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Chapter 13 Distribution Channel Decisions
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Chapter 13 Distribution Channel Decisions



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  • Channel design options: sell direct or through some channel? Retailer Wholesaler Agent Combination thereof How to decide? Consider the channel objectives (see next slide) and rate the channel structure against each one. Then balance the trade-offs and the company’s resources.
  • 3 Channel design options: sell direct or through some channel? Wholesaler Agent Combination thereof
  • Deciding among these competing objectives always involves tradeoffs.
  • A hybrid channel design can spread the necessary tasks across several players


  • 1. Chapter 13 Distribution Channel Decisions
  • 2. Supply Chain
    • The value delivery system that begins at the point of supply and ends at the point of consumption
      • Raw materials
      • Component parts
      • Finished product
      • Middlemen – wholesalers/distributors & retailers
      • Final consumer
  • 3. Supply Chain Management
    • Supply chain management
      • Viewing the supply chain as a single entity
      • Managing the supply chain in a way that maximizes the total value delivered
  • 4. Channels of distribution
    • The part of the supply chain that focuses on making the product available to the customer.
  • 5. Are channel decisions important? Consider what consumers pay.
    • Specialty store price: food item $10.00
    • Retailer gross margin (50%) 5.00
    • Price to retailer 5.00
    • Wholesaler gross margin (25%) 1.25
    • Selling price to wholesaler (revenue
    • to manufacturer) $3.75
    • Note what the consumer pays for
    • distribution: 62.5% of price paid!
  • 6. Are costs different in lower cost channels like supermarkets?
    • Supermarket price: similar item $5.00
    • Retailer gross margin (25%) 1.25
    • Price to retailer 3.75
    • Food broker commission (3%-5%) .19
    • Revenue to manufacturer $3.56
    • More efficient, lower price, but the consumer still pays 29% for distribution!
  • 7. Types of Channel members
    • Merchant wholesalers
      • Industrial products distributors
    • Agent middlemen
      • Manufacturer’s agents or manufacturer’s reps
      • Sales agents
      • Brokers
      • E-Hubs
  • 8. Types of Channel Members (cont’d)
    • Retailers
    • Facilitating agencies
      • Logistics companies
      • Trucking companies
      • Advertising agencies
      • Custom marketing research firms
      • Etc.
  • 9. Channel Design Options for a Consumer Product Exhibit 13.5 Producer Consumer Retailer B Producer Consumer Retailer Wholesaler C Producer Agents Wholesaler Retailer Consumer D Consumer A Producer E Producer Agents Retailer Consumer
  • 10. Exhibit 13.6 Channel options for industrial goods and services Producer Industrial Buyer Wholesaler B Producer Industrial Buyer Agent C Producer Agent Wholesaler Industrial Buyer D Industrial Buyer A Producer
  • 11. Major Channel Objectives
    • Making the right product available to the right buyer at the right place and time
    • Meeting the buyers’ customer service requirements
    • Cost effectiveness
  • 12. Distribution Intensity
    • Intensive distribution
    • Exclusive distribution
    • Selective distribution
  • 13. Exhibit 13. 8 Example of a Hybrid Marketing Channel Supplier Company Website & Sales Force Wholesale Distributor Company Help Line & Outside Service Centers Customer Demand Generation Physical Distribution Post-Sale Service
  • 14. Push vs. Pull Strategies
    • Push
    Manufacturer Wholesaler Retailer Consumer
  • 15. Push vs. Pull Strategies
    • Pull
    Manufacturer Wholesaler Retailer Consumer