Distribution

Logistics: Activities that focus on getting the right amount of the right products to the right place at the right time at the lowest effective cost

Agent: Independent individual or company whose main function is to act as the primary selling arm of the producer, take possession of products but do not actually own them

Wholesaler: Independently owned firms that take title to the merchandise they handle, purchase product in bulk and store it until they can resell it

Distributor: Buys noncompeting products or product lines, warehouses them, and resells them to retailers or direct to the end users or customers

Retailers: Sells goods to the consumers, typically purchases the product sold to consumers

Intermediaries perform 3 functions

• Transactional Function

  • Buying: Purchasing products for resale or as an agent for supply of a product

  • Selling: Contacting potential customers, promoting products, and seeking orders

  • Risk-taking: Assuming business risks in the ownership of inventory that can become obsolete or deteriorate

• Logistical Function

  • Assorting: Creating product assortments from several sources to serve customers

  • Storing: Assembling and protecting products at a convenient location to offer better customer service

  • Sorting: Purchasing in large quantities and breaking into smaller amounts desired by customers

  • Transporting: Physically moving a product to customers

• Facilitating Function

  • Financing: Extending credit

  • Grading: Inspecting, testing, etc

  • Marketing Information and Research

• Also produces benefits to customers

  • Time Utility: Having the product or service when you want it

  • Place Utility: Having the product or service available where you want it

  • Form Utility: Enhancing a product or service to make it more appealing to the customer

  • Possession Utility: Helping buyers take possession or ownership of a product or service

Channel Level: Layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Length of channel is measured by number of intermediaries

• Direct includes stores if owned by the manufacturer

Corporate Vertical Marketing System: Combine production and distribution under single ownership

Contractual Vertical Marketing System: Consists of independent firms at different levels of production and distribution that join together through contracts

Administered Vertical Marketing System: Coordinates successive stages of production and distribution through the size and power of one of the parties

Horizontal Marketing System: Channel arrangement where two or more companies at one level join together to follow a new marketing opportunity

Market coverage

Intensity of distribution: Number and kinds of outlets in which a product will be sold

• Intensive distribution: Using all available outlets for low-cost, convenience products

• Selective distribution: Some retail outlets in an area, shopping products, higher end products

• Exclusive distribution: Very few outlets

Buying Requirements

• Concern when buyers have limited knowledge; how to communicate with the buyer

• Convenience; proximity, minimize purchase time, ease of locating, navigation

• Variety of choices

• Pre/Post-Sale Services

Profitability; assess the margins earned for each member

Disintermediation: Major source of channel change by cutting out marketing channel intermediaries by product or service producers, or the displacement of traditional retailers