Distribution Strategy
-the path through which goods & services travel from the vendor to the consumer or payments for those products travel from the consumer to the vendor.
- A distribution channel may include several interconnected intermediaries along the way such as wholesalers, distributers, agents and retailers.
Channel of distribution
1. Middleman – independent link between producers and consumers
2. Merchant middleman – actually buys goods and takes title/ownership
3. Agent – business unit that negotiates purchases & sales but does not take ownership
4. Wholesaler – a merchant who primarily stores and handles goods in large quantities
5. Retailer – merchant middleman who sells to final consumers
6. Broker – middleman who serves as a go-between for the buyer and seller
7. Manufacturer’s agent – an agent who operates by contract serving a geographic territory
8. Distributor – wholesale middleman in lines with selective or exclusive distribution
9. Jobber – a middleman who buys from manufacturers and sells to retailers
10. Facilitating agent – a firm that performs distribution tasks other than buying, selling and
transferring
Major types of Marketing Intermediaries
Major functions Performed in Channel Distribution
Conventional Channel of Distribution of Consumer goods
Conventional Channel of Distribution of Organizational goods
General considerations in Channel Planning
- Customer characteristics- Product characteristics- Intermediary characteristics- Competitor characteristics- Company characteristics- Environmental characteristics
Distribution Coverage required
Channel selection may depend upon the nature of market coverage desired
Intensive distribution – Using as many wholesalers and retailers as possible
Selective distribution – Using only the best available per geographic area
Exclusive distribution – Selected intermediaries are given exclusive rights within a
particular territory
Degree of control desired
- Achieved by the seller is proportionate to the directness of channel
Total distribution cost
- Channel should be viewed as a total system composed of interdependent subsystems
Objective should be to optimize total system performance
Generally assumed that the total system should be designed to minimize costs,
other things being equal
Channel flexibility – Ability of the manufacturer to adapt to changing conditions
Relationship Marketing in Channels
Types of Vertical Marketing Systems (VMS)Corporate VMS
single ownership of each stage in the marketing channel
Administered VMSa dominant channel member produces channel coordination through the exercise of powersimilar to conventional channels
Contractual VMSformal agreements between channel membersinvolve independent production and distribution companies
WHOLESALING- Wholesaling is the process of selling goods and services to a client who will in turn resell those products to other consumers. Wholesalers can include retailers, organizations who market services to members, and companies that sell the purchased products under their own brand. Generally, wholesaling involves providing the customer with a discounted rate per item in exchange for buying the item in large amounts.
Specialty stores sell just one category of merchandise, although that category may be further divided into particular departments
Department stores- They are organized by divisions that include several clothing categories, cosmetics and accessories, jewelry, household goods, furniture, kitchenware. Each department has a manager, and there are store designers and decorators, plant maintenance and cleaning divisions, store security and more.
Warehouse Store-. Products include clothing, automotive parts, sports equipment, nursery plants, toys, bedding, electronics--and even groceries. Some stores require annual memberships that offer discounts. Others are just huge discount operations. Warehouse stores may train employees for multiple departments and shift you from one area to another as needed.
Grocery Stores- Mom 'n' pop groceries, national chains, organic specialists, corner delis--grocery stores come in all flavors. Departments may include a bakery, deli, produce, meat and floral. Resale Stores
Resale or second-hand stores might be considered charity shops, antique stores or consignment. Items found in these stores vary from donated clothing to valuable antiques. Resale store employees accept and sort donations, stock racks and shelves, assist customers and answer questions about the items on display.
Online Stores- They sometimes have real stores as well as virtual ones. But, even if they exist only online, the stores need a fulfillment division to take orders, find and pack purchased items from the warehouse, manage billing and shipping and deal with customer service questions and complaints.
Non store retailing
1. Catalogs and direct mail - consumers can be targeted effectively and reached home & work.
2. Vending Machines - sales are beverages/food. Its available 24 hours & placed in variety of places.
3. Television Home shopping - includes cable channels.
4. Direct sales - from salesperson to consumers to their homes and offices.
5. Electronic exchange or Internet marketing - involves collecting information, shopping, and purchasing from internet.
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