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Distribution Channels Dr. Vesselin Blagoev. Channels of Distribution. We call Channels of Distribution any series of firms or individuals who participate in the flow of products from producer to final user or consumer. Distribution Channel Functions. - PowerPoint PPT Presentation
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20/04/23 1
Distribution Channels
Dr. Vesselin Blagoev
20/04/23 2
Channels of Distribution
We call Channels of Distribution any series of firms or individuals who participate in the flow of products from producer to final user or consumer
20/04/23 3
Distribution Channel Functions
Research: gathering information needed for planning and aiding exchange
Promotion: developing and spreading persuasive information about an offer
Contact: finding and communicating with prospective buyers
Matching: shaping and fitting the offer to the buyer’s needs, incl. such activities as manufacturing, grading, assembling, and packaging
20/04/23 4
Distribution Channel Functions
Negotiation: reaching an agreement on price and other terms of an offer so that ownership or possession can be transferred
Physical distribution: transporting and storing goods
Financing: acquiring and using funds to cover the costs of the channel work
Risk taking: assuming the risks of carrying out the channel work
20/04/23 5
Type of channel
Direct Indirect
20/04/23 6
Direct & Indirect channels
Producer
Wholesaler
Wholesaler
RetailerProducer
Producer
Producer RetailerJobber
Retailer
Direct-Marketing Channel
20/04/23 7
Consumer Channels
Direct-marketing channels do not have intermediary levels
With more intermediary levels a channel of distribution has higher level of complexity
Multi-level marketing: a network of distributors, each one joined to the distributor who introduced him
20/04/23 8
Traditional marketing
Multi-levelmarketing
Manufacturer
Wholesalers
Retailers
Consumers Distributors
Distributors
Distributors
Seller
Co
nsu
mer
s
Co
nsu
mer
s
20/04/23 9
Network marketing
Manufacturer (or Retailer)
20/04/23 10
Types of channels
Consumer (end-user) channels
20/04/23 11
Producer
Producer
National Wholesalers
National Wholesalers
Регионален търговец на едро
Регионален търговец на едро
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПроизводителПроизводител
ПроизводителПроизводител
Producer
Producer
Producer
Producer
ПроизводителПроизводител
ПроизводителПроизводител
Producer
Producer
Вносител дистрибутор
Вносител дистрибутор
Нац.търго-вец на едро
Нац.търго-вец на едро
Агент (джобер)
Агент (джобер)
Regional wholesalers
Regional wholesalers
Regional wholesalers
Regional wholesalers
RetailersRetailers
RetailersRetailers
RetailersRetailers
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПотребителиПотребители
ПотребителиПотребители
ПотребителиПотребители
ПотребителиПотребители
BuyersBuyers
BuyersBuyers
Own (Direct) channel
Мрежови маркетинг
Електронна търговия
Електронна търговия
Classic channels
20/04/23 12
Producer
Producer
National Wholesalers
National Wholesalers
Регионален търговец на едро
Регионален търговец на едро
Търговци на дребно
Търговци на дребно
BuyersBuyers
роизводителроизводител
Producer
Producer
Producer
Producer
Producer
Producer
ПроизводителПроизводител
ПроизводителПроизводител
Producer
Producer
Вносител дистрибутор
Вносител дистрибутор
Нац.търго-вец на едро
Нац.търго-вец на едро
Агент (джобер)
Агент (джобер)
Regional wholesalers
Regional wholesalers
Regional wholesalers
Regional wholesalers
RetailersRetailers
RetailersRetailers
RetailersRetailers
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПотребителиПотребители
ПотребителиПотребители
ПотребителиПотребители
BuyersBuyers
BuyersBuyers
BuyersBuyers
Own (Direct) channel
Network marketing
Електронна търговия
Електронна търговия
20/04/23 13
Producer
Producer
National Wholesalers
National Wholesalers
Регионален търговец на едро
Регионален търговец на едро
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПроизводителПроизводител
Producer
Producer
Producer
Producer
Producer
Producer
ПроизводителПроизводител
ПроизводителПроизводител
Producer
Producer
Вносител дистрибутор
Вносител дистрибутор
Нац.търго-вец на едро
Нац.търго-вец на едро
Агент (джобер)
Агент (джобер)
Regional wholesalers
Regional wholesalers
Regional wholesalers
Regional wholesalers
RetailersRetailers
RetailersRetailers
RetailersRetailers
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПотребителиПотребители
ПотребителиПотребители
ПотребителиПотребители
BuyersBuyers
BuyersBuyers
BuyersBuyers
Own (Direct) channel
Network marketing
Електронна търговия
Електронна търговия
Producer Chains (METRO)
Buyers
Retailers Buyers
BuyersRetailersRegional
wholesalers
20/04/23 14
Producer
Producer
National Wholesalers
National Wholesalers
Регионален търговец на едро
Регионален търговец на едро
Търговци на дребно
Търговци на дребно
BuyersBuyers
Producer
Producer
Producer
Producer
Producer
Producer
Producer
Producer
ПроизводителПроизводител
ПроизводителПроизводител
Producer
Producer
Вносител дистрибутор
Вносител дистрибутор
Нац.търго-вец на едро
Нац.търго-вец на едро
Агент (джобер)
Агент (джобер)
Regional wholesalers
Regional wholesalers
Regional wholesalers
Regional wholesalers
RetailersRetailers
RetailersRetailers
RetailersRetailers
Търговци на дребно
Търговци на дребно
BuyersBuyers
ПотребителиПотребители
ПотребителиПотребители
BuyersBuyers
BuyersBuyers
BuyersBuyers
BuyersBuyers
Own (Direct) channel
Network marketing
E-commerceE-commerce
Producer Chains (METRO)
Buyers
Retailers Buyers
BuyersRetailersRegional wholesalers
20/04/23 15
Industrial Channels
Producer
Industrial Customer
Industrial Distributor
Producer’s RepresentativeProducer
Industrial Customer
Producer
Producer
IndustrialDistributor
Industrial Distributor
Producer’s Representative
Industrial Customer
IndustrialCustomer
20/04/23 16
Channel Conflict Horizontal conflict: between
firms at the same level of the channel (some dealers go out of their territories; some dealers reduce the quality)
Vertical conflict: between firm at different levels (GM came to conflict with some dealers by trying to enforce policies on service, pricing, and advertising.
20/04/23 17
Conventional Marketing Channel
Manufacturer Wholesaler Retailer
Consumer
A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business, seeking to maximize its own profit even at the expense of profits for the system as a whole
20/04/23 18
Vertical Marketing System
Retailer
Wholesaler
Consumer
A distribution channel structure in which producers, wholesalers, and retailers act as unified system. Usually one of them owns the other, or has powerful contracts with them.
Manufacturer
20/04/23 19
Consumer Channels Jobber: an intermediary
which operates between a wholesaler and smaller retailers, who are not served by the wholesaler. Jobbers buy from the W. and sell to the retailers.
20/04/23 20
Types of Middlemen
Three types of middlemen (channel alternatives) are usually used:
Company salesforce
Manufacturer’s agency
Industrial distributors
Expand the company’s salesforce. Assign salespeople to territories and have them contact all people in the area
Higher independent firms, whose salesforce handle related products
Find distributors in the different regions or industries who will buy and carry the new line
20/04/23 21
Number of Middlemen
Three strategies are available:
Intensive distribution
Exclusive distribution
Selective distribution
Stocking the product in as many outlets as possible
Limiting the number of middlemen, handling the product, sometimes to one
Using more than one but less than all possible distributors
20/04/23 22
Physical Distribution
Order processing / customer service
Transportation
Warehousing
Inventory carrying
Other
20/04/23 23
Direct Marketing
Marketing through various advertising media that interact directly with consumers, generally calling for the consumer to make a direct response
20/04/23 24
Direct Marketing
Direct-mail and Catalogue Marketing
Telemarketing (by phone) Television marketing e-commerce (e-shopping)
20/04/23 25
Direct-mail Marketing
Direct-mail marketing involves single mailings that include letters, ads, samples, foldouts, and other sent to prospects on mailing lists. Mailing lists are developed from customer lists or obtained from mailing list companies, which provide names of people fitting different descriptions (heavy users, veterinarians, etc.)
20/04/23 26
Direct Selling Direct-mail and Catalogue Marketing with ORDER FORM
Telemarketing (by phone) Television marketing e-commerce (e-shopping) i.e.
www.amazon.com, publibook.com
20/04/23 27
e-commerce INTERNET SALES OF THE NOVEL
L'APRES-MIDI EPHEMERE D'UNE LONGUE JOURNEE
In FRANCE and other EU countries http://www.publibook
.com/boutique2006/detail-3484-18-6-1-PB.html
http://www.amazon.fr/Apr%C3%A8s-Midi-
20/04/23 28
e-commerce In FRANCE and other EU countries (cont.) http://www4.fnac.com/Shelf/article.aspx?
PRID=2059437&OrderInSession=1&Mn=1&SID=359cd744-
http://nouveautes.chapitre.com/Octobre-2007/LITTERATURE-ETRANGERE.html
http://www.cultura.com/8073/Livre/Litterature/Litterature-etrangere/Europeenne
20/04/23 29
e-commerce In CANADA http://www.tonality.ca/index.php?
cPath=37_258
In JAPAN http://bookweb.kinokuniya.co.jp/
guest/cgi-bin/booksea.cgi?ISBN=2748338391
20/04/23 30
e-commerce In BULGARIA (in Bulgarian language) http://navigator.idg.bg/index.php?
type=2&p=2118&id=4514464 http://books.balkanatolia.com/c/sl-b/p-l/
cid-59/s-32/bylgarska-literatura.html http://www.pe-bg.com/?cid=3&cat=5&p=19 http://www.knigi.biz/?
act=products&do=detailed&id=124565
20/04/23 31
WholesalersCompany Owned Independent
Merchant Agents/Brokers
Full Function Limited Function
Rack Jobbers
General Merchandise
Single-line
Specialty
Cash and Carry
Drop Shippers
Truck Jobbers
Mail Order
Rack Jobbers
Auction Companies
Brokers
Commission Merchants
Manufacturers Agents
Selling Agents
Import-Export Agents
20/04/23 32
Merchant Wholesalers
Merchant wholesalers are independent owned businesses that take title to the merchandise they handle. They are the largest single group of wholesalers, accounting for roughly 50% of all wholesaling.
20/04/23 33
Full-Function (Full-Service)
Full-service wholesalers provide a full set of services such as:
carrying stock using salesforce offering credit making deliveries providing management assistance getting market information sorting and assorting
20/04/23 34
Rack Jobbers
Rack jobbers usually serve drug and grocery retailers, mostly in the nonfood sector. They send delivery trucks to stores and the delivery person sets up racks of newspapers and magazines, toys, sunglasses, hardware items, health and beauty aids, and other. They price the goods, keep them fresh, and bill the retailers for the sold items only.
20/04/23 35
Cash-and-Carry Cash-and-carry wholesalers are characterized by:
They have a limited line of fast-moving goods
Sell to small retailers for cash Normally they do not deliver
Example: A small fish store buys several crates of fish from a cash-end-carry wholesaler and pays at the spot.
20/04/23 36
Drop Shippers Drop shippers operate in bulk industries such as
coal, lumber, and heavy equipment. They do not carry inventory or handle the
product Once an order is received, they find a
producer who ships the goods directly to the customer
The drop shippers take the title and the risk from the time the order is accepted to the time the goods are delivered to the customer
Their costs are lower
20/04/23 37
Truck JobbersTruck Jobbers (Truck Wholesalers):
Perform selling and delivery functions
They carry a limited line of products (milk, bread, wines, snack foods)
They sell for cash as they make their rounds to small retailers, supermarkets, restaurants, hospitals, factory cafe, hotels
20/04/23 38
Mail-order Wholesalers
Male-order wholesalers send catalogs to retail, industrial and institutional customers offering cosmetics, special foods, jewelry and other small items.They do not have salesforce to call on customers. The orders are sent by mail, truck, or other means.
20/04/23 39
Producer’s Cooperatives
They are owned by farmer-members, assemble farm products to sell in local markets. They often try to improve the quality and promote the coop brand name (Sunkist oranges, Diamond walnuts)
20/04/23 40
Agents and Brokers
Agents and Brokers differ from merchant wholesalers in two ways:
They do not take title to goods (they do not own the products they sell)
They perform a few functions only. Their main function is to aid in buying and selling
They earn commission on the selling price (1% to 6% usually)
20/04/23 41
Agents Agents are important in international
trade. They are usually experts on local business customs and rules concerning imported products in their respective countries. In many cases they are experts on particular markets of interest.
Agents specialize by customer type or by product and product line.
20/04/23 42
Manufacturers’ Agents
They sell similar products for several noncompeting producers (machinery and equipment, electronic items, automobile products, clothing and apparel accessories)
They sell for a commission on what is actually sold (usually 10–15%)
They are independent; they often work almost as members of each company salesforce
They can add a new line for no costs to the producer
Specially useful for introducing new products
20/04/23 43
Selling Agents Selling agents take over the whole
marketing function of the producers – not only the selling function
They can work for several producers, even competing producers
They have almost full control of pricing, selling, and advertising
They serve as marketing manager for the particular producers
20/04/23 44
Commission Merchants
Commission merchants and export or import commission houses handle products shipped to them by sellers, complete the sale and send the money (minus their commission) to each seller
Used in agricultural markets where farmers must have someone to handle the shipment (in the city)
They do not own the products they sell, but they have the right to sell ‘at market price’ (above some minimum)
20/04/23 45
Brokers Brokers bring buyers and sellers together
Brokers usually have a temporary relationship with the Buyer and Seller while a particular deal is negotiated
Their product is information about what the Buyer needs and what supplies are available
They can aid in the negotiation process If the transaction is completed they earn a
commission from the party, which hired them
20/04/23 46
Other Specialized Middlemen
Factors – wholesalers of credit. They provide their clients with working capital against accounts receivable, which they buy
Field warehousing – provide cash for products on hand. The producer retains title to the goods, but control of them passes to the field warehouser
Sales finance companies do floor planning – financing of display stocks for auto, appliance, and electronics retailers. Many auto dealers do not own the products they display and do it for commission
20/04/23 47
RetailersMerchandizeLine carried
General merchandize
Limited line
Single line
Level of Service
Self-service
Self-selection
Limited service
Full service
Method of operation
Form of Ownership
Location of Facilities
Store
Nonstore Mail-order
In-home
Automatic vending machines
Direct response merchandisers
New technologies
Independent
Corporate chain
Association of ind.
Retailer cooperative chains
Wholesaler- sponsored voluntary
chains
Consumer cooperative
Franchises
Central business district
Main business thoroughfare
Secondary business district
Neighborhood cluster
Shopping center
Scattered individual location
20/04/23 48
Personal (Direct) Selling
By Personal Selling we understand
Door-to-Door retailing Office-to-Office selling Home-Sales Parties
20/04/23 49
Personal Selling Prospecting: find and cultivate new customers Targeting: decide how to allocate their scarce
time among prospects and customers Communicating: Communicate information
about company’s products and services Selling: approaching, presenting, answering q Servicing: consulting, arranging finance, etc. Info gathering: fill-in call reports and other Allocating: products to whom during shortages