Channels of Distribution Presented by Saudi teem – group 6
Agenda time activities10:00 – 10:10 Ice breaking – Introduction10:10 – 10:30 Definition of distribution channels – Direct / Indirect distribution10:30 – 10:50 The function of distribution channel10:50 – 11:00 Break11:00 – 11:15 channel members11:15 – 11:30 transportations system – conclusion
Learning ObjectivesDescribe the distribution channelsDirect/Indirect distributionThe function of distribution channelThe kinds of channel members & Identifyfactors to consider when choosing abusiness location.Determine a transportations system
What Is Distribution Channel?Distribution or marketing channelcomprises a set of interdependentinstitutions and agencies involved inthe process of making a product orservice available for consumption oruse.
Philip Kotler“Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption” 26
Channels of Distribution“Systems” of interdependent organizationsthat direct the flow of product(title/possession) from producers to buyers.Producers Intermediaries Customer
Channel Structure Mfg. A Mfg. B Mfg. C Withoutintermediaries 1 2 3 4 5 6 7 8 Dr. Rosenbloom
Channel Structure Mfg. A Mfg. B Mfg. C Withintermediaries Intermediary 1 2 3 4 5 6 7 8 Dr. Rosenbloom
the Number of Channel Transactions1234 A. Number of contacts 5 without a distributor 6 MxC=3X3=9789 = Manufacturer = Customer
the Number of Channel Transactions 1 4 B. Number of contacts with a distributor MxC=3+3=6 Store 2 5 6 3= Manufacturer = Customer = Distributor
Business Channels PRODUCERS OF BUSINESS GOODS Agents Agents Merchant wholesalers Merchant wholesalers (industrial distributors) (industrial distributors) BUSINESS USERS 15 - 33
Service Channels PRODUCERS OF SERVICES Agents ULTIMATE CONSUMERS OR BUSINESS USERS 15 - 34
Direct Distribution• Direct contact between producer and customer.• Most common in B2B markets.• Often found in the marketing of relatively expensive, complex products that may require demonstrations.• Internet is helping companies distribute directly to consumer market.Distribution Channels Using Marketing Intermediaries• Producers distribute products through wholesalers and retailers.• Inexpensive products sold to thousands of consumers in widely scattered locations.• Lowers costs of goods to consumers by creating market utility.
Information Transfer Communication PhysicalDistribution Negotiation Risk Taking Matching Financing
Distribution Channel Functions Distribution Key Functions Channel Information Gathering and distributing marketing research about the environment Finding and communicating with prospectiveCommunication buyers and promotion Matching Shaping and fitting the offer to the buyer’s need Agreeing on price and terms of the offer so Negotiation ownership or possession can be transferred Physical Distribution: transporting and storing goods Financing Acquiring and using funds to cover the costs of channel work Risk Taking Assuming financial risks such as the inability to sell inventory at full margin or or stock holding Transfer all products must be moved by using several transportations
Considerations in Channel ChoiceMarket Considerations: Type ofmarket, concentration, potentialcustomers, order size.Product Considerations: Considerunit value, perishability, technicalnature of product.Intermediaries Considerations:Servicesoffered, availability, attitude, dominance or control channel.Company Considerations: Desire forchannel control, management, money 15 - 40and services seller can provide to
Channel MembersRetailers– Sell goods to final consumer for personal use.– Brick-and-mortar retailers-sell goods to the customer from their own physical stores.– Buy products from manufacturers or wholesalers.– Non-store retailers– Takes title for goods.– E-tailing-online retailing; selling products over the Internet
Channel MembersWholesalers– Businesses that buy large quantities of goods from manufacturers, store the goods, and then resell them to other businesses.– Take title to goods they buy for resale.– Rack jobbers-wholesalers who manage inventory and merchandising for retailers by counting stock, filling it in when needed and maintaining store displays.– Drop shippers-own the goods they sell but do not physically handle the actual products.
Channel MembersAgents– Intermediaries that bring buyers and sellers together.– Independent Manufacturer’s Representative Work with several related, but noncompeting manufacturer’s in a specific industry. Paid commission on what they sell.– Brokers Negotiate a sell, paid a commission, and look for new customers
Exercise What the important services provideing by1 Wholesales to producer ?2 Wholesales to retailer ?3 Retailer to final costumer?
TransportationAlmost all products must be moved byusing several transportations such astrain, airplane, ship, truck and pipeline Dr. Rosenbloom
Exercise Comparison of Transport Modes Mode Speed security Frequency Locations quantity Cost of Shipments train Average ship Very Very low highTruck High Pipe High Very limitedAirplane Very Low fast
Comparison of Transport Modes Mode Speed security Frequency Locations quantity Cost of Shipments train Average Average Low Low High Average ship Very Low Very low Limited Very Very low slow highTruck Fast Average High Very Average High extensive Pipe Slow High High Very Very low Low limitedAirplane Very High Average Average Low Very fast high