial Channels
Industrial
Customer
Producer
Industrial
Distributor
Industrial
Customer
Producer
Producer’s
Representative
Industrial
Distributor
Industrial
Customer
Producer
Producer’s
Representative
Industrial
Distributor
Industrial
Customer
Producer
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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.
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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
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Vertical
Marketing System
Manufacturer
Wholesaler
Retailer
A distribution channel structure in
which producers, wholesalers, and
Consumer
retailers act as unified system.
Usually one of them owns the
other, or has powerful contracts
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with them.
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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.
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Types of Middlemen
Three types of middlemen (channel
alternatives) are usually used:
Company salesforce
Expand the company’s salesforce.
Assign salespeople to territories
and have them contact all people in
the area
Manufacturer’s agency
Higher independent firms,
whose salesforce handle
related products
Industrial distributors
Find distributors in the
different regions or
industries who will buy and
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carry the new line
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Number of Middlemen
Three strategies are available:
Intensive distribution
Stocking the product in
as many outlets as
possible
Exclusive distribution
Limiting the number of
middlemen, handling the
product, sometimes to one
Selective distribution
Using more than one but
less than all possible
distributors
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Physical Distribution
Order processing / customer service
Transportation
Warehousing
Inventory carrying
Other
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Direct Marketing
Marketing through various
advertising media that
interact directly with
consumers, generally calling
for the consumer to make a
direct response
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Direct Marketing
Direct-mail and Catalogue
Marketing
 Telemarketing (by phone)
 Television marketing
 e-commerce (e-shopping)

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Direct-mail Marketing
Direct-mail marketing 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.)
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Direct Selling
Direct-mail and Catalogue
Marketing with ORDER FORM
 Telemarketing (by phone)
 Television marketing
 e-commerce (e-shopping) i.e.
www.amazon.com, publibook.com

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e-commerce
INTERNET SALES OF THE NOVEL
L'APRES-MIDI EPHEMERE D'UNE
LONGUE JOURNEE
In FRANCE and other EU countries
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http://www.publibook.com/boutique2006/de
tail-3484-18-6-1-PB.html
http://www.amazon.fr/Apr%C3%A8s-Midi17/07/2015
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e-commerce
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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/Octobre2007/LITTERATURE-ETRANGERE.html
http://www.cultura.com/8073/Livre/Litteratur
e/Litterature-etrangere/Europeenne
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e-commerce
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In CANADA
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http://www.tonality.ca/index.php?cPath=37_258
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In JAPAN
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http://bookweb.kinokuniya.co.jp/guest/cgibin/booksea.cgi?ISBN=2748338391
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e-commerce
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In BULGARIA (in Bulgarian language)
http://navigator.idg.bg/index.php?type=2&p
=2118&id=4514464
http://books.balkanatolia.com/c/sl-b/pl/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=det
ailed&id=124565
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Wholesalers
Company Owned
Merchant
Full Function
Rack Jobbers
General
Merchandise
Single-line
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Specialty
Limited Function
Independent
Agents/Brokers
Auction Companies
Brokers
Cash and Carry
Commission Merchants
Drop Shippers
Manufacturers Agents
Truck Jobbers
Selling Agents
Mail Order
Import-Export Agents
Rack Jobbers
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Merchant Wholesalers
Merchant wholesalers are
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.
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Full-Function (Full-Service)
Full-service wholesalers provide a
full set of services such as:
carrying stock
 using salesforce
 offering credit
 making deliveries
 providing management assistance
 getting market information
 sorting and assorting

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Rack Jobbers
Rack jobbers usually 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.
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Cash-and-Carry
Cash-and-carry wholesalers are
characterized by:
They have a limited line of fastmoving 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
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pays at the spot.
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Drop Shippers

Drop shippers operate in bulk industries such as
coal, lumber, and heavy equipment.
 They do not carry inventory or handle the
product
 Once an order is received, they find a producer
who ships the goods directly to the customer
 The drop shippers take the title and the risk
from the time the order is accepted to the time
the goods are delivered to the customer
 Their costs are lower
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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,
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Mail-order Wholesalers
Male-order wholesalers send
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.
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Producer’s Cooperatives
They are owned by farmermembers, assemble farm
products to sell in local markets.
They often try to improve the
quality and promote the coop
brand name (Sunkist oranges,
Diamond walnuts)
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Agents and Brokers
Agents and Brokers differ from
merchant wholesalers in two ways:
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They do not take title to goods (they
do not own the products they sell)
They perform a few functions only.
Their main function is to aid in buying
and selling
They earn commission on the selling
price (1% to 6% usually)
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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.
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Manufacturers’ Agents
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They sell similar products for several
noncompeting producers (machinery and
equipment, electronic items, automobile products,
clothing and apparel accessories)
They sell for a commission on 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 for no costs to the
producer
Specially
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Selling Agents
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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
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Commission Merchants
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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 someone to 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)
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Brokers
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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
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them
Other Specialized
Middlemen
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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 companies do 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
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Retailers
Method of
operation
Store
Merchandize
Line carried
General
merchandize
Nonstore
Limited line
Form of
Ownership
Independent
Corporate chain
Association of ind.
Single line
Mail-order
Level of Service
In-home
Self-service
Automatic
vending machines
Self-selection
Limited service
Direct response
merchandisers
Full service
New technologies
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Location of
Facilities
Retailer cooperative
chains
Wholesalersponsored voluntary
chains
Consumer
cooperative
Franchises
Central business
district
Main business
thoroughfare
Secondary business
district
Neighborhood cluster
Shopping center
Scattered individual
location
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Personal (Direct)
Selling
By Personal Selling we
understand
 Door-to-Door retailing
 Office-to-Office selling
 Home-Sales Parties
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Personal Selling

Prospecting: find and cultivate new customers
Targeting: decide how to allocate their scarce

Communicating: Communicate information
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time among prospects and customers
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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