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The Channels of Distribution
Course Facilitator: Khurshid Alam Swati
University of Swat, Swat
Email your query to:
Khurshi...
What is distribution?
• The process of getting products from
production to the consumer
• In marketing, distribution refer...
Different options
3©Khurshid Alam Swati
Consumer and Business Marketing
Channels
4©Khurshid Alam Swati
Direct Selling
Manufacturer to Consumer
Manufacturer Consumer
Product/Service
5©Khurshid Alam Swati
Single-Intermediary Channel
Manufacturer to a Retailer to a Customer
Manufacturer Retailer Consumer
6©Khurshid Alam Swati
Two-Intermediary Channel
Manufacturer to Wholesaler to Retailer to a
Customer
Manufacturer Warehouse Retailer Consumer
7©K...
Distribution Policy
- Policy regarding how a business wants
its products distributed to consumers
- There are four types
1...
1. Intensive Distribution
- Try to get the product sold in as many
different places as possible
- Diverse and intensive
- ...
2. Selective Distribution
Try to control the distribution of product but
not exclusively
Concentrate on selected segments
...
3. Exclusive Distribution
Exclusive distribution contracts with one
or two businesses in a certain area
Like niche marketi...
4. Integrated Distribution
When business owns both distribution
and manufacturing
 Advantage
 Total control of product
...
Marketing Channel
A marketing channel is a set of practices or
activities necessary to transfer the ownership
of goods, an...
Types of Channels
1. Direct Channels
 Product goes directly from producer to the consumer
Examples
 Trade Services
 “Le...
2. Indirect channel
2. Indirect Channels
 Use distribution intermediaries who make a profit off holding on
to the product...
2. Indirect channel
Examples
 Importers
 Foreign made product goes to exclusive
importer who sells to retail outlets in ...
Advantages of the Wholesaler
for the Retailer
Buy in bulk – lower costs per unit
Warehousing – hold on to greater amount o...
3. Specialty Channels
A media whose content is focused on a single genre,
subject or targeted market at a specific demogra...
Intermediaries make distribution and
selling processes more efficient
Intermediaries offers supply chain
partners more tha...
Channel Efficiency: How Intermediaries Reduce the
Number of Channel Transactions
20©Khurshid Alam Swati
The physical flow of goods, services, and
related information from points of origin
to points of consumption.
Includes
 I...
Transportation Modes
Rail
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
Truck
Flexible in...
23
1. Speed
2. Dependability
3. Availability
4. Costs
5. Others
Checklist for Choosing
Transportation Modes
Choosing Trans...
Recent trends in distribution
Increased internet and direct selling of
goods and services
Large supermarkets that act as
w...
Effective Use of Distribution
Channels
Feature Products or Services Benefits Drawbacks
Direct Selling
NO intermediaries
So...
What is an Agent?
A business with the authority to act on
behalf of another firm to market its
products.
Examples: Best Bu...
Supply Chain Management
(SCM)
Managing the network of businesses
that are involved in the provision of
products to the fin...
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Principles of Marketing - Lecture No 14

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Principles of Marketing - Lecture No 14

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Principles of Marketing - Lecture No 14

  1. 1. The Channels of Distribution Course Facilitator: Khurshid Alam Swati University of Swat, Swat Email your query to: Khurshidalamswati@yahoo.com Lecture No: 14
  2. 2. What is distribution? • The process of getting products from production to the consumer • In marketing, distribution refers to the process of making a product or service available for use or consumption by a consumer or business user • It is one of the four elements of the marketing mix 2©Khurshid Alam Swati
  3. 3. Different options 3©Khurshid Alam Swati
  4. 4. Consumer and Business Marketing Channels 4©Khurshid Alam Swati
  5. 5. Direct Selling Manufacturer to Consumer Manufacturer Consumer Product/Service 5©Khurshid Alam Swati
  6. 6. Single-Intermediary Channel Manufacturer to a Retailer to a Customer Manufacturer Retailer Consumer 6©Khurshid Alam Swati
  7. 7. Two-Intermediary Channel Manufacturer to Wholesaler to Retailer to a Customer Manufacturer Warehouse Retailer Consumer 7©Khurshid Alam Swati
  8. 8. Distribution Policy - Policy regarding how a business wants its products distributed to consumers - There are four types 1. Intensive Distribution 2. Selective Distribution 3. Exclusive Distribution 4. Integrated Distribution 8©Khurshid Alam Swati
  9. 9. 1. Intensive Distribution - Try to get the product sold in as many different places as possible - Diverse and intensive - Advantages - Increase sales - Increase recognition - Disadvantages - Lack of control of retail locations - Intensive competition - Product examples: Chocolate, Soft drinks Gum etc 9©Khurshid Alam Swati
  10. 10. 2. Selective Distribution Try to control the distribution of product but not exclusively Concentrate on selected segments  Advantages  Some control over where product is sold  Can still cover a large area  Disadvantages  Legal implications – purchase minimums  Missing out on possible sales  E.g. Fashion goods, 10©Khurshid Alam Swati
  11. 11. 3. Exclusive Distribution Exclusive distribution contracts with one or two businesses in a certain area Like niche marketing  Advantages  Control over image  Favorable agreements  Disadvantages  Can severely limit sales  Geographical problems  E.g. Furniture, Jewelry, Cars 11©Khurshid Alam Swati
  12. 12. 4. Integrated Distribution When business owns both distribution and manufacturing  Advantage  Total control of product  Keep sales revenue  Disadvantage  Handle all expenses  Handle all difficulties 12©Khurshid Alam Swati
  13. 13. Marketing Channel A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption Links producers to buyers. Performs sales, advertising and promotion. Influences the firm's pricing strategy. Affecting product strategy through branding, policies, willingness to stock 13©Khurshid Alam Swati
  14. 14. Types of Channels 1. Direct Channels  Product goes directly from producer to the consumer Examples  Trade Services  “Lemonade stand”  Marketing agents 14©Khurshid Alam Swati
  15. 15. 2. Indirect channel 2. Indirect Channels  Use distribution intermediaries who make a profit off holding on to the product 15©Khurshid Alam Swati
  16. 16. 2. Indirect channel Examples  Importers  Foreign made product goes to exclusive importer who sells to retail outlets in a geographical area  Wholesaler  Buy products from domestic manufacturers and sell them to retail stores and other businesses  Retailers  Sell product to consumers 16©Khurshid Alam Swati
  17. 17. Advantages of the Wholesaler for the Retailer Buy in bulk – lower costs per unit Warehousing – hold on to greater amount of product in case needed Risk bearing – retailer has less risk for owning large quantity of a product with unknown or changing demand Financing – retailers don’t have to borrow money to pay for extra stock, they can use previous sales of smaller quantities to buy more Buying – saves the time and effort of finding multiple suppliers Transporting – Wholesalers usually deliver without charge (in the price of the product) Managing – Wholesalers will provide advice on inventory management and play a major role in controlling inventory levels for their customers Promoting – wholesalers pass on free promotional materials Providing market information – they know what's hot, what not and what is on the horizon 17©Khurshid Alam Swati
  18. 18. 3. Specialty Channels A media whose content is focused on a single genre, subject or targeted market at a specific demographic Any distribution that does involve a retail store 18©Khurshid Alam Swati
  19. 19. Intermediaries make distribution and selling processes more efficient Intermediaries offers supply chain partners more than they could achieve on their own  Market Exposure  Technical Knowledge/Information Sharing  Operational Specialization  Scale of operation The Importance of Marketing Channels 19©Khurshid Alam Swati
  20. 20. Channel Efficiency: How Intermediaries Reduce the Number of Channel Transactions 20©Khurshid Alam Swati
  21. 21. The physical flow of goods, services, and related information from points of origin to points of consumption. Includes  Inbound distribution  Outbound distribution  Reverse distribution Marketing Logistics 21©Khurshid Alam Swati
  22. 22. Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items 22©Khurshid Alam Swati
  23. 23. 23 1. Speed 2. Dependability 3. Availability 4. Costs 5. Others Checklist for Choosing Transportation Modes Choosing Transportation Modes ©Khurshid Alam Swati
  24. 24. Recent trends in distribution Increased internet and direct selling of goods and services Large supermarkets that act as wholesalers and retailers Complete packages are sold….air flights, rental cars, and hotel accommodations are packaged and distributed together. 24©Khurshid Alam Swati
  25. 25. Effective Use of Distribution Channels Feature Products or Services Benefits Drawbacks Direct Selling NO intermediaries Sometimes called “zero intermediary” channel • Mail order from manufacturer • Farmers markets • No intermediaries so no additional profit markup • Quicker than other channels • Producer has complete control • All storage and stock costs paid for by producer • No retail outlets • Can be expensive to deliver products to customer One-intermediary Usually used for consumer goods but can be used for B2B • Travel agents selling airline, hotel, rental car services • Large supermarkets that old their own stock rather than wholesalers • Retailer holds stock and pays for this cost • Retailer has product displays • Producers focus on production no selling • Intermediary takes a profit which makes product more expensive •Producers lose some control over marketing mix •Producer has delivery costs to retailer Two-intermediaries Wholesaler buys goods from producer and sells to retailer • In a large country with many retailers and great distances, many goods are distributed this way, e.g. beverages, books, clothing • Wholesaler holds goods and buys in bulk • Reduces stock holding costs for producer • Wholesaler breaks large stock quantities into smaller units to sell to retailer • Another intermediary takes a profit which increases the purchases price • Slows down the distribution chanel HL 25©Khurshid Alam Swati
  26. 26. What is an Agent? A business with the authority to act on behalf of another firm to market its products. Examples: Best Buy sells HP computers and is allowed to handle customer complaints, provide sales force to sell products, and creates sales displays. HL 26©Khurshid Alam Swati
  27. 27. Supply Chain Management (SCM) Managing the network of businesses that are involved in the provision of products to the final consumers HL 27©Khurshid Alam Swati

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