© 2009 John Wiley and Sons AustraliaDistribution (place).docx

© 2009 John Wiley and Sons Australia
Distribution (place)
Week 8
Part 2
assap dawgs
*
Vertical Marketing System
(VMS)
A channel of distribution in which there is formal cooperation
among members at the manufacturing, wholesaling, and
retailing levels
A marketing channel in which all stages occur under a single
management structure.
e.g.15 independently owned restaurants enter into an agreement
with a produce wholesaler, the total costs go down for everyone
thanks to bulk ordering and shipping

Vertical Marketing System
(VMS) Firestone manufactures tires and owns the service
centers that sell the tires to customers.
Australia Post owns post boxes situated on street corners, post
offices that sell envelopes, stamps, boxes and other goods as
well as accept mail, a fleet of delivery vans and bikes, storage
and sorting facilities and so on.
VMS - FranchisingFranchises are also a type of VMS in which
individual retail outlets are contractually obliged to cooperate
closely with the franchisor.
Franchising is a type of business where the right to sell
products or rights to use the main elements of a business model
are licensed by one party to another.
VMS - Franchising
In franchising the franchiser:
licenses the right to use its business model or to sell its
products
provides services such as advertising, business know-how and
supplier networks

stipulates standards and rules by which the franchise business
must operate
VMS - Franchising
In franchising the franchiser:
sometimes promises exclusive rights to a particular geographic
area
e.g. 7-11 video
http://franchise.7eleven.com.au/benefits.html
VMS - Franchising
In franchising the franchisee:
pays the franchiser a fee and/or percentage of sales receipts
(e.g. 7-11, $400K-$1m(Inititial) + 50% Gross Sale)
supplies labour and capital
operates the business in accordance with the conditions of the
franchise agreement.
VMS - Franchising
Franchising offers franchisers a way to expand relatively

rapidly, keep some control of the distribution of their products,
and to share risk;
It offers franchisees a way to start a business without needing to
formulate an idea, systems or raise a profile and, statistically,
gives them a much higher rate of business success (50 per cent
compared to 10 per cent for new independent businesses)
VMS - Franchising
In Australia, retail franchises operate in the following ways:
a producer licenses distributors to sell its products to retailers:
Coca-Cola licenses bottlers to make up its drinks then sell the
finished beverage to retail stores.
VMS - Franchising
In Australia, retail franchises operate in the following ways:
a franchiser licenses key aspects of its business model to the
franchisee: e.g. Dominos, Baker’s Delight and Jim’s Mowing.
a manufacturer authorises retail stores to sell its brand name
item: e.g. car company Ford
Distribution of goods
Physical distribution involves
order processing, inventory management, warehousing and
transportation.
Physical products need to be moved from producers to

consumers via a number of activities that are collectively known
as physical distribution. Physical distribution involves order
processing, inventory management, warehousing and
transportation. Order processing is the term used to describe all
of the activities involved in managing the information required
to receive, handle and fill a sales order. Efficient order
processing is important to minimise costs and ensure customer
satisfaction. Order processing is usually most efficient when
computerised systems are involved, but paper-based ordering
systems are still common and their relative simplicity and low
cost are significant advantages for smaller businesses.
Electronic order processing systems are based on electronic data
interchange (EDI), which uses standardised data formats to
share information, often in real time, between all the different
functional areas of distribution. Order processing begins when
a customer places an order. An order usually specifies the
products wanted, the price to be paid and how the payment will
be made, the time the products are wanted and the location to
which the products should be delivered. The next step is order
handling, which involves checking that the terms of the
purchase are acceptable (price, creditworthiness of purchaser
and so on) and that the product is in stock. If the product is not
in stock, it will be ordered and/or the customer will be
contacted to see if they will accept a substitute product. When
the order details and product availability are verified the order
will be assembled and shipped, and the company records will be
updated to reflect completion of the purchase.
*

*
Order processing is the term used to describe all of the
activities involved in managing the information required to
receive, handle and fill a sales order.

Order processing is usually most efficient when computerised
systems are involved, but paper-based ordering systems are still
common and their relative simplicity and low cost are
significant advantages for smaller businesses.
*

(EDI)
functional areas of distribution.

*
Order processing begins when a customer places an order.
An order usually specifies the products wanted, the price to be
paid and how the payment will be made, the time the products
are wanted and the location to which the products should be
delivered.

*
The next step is order handling, which involves checking that
the terms of the purchase are acceptable (price, creditworthiness
of purchaser and so on) and that the product is in stock.
If the product is not in stock, it will be ordered and/or the
customer will be contacted to see if they will accept a substitute
product.

*
When the order details and product availability are verified the
order will be assembled and shipped, and the company records
will be updated to reflect completion of the purchase.

*
Watch UBD video
Types of retailers
There are many different types of retailers. Generally, they fall
under the categories:
General-merchandise retail storeSpeciality retail storeDirect
marketingDoor-to-door sellingAutomatic vending.
Types of retailers - There are many different forms or retailer,
each offering relative strengths and weaknesses for the
customer and the producer or wholesaler. We will discuss the
various forms in this section under the categories:General-
merchandise retail storeSpeciality retail storeDirect

marketingDoor-to-door sellingAutomatic vending.
*
Types of retailers
General-merchandise retail stores Offer a wide variety of
products, e.g. department store, convenience store
Specialty retailersCarry just one or a small number of different
types of products, but within that product line, they carry a
great deal of variety.
General-merchandise retail stores offer a wide variety of
products. The main general-merchandise retail stores are
convenience stores, showrooms, department stores, discount
stores, supermarkets, superstores and hypermarkets. Most of
these will be familiar if you spend much time shopping.
Specialty retailers usually carry just one or a small number of
different types of products, but within that product line, they
carry a great deal of variety. Specialty retailers can be specialty
stores, category killers and off-price retailers.
*
Types of retailers
Direct marketingNon-store retailing that promotes and sells
products via mail, telephone or the web.Mobile e-commerce is
also an example of direct marketing.
Direct marketing - non-store retailing that uses mail, telephone
or the web. Direct marketing does not rely on a store, offers

consumers complete flexibility as to the timing of their
purchases and the ability to shop without leaving their homes.
The main types of direct marketing are online retailing,
telemarketing, catalogue marketing, television shopping and
direct response marketing. Online retailing or e-tailing involves
selling to customers via the internet, enabling purchases without
leaving home. This is offset by the inability to examine the
product in ‘real life’, plus the probable postage fees. The
retailer avoids the expense associated with stores and enables
them access to customers in any geographic region. Retailers
with a physical and an online store (i.e. Officeworks) need to
carefully coordinate the offerings of each.. Mobile e-commerce
is the use of a mobile phone to make purchases. Mobile e-
commerce encompasses all of online retailing, plus a number of
unique direct selling opportunities. The vast majority of mobile-
facilitated purchases are of products for the mobile itself
(ringtones, screensavers, applications etc.) Telemarketing is the
performance of marketing-related activities over the telephone.
Consumers overwhelmingly hate it, but it is successful enough
that many businesses invest enormous resources into it.
Catalogue marketing is still an effective direct marketing
approach. Avon, Amway and Tupperware are all businesses that
use catalogue marketing. A catalogue is provided to customers
who then place their orders by mail, telephone or the internet,
offering customers all the convenience of online shopping.
Direct-response marketing requires customers to use the mail,
internet or telephone to make a purchase. The difference is that
instead of catalogues, direct-response marketing uses
advertising, such as a brochure in a mailbox, spam, or a
television advertisement. DVDs of old television series are one
of the best-known examples, with the instruction to ‘call now’
and the reassurance that ‘our operators are waiting’. Television
home shopping is essentially an enlarged version of direct-
response marketing, where a full half-hour program is devoted
to promoting a particular product (often in the early hours of the
morning) or indeed an entire television channel is dedicated to

home shopping.
*
Types of retailers
Direct marketingThe main types of direct marketing are online
retailing, telemarketing, catalogue marketing, television
shopping etc,.
Direct marketing - non-store retailing that uses mail, telephone
or the web. Direct marketing does not rely on a store, offers
consumers complete flexibility as to the timing of their
purchases and the ability to shop without leaving their homes.
The main types of direct marketing are online retailing,
telemarketing, catalogue marketing, television shopping and
direct response marketing. Online retailing or e-tailing involves
selling to customers via the internet, enabling purchases without
leaving home. This is offset by the inability to examine the
product in ‘real life’, plus the probable postage fees. The
retailer avoids the expense associated with stores and enables
them access to customers in any geographic region. Retailers
with a physical and an online store (i.e. Officeworks) need to
carefully coordinate the offerings of each.. Mobile e-commerce
is the use of a mobile phone to make purchases. Mobile e-
commerce encompasses all of online retailing, plus a number of
unique direct selling opportunities. The vast majority of mobile-
facilitated purchases are of products for the mobile itself
(ringtones, screensavers, applications etc.) Telemarketing is the
performance of marketing-related activities over the telephone.
Consumers overwhelmingly hate it, but it is successful enough
that many businesses invest enormous resources into it.
Catalogue marketing is still an effective direct marketing
approach. Avon, Amway and Tupperware are all businesses that

use catalogue marketing. A catalogue is provided to customers
who then place their orders by mail, telephone or the internet,
offering customers all the convenience of online shopping.
Direct-response marketing requires customers to use the mail,
internet or telephone to make a purchase. The difference is that
instead of catalogues, direct-response marketing uses
advertising, such as a brochure in a mailbox, spam, or a
television advertisement. DVDs of old television series are one
of the best-known examples, with the instruction to ‘call now’
and the reassurance that ‘our operators are waiting’. Television
home shopping is essentially an enlarged version of direct-
response marketing, where a full half-hour program is devoted
to promoting a particular product (often in the early hours of the
morning) or indeed an entire television channel is dedicated to
home shopping.
*
Types of retailers
Door-to-door sellingSometimes known as ‘direct selling’. In the
past, salesperson would walk from door to door to promote
products to the person at home. Usually, customers are now
identified by other means and an appointment is made.
Automatic vendingUse of machines to dispense a product; used
for small, routinely purchased products.
Door-to-door, sometimes known as direct selling, is an
approach taking its name from the old practice of a salesperson
walking door to door to promote products to the person at home.
Usually now customers are identified through some other means
and then an appointment is made for a visit by a salesperson.
Party plan - most commonly associated with Tupperware and
Tupperware Parties, relies on a consumer hosting a party for
friends at which a salesperson leads the group through product

demonstrations. Automatic vending - relies on machines to
accept payments and then dispense products. The main benefits
of automatic vending are that the product can be bought by the
customer without any immediate interaction with staff of the
marketing organisation. Essentially, vending machines are an
‘always open’ store. Vending machines are expensive pieces of
electronic machinery, which require regular maintenance and
restocking. They are subject to vandalism and they are
impersonal.
*
The ‘wheel of retailing’ theory
The theory is that retailers enter the market with low costs, low
margins and low prices, but move to high costs and high prices
as they seek to compete with copiers.
A discount retail business might develop into a higher
end department store, leaving its former niche to be filled by
newer discount businesses.
The wheel of retailing is a theory about how retailers evolve in
the market. It is somewhat similar to the product lifecycle
concept. retailers enter the market using some innovation to
achieve low costs and use that to charge low prices other new
and existing retailers copy the low-cost innovation and compete
directly with the new entrants to distinguish itself, the retailer
adds extra services, improves its location and store image, and
so on, which results in higher costs and higher prices new
retailers enter the market using some new innovation to achieve

low costs and then compete with the original, now high-price,
retailer.
*
The ‘wheel of retailing’ theory
The wheel of retailing is a theory about how retailers evolve in
the market. It is somewhat similar to the product lifecycle
concept. retailers enter the market using some innovation to
achieve low costs and use that to charge low prices other new
and existing retailers copy the low-cost innovation and compete
directly with the new entrants to distinguish itself, the retailer
adds extra services, improves its location and store image, and
so on, which results in higher costs and higher prices new
retailers enter the market using some new innovation to achieve
low costs and then compete with the original, now high-price,
retailer.
*
AgentsMarketing intermediaries engaged by buyers or sellers on
an ongoing basis to represent them in negotiations with other
parties in the marketing channel.
Never take ownership of the products. Agents and brokers earn
income from commissions, which are usually calculated on the
total size of the sale.
Agents and brokers perform some of the services of
wholesalers, but never take ownership of the products. Agents
and brokers earn income from commissions, which are usually
calculated on the total size of the sale. Agents are engaged by

buyers or sellers to represent them in negotiations with other
marketing channel participants. The main types of agents
are:manufacturers’ agents: act in a similar way to a salesperson
for multiple producers, selling specified, non-competing
products in a particular region under standard terms and
conditions. For the manufacturer, the use of manufacturers’
agents can remove the need to employ and manage a sales team.
For the retail and wholesale buyers, it is more efficient to deal
with a small number of manufacturers’ agents than to deal with
manufacturers individually.selling agents: agents that perform
all of the wholesaling function other than taking ownership of
the products. Selling agents are commonly used by small
producers that cannot afford a sales force or marketing
department. Selling agents usually work for multiple producers,
but do not take on competing products. They have a fairly
involved role in how the product is promoted and priced.buying
agents: specialist buyers that make purchases and handle goods
for long term partners, such as retailers. Buying, or purchasing,
agents generally have extensive knowledge of the products they
work with, can advise their partners and are able to obtain
beneficial pricing and terms.commission merchants: agents that
receive goods on consignment and negotiate the best possible
price in centralised markets. The Tokyo flower markets operate
with commission merchants who sell consignments of flowers at
a massive flower market by auction each morning.
*
AgentsThe main types of agents are:
manufacturers’ agents
selling agents
buying agents
commission merchants

*
Agentsmanufacturers’ agentsAct in a similar way to a
salesperson for multiple producers. For the manufacturer, the

use of manufacturers’ agents can remove the need to employ
and manage a sales team. For the retail and wholesale buyers, it
is more efficient to deal with a small number of manufacturers’
agents than to deal with manufacturers individually.
*

AgentsSelling agents
Selling agents are commonly used by small producers that
cannot afford a sales force or marketing department. (e.g.
property developer sells open plan units )
Selling agents usually work for multiple producers, but do not
take on competing products.
They have a fairly involved role in how the product is promoted
and priced.

*
Agents
3. buying agents
A secialist buyers that make purchases and handle goods for
long term partners, such as retailers. Buying, or purchasing,
beneficial pricing and terms.

*
Agents
4. commission merchants
Agents that receive goods on consignment and negotiate the
best possible price in centralised markets. The Tokyo flower
markets operate with commission merchants who sell
consignments of flowers at a massive flower market by auction
each morning

*
Brokers
Brokers
Marketing intermediaries engaged by buyers or sellers on a
short-term or one-off basis to represent them in negotiations
with other parties in the marketing channel (e.g. insurance and
mortgage brokers)
Brokers - engaged on a short-term or one-off basis to negotiate
on behalf of buyers or sellers. They have a more limited role
than agents, but their value is in their specialist knowledge and
well-established contacts in the industries in which they work.
Real estates salespeople, insurance brokers, mortgage brokers
and stockbrokers are among the better known examples.
Insurance brokers work to find the most suitable insurance for

individuals and organisations and provide expert advice about
insurance contracts. Mortgage brokers offer consumers a higher
level of service than the financial institutions and offer lenders
access to new customers. Mortgage brokers often take
responsibility for almost all aspects of the loan application.
*
WholesalingWholesalingExchanges in which products are
bought for resale, for use as inputs in other products, or for
some other use in a business.Wholesaling tasks include:acting
as a sales force, selling to retailersholding and managing
inventorynegotiating good deals with producersprovide cash
flow for producers and credit for retailers
Wholesaling comprises exchanges in which products are bought
for resale, for use as inputs in other products, or for some other
use in a business. It does not include transactions with end
consumers. Some organisations undertake both wholesaling and
retailing. Wholesaling differs from retailing in that wholesalers
deal with businesses. Wholesalers deal in large volumes; they
are usually not set up to handle numerous small transactions.
Wholesalers act as the connection between producers and
retailers and offer benefits to both. For the producer,
wholesalers:act as a salesforce, promoting and selling its
products to retailershold and manage inventory, relieving the
producer’s warehousing and transport burdenassume the risk
when retailers are given products on creditprovide cash flow by
paying for and taking possession of inventory shortly after it is
producedcommunicate producer and market issues to retailers.
For many producers, these benefits — and the fact that
wholesalers, being specialists, can provide the services more
efficiently than the producer can perform them itself —

outweigh the financial costs of dealing with wholesalers in the
marketing channel.
For the retailer, wholesalers:manage distributionhelp choose
and source appropriate inventoryhave bulk buying power and
the ability to negotiate good deals with producersprovide access
to a wide range of goods through one business partnershipcan
provide sophisticated technology solutions to manage
orderingcan provide creditcommunicate market and retail issues
to producers.
*
A wholesale merchant
It operates in the chain between producer and retail merchant,
typically dealing in large quantities of goods
E.g. Fleming Foods
*
Fleming Foods It sponsors the Independent Grocer’s Alliance
(IGA). IGA is a voluntary chain. Each independent grocery
store that is a member of IGA may have its own store name, but
each also will display the IGA logo.
Fleming operates a number of distribution centers around the
country. Each stocks the wide assortment of grocery products
required to stock the shelves of its member retail stores.
*

Chapter 10: Distribution (place)
Summary:understand the concept of place and how distribution
channels connect producers and consumers/organisational
buyersdescribe the major activities involved in the distribution
of goodsdescribe the distribution of servicesunderstand the
major aspects of retailingexplain the role of agents and brokers
in the distribution channelexplain the role of wholesalers in
marketing distribution.
Learning objectives: understand the concept of place and how
distribution channels connect producers and
consumers/organisational buyers describe the major activities
involved in the distribution of goods describe the major
activities involved in the distribution of services understand the
major aspects of retailing explain the role of agents and brokers
in the distribution channel explain the role of wholesalers in
*
Title
ABC/123 Version X
1
Business Forms Worksheet
ETH/321 Version 4

1
University of Phoenix MaterialSample Business Forms
Worksheet
There are seven forms of business: sole proprietorship,
partnership, limited liability partnership, limited liability
company (including the single member LLC), S Corporation,
Franchise, and Corporation.
1. Select one of the forms of business
2. Research and provide three advantages and three
disadvantages for this business form.
3. Provide a 100- to 200-word summary in which you provide an
example business for each form. Discuss at least one of the
advantages and one of the disadvantages of that form and
potential legal forms that might be required.
Business Form:
Advantages
2.
3.
Disadvantages
2.
3.
Summary

Copyright © XXXX by University of Phoenix. All rights
reserved.
Copyright © 2015 by University of Phoenix. All rights reserved.
Distribution (place)
Week 8
Part 1
assap dawgs
*
Chapter 10: Distribution (place)
Learning objectives:understand the concept of place and how
consumers/organisational buyersdescribe the major activities
involved in the distribution of goodsdescribe the distribution of
servicesunderstand the major aspects of retailingexplain the role
of agents and brokers in the distribution channelexplain the role
of wholesalers in marketing distribution.
Learning objectives: understand the concept of place and how
consumers/organisational buyers describe the major activities
involved in the distribution of goods describe the major
activities involved in the distribution of services understand the

major aspects of retailing explain the role of agents and brokers
in the distribution channel explain the role of wholesalers in
*
Retailing versus e-tailing in the florist industry
Roses Only
Dial-up
Broadband
Formed in 1995, Roses Only is now Australia’s leading floral
retailer, offering a wide range of boxed long stem roses, tulips,
gerberas, lilies and mixed seasonal flowers, in addition to floral
arrangements. Champagne, wine, teddy bears and Lindt
chocolates are also available to be packaged with the flowers.
Suggestions for class discussion – how has consumer behaviour
influenced Roses Only’s distribution strategy?
*
Marketing channelsMarketing intermediaries are individuals or
organisations that act in the distribution chain between the
producer and the end user (e.g. industrial distibuters,
wholesalers, agents and brokers and retailers)
Marketing channels: Many manufacturers and service businesses

deal directly with the consumers of their products. This
approach to marketing is known as direct distribution and it is
particularly common for services products, as services are
directly tied to the service provider. Conversely, many
producers, especially makers of physical products, rely on other
organisations and individuals to help them get their product to
end users. This approach is known as indirect distribution and
the main organisations and individuals who act in the
distribution chain between the producer and end user are known
as marketing intermediaries. The key marketing intermediaries
are industrial buyers, wholesalers, agents and brokers, and
retailers. The path from the manufacturer or service provider to
the end user is known as the marketing channel. Marketing
intermediaries are useful and necessary when they can more
efficiently connect producers with their customers than can the
producers themselves. Even if a producer can manage to get
their product directly to end users, they are often better off to
concentrate on their core abilities (production) and rely on
specialist intermediaries who can more efficiently move the
product closer to customers. Because they have expertise,
equipment, experience, contacts, skills and scales of economy,
intermediaries help producers achieve better results than
producers can achieve when acting alone.
*
Marketing channelsThe distribution channel involves a group of
individuals and organisations directing products from producers
to end users.
Marketing channels: Many manufacturers and service businesses
deal directly with the consumers of their products. This
approach to marketing is known as direct distribution and it is

particularly common for services products, as services are
directly tied to the service provider. Conversely, many
producers, especially makers of physical products, rely on other
organisations and individuals to help them get their product to
end users. This approach is known as indirect distribution and
the main organisations and individuals who act in the
distribution chain between the producer and end user are known
as marketing intermediaries. The key marketing intermediaries
are industrial buyers, wholesalers, agents and brokers, and
retailers. The path from the manufacturer or service provider to
the end user is known as the marketing channel. Marketing
intermediaries are useful and necessary when they can more
efficiently connect producers with their customers than can the
producers themselves. Even if a producer can manage to get
their product directly to end users, they are often better off to
concentrate on their core abilities (production) and rely on
specialist intermediaries who can more efficiently move the
product closer to customers. Because they have expertise,
equipment, experience, contacts, skills and scales of economy,
intermediaries help producers achieve better results than
producers can achieve when acting alone.
*
Benefit of using distribution channel intermediaries
Figure 10.1 shows the benefit of using distribution channel
intermediaries.
*

Marketing channels Functions
Effective intermediaries in marketing channels achieve the
followings:
Time utility
Place utility
Form utility
advice and personal service
Exchange efficiencies
When they are well managed, effective intermediaries
operating in marketing channels achieve the following benefits:
time utility — making products available to the consumer at the
time that the consumer wants to purchase them place utility —
making products available in the locations that the consumer
wants to purchase them form utility — customising products to
the consumer’s particular needs exchange efficiencies —
making transactions as simple and cheap as possible for
consumers, producers and other intermediaries by establishing
and managing efficient exchange processes. Conversely, when
poorly managed, or inappropriately chosen, marketing channel
intermediaries can add to costs, reduce efficiency, create delays
and cause frustration. Consumers are often wary of
intermediaries, believing they are ‘middlemen’ who add no
value but increase the price they must pay for products. Some
producers blame intermediaries for every problem they face
and, like consumers, can feel they add little value to the
marketing process.
*
1.Time utility:

Making products available at the time the consumer wants
to purchase them
marketing process.
*
2. Place utility:
Making products available in the locations that the
consumer wants them

marketing process.
*
3. Form utility:
Customising products to the consumer’s particular needs

marketing process.
*
4. Advice and personal service: retailers are geared to deal with
customers one on one, providing advice and personal service.
E.g. Harvey Norman salesperson
the pros and cons of
different models of LCD TV set.
marketing process.
*

5. Exchange efficiencies: Making transactions as simple and
cheap as possible by establishing and managing efficient
exchange processes.
Reduce the number of sellers that consumers must deal with.
Retailers can offer consumers a wide range of products from
numerous producers all in one place.
marketing process.
*
Level of Intensity

The market coverage decision takes into account the nature of
the product and its target market. Generally, marketers will
choose from:
intensive distribution
exclusive distribution
selective distribution
Market coverage decisions - The marketing organisation must
decide what market coverage is appropriate for its products.
Marketers choose from:intensive distribution which distributes
products through every possible available outletexclusive
distribution which distributes products through only a single
outlet for any given geographic regionselective distribution
which distributes products through only some of the available
outlets.
the product and its target market. Intensive distribution is an
obvious strategy for everyday purchases such as milk. The
consumer invests little time in deciding where, when or how
much to buy or how much to pay. They make their decision
based on convenience, often just purchasing at the closest store,
whether that be a corner store, a supermarket, a petrol station or
a takeaway food store.
In contrast, exclusive distribution is generally used for products
that are only purchased after a great deal of deliberation by the
consumer or where exclusivity adds to the appeal of the
product. Prestige cars and designer furniture are typical
examples. Producers and wholesalers can also increase the
commitment of retailers in the marketing channel by promising
them exclusivity.
Selective distribution falls somewhere between intensive and
exclusive distribution. It is most appropriate for goods that

require some degree of deliberation by the consumer and where
the consumer might visit multiple stores to compare prices and
products. While it is good for the consumer, it is not generally
beneficial to the parties in the marketing channel to have
consumers play retailers against each other.
*
Level of Intensityintensive distribution which distributes
products via every suitable intermediary
A strategy for everyday purchases such as milk. The consumer
invests little time in deciding where, when or how much to buy
or how much to pay.
They make their decision based on convenience, often just
purchasing at the closest store, whether that be a corner store, a
supermarket, a petrol station or a takeaway food store.
outlets.

them exclusivity.
*
Level of Intensityexclusive distribution which distributes
products through a single intermediary for any given geographic
region
products that are only purchased after a great deal of
deliberation by the consumer or where exclusivity adds to the
appeal of the product. (e.g. Prestige cars and designer furniture
) Producers and wholesalers can also increase the commitment
of retailers in the marketing channel by promising them
exclusivity.

outlets.
them exclusivity.
*
Level of Intensityselective distribution which distributes

products through intermediaries chosen for some specific
reason.It is most appropriate for goods that require some degree
of deliberation by the consumer and where the consumer might
visit multiple stores to compare prices and products.
While it is good for the consumer, it is not generally beneficial
to the parties in the marketing channel to have consumers play
retailers against each other
outlets.
them exclusivity.

*
Consumer product marketing channels
For consumer products, the main marketing intermediaries are
agents, wholesalers and retailers. A marketing channel can
consist of all, some or none of these between the producer and
the consumer
1
2
3
4
5
the consumer. In channel 1, the producer deals directly with the
consumer. Examples include: Dell, which sells computers
directly to consumers via their websites. Consumers need to feel
confident that they will get the level of service, including after-
sales support, that they require. Dealing directly with producers
can offer greater customisation of the product. Consumers may
also feel they can get a cheaper price. This is often not the case
though, as producers are reluctant to undercut the prices of their
retail distributors. Dealing directly with producers will more
often than not require the consumer to pay in full for the goods

before receiving them if mail order or online purchasing is
involved. In channel 2, producers provide their products
directly to retailers for sale to consumers. e.g. Large retailers
choose to deal directly with producers. From the consumer’s
perspective, many feel that they receive more personal service
from a retailer than a producer, including the ability to examine
the goods before purchasing them and often to take possession
of the goods when paying for them. In channel 3, producers sell
to wholesalers who then sell on to the retailers. This is a
common choice for goods that are sold in high volumes through
numerous retailers. Examples include grocery items. The
advantage for the producer is in dealing with larger volumes to
fewer buyers rather than small volumes to numerous buyers.
The advantage for the retailer is the ability to buy a range of
different lines from one source (the wholesaler) rather than
having to deal with large numbers of producers. Channel 4 is a
common choice for exports, where the complexities of dealing
with different legal, regulatory and cultural factors suggests an
experienced and skilled agent will be more able to effectively
deal with intermediaries in the foreign market. Marketing
channel 5 is commonly used in the financial services industry.
The use of more than one marketing channel is known as dual
distribution.
*
In channel 1,
the producer deals directly with the consumer.
(e.g. Dell, which sells computers directly to consumers via their
websites)
Consumers need to feel confident that they will get the level of
service, including after-sales support, that they require.

distribution.
*
Channel 1Consumers may also feel they can get a cheaper price.
This is often not the case though, as producers are reluctant to
undercut the prices of their retail distributors.
Dealing directly with producers will more often than not require
the consumer to pay in full for the goods before receiving them
if mail order or online purchasing is involved.

distribution.
*
In channel 2, producers provide their products directly to
retailers for sale to consumers. e.g. Large retailers choose to
deal directly with producers.
From the consumer’s perspective, many feel that they receive
more personal service from a retailer than a producer, including
the ability to examine the goods before purchasing them and
often to take possession of the goods when paying for them.

distribution.
*

In channel 3,
producers sell to wholesalers who then sell on to the retailers.
The advantage for the producer is in dealing with larger
volumes to fewer buyers rather than small volumes to numerous
buyers.

distribution.
*
In channel 3
having to deal with large numbers of producers.

distribution.
*
Channel 4 is a common choice for exports, where the
complexities of dealing with different legal, regulatory and
cultural factors suggests an experienced and skilled agent will
be more able to effectively deal with intermediaries in the
foreign market.

distribution.

*
Consumer product marketing channelsMarketing channel 5 is
commonly used in the financial services industry.

distribution.
*
Business-to-business product marketing channels
In the market for business products the main intermediaries are
agents and industrial distributors.
agents and industrial distributors. A marketing channel can
consist of both, one or neither of these between the producer
and the organisational buyer. Marketing channel 1 accounts for
the majority of business-to-business product transactions.
Business buyers are usually buying products that are crucial to
their own business success and often want to deal directly with
the producer so they can be sure of direct access to information
and assistance. Sometimes the organisational buyer will need a
customised product and so needs to deal directly with the
producer. Marketing channel 2 features an industrial
distributor. Industrial distributors play roughly the same role in
the marketing channel as retailers do in the consumer product
marketing channel. They purchase commonly used goods such
as tools and office supplies from producers and resell them to
organisational buyers. Marketing channel 3 features an agent.
An agent in the business products market is an intermediary

who plays matchmaker between producers and organisational
buyers and is paid a commission on the sales they bring to the
producer. Marketing channel 4 combines channels 2 and 3. The
agent takes a commission on sales it secures with industrial
distributors. The industrial distributor then sells to
organisational buyers as in channel 2.
*
Business-to-business product marketing channels Marketing
channel 1
accounts for the majority of business-to-business product
transactions

*
Marketing channel 1 Business buyers are usually buying
products that are crucial to their own business success and often
want to deal directly with the producer so they can be sure of
direct access to information and assistance.
Sometimes the organisational buyer will need a customised
product and so needs to deal directly with the producer.

*
Marketing channel 2 features an industrial distributor. Industrial
distributors play roughly the same role in the marketing channel
as retailers do in the consumer product marketing channel.

*
Marketing channel 2They purchase commonly used goods such
organisational buyers.

*
Marketing channel 3 features an agent. An agent in the business
products market is an intermediary who plays matchmaker
between producers and organisational buyers and is paid a
commission on the sales they bring to the producer.

*
Marketing channel 3 features an agent.
e.g. Magnis Resource is an Australian Graphite mining
company based on Tanzania planning to sell the raw minerals to
POSCO (in 2010, it was a largest steel manufacturer in the
World)

*
Marketing channel 4 combines channels 2 and 3. The agent
takes a commission on sales it secures with industrial

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