4MD3 Business to Business Marketing

Lecture 10

Steve Howse

March 9, 2009

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Wilson’s Social Style Matrix

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PREVIEW OF DISTRIBUTION• BM/CM differences 

• the basic distribution decision• making that decision • middleman types for indirect channels• finding middlemen • website-induced channel conflict

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BRIEF REVIEW OF CHANNEL TERMS

• direct channel

• indirect channel

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BM/CM DIFFERENCES - DISTRIBUTION

• direct channel dominant by dollar sales

• but not by other measures • many middleman types unique to BM• no retailers!

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THE BASIC DISTRIBUTION DECISION

• indirect channel or direct? 

• get the decision right, because ..• it determines who does the critical PS • and it’s hard to reverse…

o e.g. indirect channel to direct  o e.g. direct channel to indirect

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FAVOUR THE DIRECT CHANNEL WHEN YOUR

PRODUCTS ARE…• expensive  • technical or complex  • custom designed  • new  to the market• in need of strong support services  • a high-risk purchase for your customer• purchased at high level • bulky or heavy  

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FAVOUR THE DIRECT CHANNEL WHEN YOUR

CUSTOMERS ARE…

• few, large or close together• buying steadily year-round

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FAVOUR THE DIRECT CHANNEL WHEN YOUR

OWN FIRM…

• wants to control "customer interface"  

• wants focused sales attention  • has wide product range  • has necessary time and money 

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INDIRECT-CHANNEL TERMINOLOGY

 • principals

• wholesalers omeaningoalways independentomerchant and agent wholesalers

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MERCHANT WHOLESALERS

• AKA (industrial) distributors • buy the manufacturer’s product• and usually physically possess it

too• their reward is margin• usually “full function” middlemen

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TYPES OF MERCHANT WHOLESALER

AKA (INDUSTRIAL) DISTRIBUTOR

odealers  ocontractor-dealers  opaper merchants  osteel service centres  otrading companies  

odrop shippers - AKA desk jobbers

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AGENT WHOLESALERS

• don’t buy the manufacturer’s product

• and seldom physically possess it• reward is commission plus

expenses• usually not “full-function”

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TYPES OF AGENT WHOLESALER

o manufacturers' agents AKA reps  o selling agents  o brokerso export management companies

o commission merchants

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THE PROS OF DISTRIBUTORS VS. REPS

 • distributors are more “locked in” to you 

• are bigger and more stable• are more likely to provide national

coverage• are best for "catalogued products"

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THE CONS OF DISTRIBUTORS VS. REPS

• distributors try to shave selling expenses  • favour bigger, more-established customers• and more-established products  • have more channel control  than reps• carry more product lines• carry competing products  • give inferior market feedback  

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FINDING MIDDLEMEN

• check directories • run ads in trade publications  • exhibit at or visit trade shows• consult Canadian Trade Commissioners

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MINIMIZING WEBSITE INDUCED CHANNEL CONFLICT

• use Web for communication only• alternatively..

o don’t price lower on Webo don’t sell all products on the Webo don’t sell to all customerso use different brand name for Web saleso involve middleman in website