This document discusses marketing channels and distribution. It begins by explaining that most producers do not sell directly to consumers, but instead use intermediaries like wholesalers and retailers. It notes that channels are critical to business success and involve long-term commitments. The document then discusses different types of intermediaries like merchant middlemen, agent middlemen, and facilitators. It explains that intermediaries help bring supply and demand together efficiently and perform important functions like overcoming time, place, and possession gaps between producers and consumers.

1. Reading for this week:
Chapter 10
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Chapter 11
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0357165539&snapshotId=899247&id=350243189&
5 Lecture 1 "Distribution"
Welcome to the "dark" side of marketing - channels of
distribution, physical distribution and logistics. It sounds like
the "dismal science" tag that economics got stuck with. Well,
having been there, let me assure you there is light at the end of
the "distribution" tunnel. In fact, it's one of the "hottest" areas
in marketing right now as firms strive to improve customer
service and the bottom line.
Channel of distribution decisions involve numerous interrelated
variables that must be integrated into the total marketing mix.
Because of the time and money required to set up an efficient
channel, and since channels are often hard to change once they
are set up, these decisions are critical to the success of the firm.

2. This week we're concerned with the development and
management of channels of distribution and the process of
goods distribution in an extremely complex, highly productive,
and specialized economy. It should be noted at the outset that
channels of distribution provide the ultimate consumer, or
organizational buyer, with time, place, and possession utility.
Thus, an efficient channel is one that delivers the product when
and where it is wanted at a minimum total cost.
THE NEED FOR MARKETING INTERMEDIARIES
Let's start off with a relatively simple concept...but it is
important in the grand scheme of things. In today's economy,
most producers do not sell their goods directly to the final
users. Between them (the producer) and the final users, stand a
host of marketing intermediaries performing a variety of
functions and bearing a variety of names. Some intermediaries -
- such as wholesalers and retailers--buy, take title to, and resell
the merchandise; sometimes we call them merchant middlemen.
Others-- such as brokers, manufacturers' representatives, and
sales agents--search for customers and may negotiate on behalf
of the producer, but do not take title to the goods. They're
called agent middlemen. Still others--such as transportation
companies, independent warehouses, banks, and advertising
agencies--assist in the performance of distribution, but neither
take title to goods nor negotiate purchases or sales. Hence the
name - facilitators.
A channel of distribution is the combination of institutions
through which a seller markets products to the user or ultimate
consumer. The need for other institutions or intermediaries in
the delivery of goods is sometimes questioned, particularly
since the profits they make are viewed as adding to the cost of
the product. However, this reasoning is generally fallacious,
since producers use marketing intermediaries because the
intermediary can perform functions more cheaply and more

3. efficiently than the producer can. This notion of efficiency is
critical when the characteristics of our economy are considered.
For example, our economy is characterized by heterogeneity in
terms of both supply and demand. In terms of numbers alone,
there are nearly 6 million establishments comprising the supply
segment of our economy, and there are close to 90 million
households making up the demand side. Clearly, if each of these
units had to deal on a one-to-one basis to obtain needed goods
and services, and there were no intermediaries to collect and
disperse assortments of goods, the system would be totally
inefficient. This is pretty much where most of the ex-Soviet
economies are today. The primary job of intermediaries is to
bring supply and demand together in an efficient and orderly
fashion.
Marketing-channel decisions are among the most critical
decisions facing you and your company's management. The
chosen channels intimately affect all the other marketing
decisions. For example: The company's pricing depends on
whether it uses mass merchandisers or high-quality boutiques.
The firm's salesforce and advertising decisions depend on how
much training and motivation the dealers need. In addition, (and
this one can really be important) the company's channel
decisions involve relatively long-term commitments to other
firms. Consider this: When an auto maker signs up independent
dealers to sell its automobiles, the auto maker cannot buy them
out the next day and replace them with company-owned outlets.
There is a powerful inertial tendency in channel arrangements.
Therefore, management must choose channels with an eye on
tomorrow's likely selling environment as well as today's.
Now remember, a marketing channel performs the work of
moving goods from producers to consumers. It overcomes the
time, place, and possession gaps that separate goods and
services from those who would use them. Members in the

4. marketing channel perform several key functions and participate
in the marketing flows.
It should be remembered that whether a manufacturer utilizes
intermediaries to perform these functions, the functions should
be performed by someone. In other words, the managerial
question is not whether to perform the functions, but who will
perform them, and to what degree.
To the extent that the manufacturer performs the functions, the
manufacturer's costs go up, and its prices must be higher. When
some functions are shifted to middlemen, the producer's costs
and prices are lower, but the middlemen must add a charge to
cover their work. If the middlemen are more efficient than the
manufacturer, the prices faced by consumers should (this isn't
always the case) be lower. Consumers might decide to perform
some of the functions themselves, in which case they should
enjoy lower prices. The issue of who should perform various
channel tasks is one of relative efficiency and effectiveness.
CHANNELS OF DISTRIBUTION
As previously noted, a channel of distribution is the
combination of institutions through which a seller markets
products to the user or ultimate consumer. Some of these links
assume the risks of ownership; others do not. Some perform
marketing functions, while others perform non-marketing, or
facilitating functions, such as transportation and storage.
Some manufacturers use a direct channel, selling directly to a
market. For example, Dell Computer sells computers through
the mail without the use of other intermediaries. Using a direct
channel, called direct marketing, increased in popularity as
marketers found that products could be sold directly using a
variety of media. These media include direct mail,
telemarketing, direct-action advertising, catalog selling, cable

5. selling, online selling, and direct selling through
demonstrations at home or place of work.
In other cases, one or more intermediaries may be used in the
distribution process. For example, Hewlett-Packard sells its
computers and printers through retailers such as Best Buy and
Office Max. A common channel for consumer goods is one in
which the manufacturer sells through wholesalers and retailers.
For instance, a cold remedy manufacturer may sell to drug
wholesalers who, in turn, sell a vast array of drug products to
various retail outlets. Small manufacturers may also use agents,
since they do not have sufficient capital for their own sales
forces. Channels with one or more intermediaries are referred to
as indirect channels.
In contrast to consumer products, the direct channel is often
used in the distribution of organizational goods. The reason for
this stems from the structure of most organizational markets,
which often have relatively few, but extremely large customers.
Also, many organizational products, such as computers, need a
great deal of presale and post-sale service. Distributors are used
in organizational markets when the number of buyers is large
and the size of the buying firm is small. As in the consumer
market, agents are used in organizational markets in cases
where manufacturers do not wish to have their own sales forces.
Such an arrangement may be used by small manufacturers or
when the market is geographically dispersed.
SELECTING CHANNELS OF DISTRIBUTION
Given the numerous types of channel intermediaries and
functions that must be performed, the task of selecting and
designing a channel of distribution may at first appear to be
overwhelming. However, in many industries, channels of
distribution have developed over many years and have become
somewhat traditional. In such cases, the producer may be

6. limited to this type of channel to operate in the industry. This is
not to say that a traditional channel is always the most efficient
and that there are no opportunities for innovation, but the fact
that such a channel is widely accepted in the industry suggests
it is highly efficient. A primary constraint in these cases and in
cases where no traditional channel exists is that of availability
of the various types of middlemen.
All too often in the early stages of channel design, executives
map out elaborate channel networks only to find out later that
no such independent intermediaries exist for the firm's product
in selected geographic areas. Even if they do exist, they may not
be willing to accept the seller's products. It's all a part of the
complexity of marketing channels of distribution.
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W5 Video Distribution Strategy - An Introduction
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7. W5 Discussion "Channel Distribution"
Marketing Management
Channel Distribution
What are the various types and functions of marketing
intermediaries? Which are more important for large businesses
and why? Which are more important for the small business and
why? How could additional marketing channel options help you
better serve your target market?
In your initial post…Provide a synopsis for your case and
evaluation of your results, using a scholarly article found on
EBSCOhost as your basis for your reasoning. Give specific
examples, and be sure to cite your source.
Follow up posts…After your initial post, read over the
responses posted by your peers and your instructor. Select at
least two different posts, and address the following in your
responses: Is there a common theme in your peer’s responses?