Summary
Summary of Chapter 13
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- Business Management 113
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- Stellenbosch University (SUN)
Summary of Chapter 13
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CHAPTER 13CHANNELS OF DISTRIBUTION
distribution channel (or
A channel of distribution, or marketing channel, is e marketing channel): a
sequence of marketing organizations that directs a product sequence of marketing
from the producer to the ultimate user. organizations that directs a
product from the producer
A marketing organization that links a producer and user within to the ultimate user
a marketing channel is called a middleman or marketing
intermediary. Middlemen are concerned with the transfer of middleman (or
ownership of products. A merchant middleman (merchant) is a marketing
middleman that actually takes title to products by buying intermediary): a
them. A functional middleman helps in the transfer of marketing organization
ownership of products but does not take title to the products. that links a producer and
user within a marketing
CHANNELS FROM CONSUMER PRODUCTS channel
Producer to consumer merchant middleman: a
middleman that actually
This channel, often called the direct channel, includes no takes title to products by
marketing intermediaries. Practically all services and a few buying them
consumer goods are distributed through a direct channel.
Producers sell directly to consumers for several reasons. They functional middleman: a
can better control the quality and price of their products. They middleman that helps in
do not have to pay (through discounts) for the services of the transfer of ownership
intermediaries. They can maintain closer ties with customers. of products but does not
Examples: Dell Computer take title to the products
Producer to retailer to consumer retailer: a middleman that
A retailer is a middleman that buys from producers or other buys from producers or
middlemen and sells to consumers. Producers sell directly to other middlemen and sells
retailers when retailers can buy in large quantities. This to consumers
channel is used most often used for bulky products for which
additional handling would increase selling costs, and for wholesaler: a middleman
perishable or high-fashion products that must reach consumers quickly
Producer to wholesaler to retailer to consumer
This channel is known as the traditional channel because many consumer goods
pass through wholesalers to retailers. A wholesaler is a middleman that sells
products to other firms. These firms may be retailers, industrial users, or other
wholesalers. A producer uses wholesalers when its products are carried by so many
retailers that the producer cannot deal with all of them.
,Producer to agent to wholesaler to retailer to consumer
Producers may use agents to reach wholesalers. Agents are functional middlemen
who do not take title to products and are compensated by commissions paid by
producers. Often these products are inexpensive, frequently purchased items.
MULTIPLE CHANNELS FOR CONSUMER PRODUCTS
Often, a manufacturer uses different distribution channels to reach different market
segments. A manufacturer uses multiple channels, for example, when the same
product is sold to consumers and business customers. Multiple channels are also
used to increase sales or to capture a larger share of the market.
CHANNELS FOR BUSINESS PRODUCTS
Producer to business user
In this direct channel, the manufacturer’s own sales force sells directly to business
users. Heavy machinery and major equipment usually are distributed in this way.
The very short channel allows the producer to provide customers with expert and
timely services.
intensive distribution:
the use of all available
LEVEL OF MARKET COVERAGE outlets for a product
The level of market coverage refers to the number of selective distribution:
wholesalers and the number of retailers that are used for a the use of only a portion
specific geographic area. of the available outlets for
a product in each
Intensive distribution is the use of all available geographic area
outlets for a product. E.g. Coke.
exclusive distribution:
the use of only a single
retail outlet for a product
in a large geographic area
, Selective distribution is the use of only a portion of the available outlets
for a product in each geographic area. E.g. Perfumes.
Exclusive distribution is the use of only a single retail outlet for a product
in a large geographic area. E.g. Zara at V&A Waterfront.
MARKETING INTERMEDIARIES: WHOLESALERS
Wholesalers provide a variety of essential marketing services.
JUSTIFICATIONS FOR MARKETING INTERMEDIARIES
- Intermediaries perform essential marketing services.
- Manufacturers would be burdened with additional record keeping and
maintaining contact with numerous retailers
- Costs for distribution would not decrease and could possibly increase due to
the marketing inefficiencies of producers
TYPES OF WHOLESALERS
Wholesalers generally fall into two categories: merchant wholesalers, and agents Wi
brokers. Of these, merchant wholesalers constitute the largest portion. They
amount for about four-fifths of all wholesale establishments and employees.
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