Chapter 6. Distribution Channel

Chapter 6.
Distribution channel
§ 6.1. Definition and role of distribution channel

§ 6.2. Distribution channel structure
§ 6.3. External and internal determinants of channel decisions
§ 6.4. Managing and controlling distribution channels
§ 6.5. Commercial agency

Chapter 6. Distribution channel
§ The business marketplace consists of three major categories of
customers: producers, resellers, and organizations.
§ B2B marketers must understand the different needs of these

customers if they want to build successful relationships with
them
§ resellers : The individuals or organizations that buy finished
goods for the purpose of reselling, renting, or leasing to others
to make a profit and to maintain their business operations.
§ government markets : The federal, state, county, and local

governments that buy goods and services to carry out public
objectives and to support their operations.
§ producers : The individuals or organizations that purchase

products for use in the production of other goods and services.
§ business-to-business (B2B) markets : The group of customers

that include manufacturers, wholesalers, retailers, and other
organizations.
§ The role of place decisions in the marketing mix
§ After deciding on the product, its price and the best ways to promote it,
the business has to actually sell the product to the consumer. The product
or service must be available where and when customers want to buy it.
How and where consumers can buy the product will affect how well it will
sell.
§ Think of your local shop where you buy food. Would expensive luxury
chocolates sell well?
§ If many of the customers who use the shop are on low incomes then not
many highly priced chocolates will be sold.
§ If the product is not available to customers in convenient locations and

they have to go searching in different shops, then they may give up and
buy a competitor’s product.
§ It is very easy for a business to get the place wrong and therefore lose
sales.
6.1. Definition and role of distribution channel
§ Businesses have to decide where to sell their products.

§ They also have to decide whether to sell directly to consumers
or use other businesses to do this. This means deciding on the
best distribution channel to use.
§ There are several different distribution channels that

businesses can use – from selling directly to the consumer, to
using intermediary channels.
§ A distribution channel is the means by which a

product is passed from the place of production to the
customer.
§ A channel of distribution (sometimes called a marketing

channel) is a group of individuals and organizations that direct the
flow of products from producers to customers or ultimate user.
§ A marketing channel, or channel of distribution, is a group of

organizations that moves products from their producer to
customers. Every marketing channel begins with the producer
and ends with either the consumer or the business user.
§ Marketing channels make products available to buyers when

and where they desire to purchase them.
§ Organizations that bridge the gap between a product’s
manufacturer and the ultimate consumer are called middlemen,
or intermediaries. They create time, place, and ownership
utility.
§ A marketing organization that links a producer and user within

a marketing channel is called a middleman (or marketing
intermediary).
§ Two intermediary organizations are retailers and wholesalers.

§ For the most part, middlemen are concerned with the transfer of
ownership of products along their journey from producer to
customer.
§ In many cases, intermediaries handle the product, including its

ownership, and add their own value as they move it along the
distribution channel
§ Providing customer satisfaction should be the driving force behind
all marketing channel activities.
§ Buyers’ needs and behaviour are important concerns of channel

members.
§ Channels of distribution make products available

Ø at the right time,
Ø in the right place and
Ø in the right quantity
by providing such product-enhancing functions as transport, storage

and customer service.
§ Some products pass through few stages, whereas others have

complex channels with many parties involved.
§ There are several different distribution channels that businesses can use
– from selling directly to the consumer, to using intermediary channels.
§ The diagram below summarises the main distribution channels that are used.
Distribution channel 1 – Direct to consumers
qAdvantages qDisadvantages
Ø This distribution channel is very simple. Ø This is usually impractical for most
It involves manufacturers selling their products because the consumers
products directly to the consumer. probably do not live near to the
factory and could not go there to buy
Ø It is suitable for products, such as the products.
certain types of food products, which
are sometimes sold straight from the Ø This method may not be suitable for
farm. products which cannot easily be sent
by post.
Ø There is a lower price if sold direct to
customers – cuts out Ø It can be very expensive to send
wholesaler/retailer. products by post or courier and
therefore it may not be cost effective.
Ø Products can be sold by mail order
catalogue or via the internet. Ø This channel is also common when
selling directly from one
manufacturer to another
manufacturer. For example, car
components are sold directly to the
car producer.
Distribution channel 2 – Using a retailer as the only intermediary
Ø Producer sells large ØNo direct contact with
quantities to retailers. customers.
ØReduced distribution costs ØThe price is often higher

compared to selling directly than ‘direct selling’ as the
to consumers retailer has to cover its costs
and make a profit.
vThe second distribution channel is where the producer
sells directly to retail outlets and then they sell the
product to the consumer.
vThis is most common where the retailer is large, such as
a large supermarket, or when the products are
expensive, such as furniture outlet or jewellery shop
Distribution channel 3 – Using a wholesaler and retailer as intermediaries
Ø Wholesaler saves storage space for Ø May be more expensive for the small
small retailer and reduces storage costs. shop to buy from a wholesaler than if
it bought straight from the
Ø Small retailers can purchase fresh manufacturer.
products in small quantities from
wholesaler because they have a Ø Wholesaler may not have the full
relatively short ‘shelf life’ before they range of products to sell.
deteriorate.
Ø Takes longer for fresh produce to
Ø Wholesaler may give credit to retail reach the shops, so may not be as
customers so they can take the goods good quality.
straightaway and pay at a later date.
Ø Wholesaler may be a long way from
Ø Wholesaler may deliver to the small the small shops.
retailer thus saving on transport costs.
Ø The consumer price is often higher
Ø Wholesaler can give advice to small than ‘direct selling’ as both the
retailers about what is selling well. They wholesaler and retailer have to cover
can also advise the manufacturer what costs and make a profit.
is selling well.
Distribution channel 4 – Using an additional intermediary such as an agent
Ø Manufacturer may not know the best Ø The producer has less control over the
way to sell the product in other way the product is sold to customers.
markets.
Ø Agents will be aware of local conditions

and will be in the best position to select
the most effective places in which to
sell.
v When products are exported, the manufacturer sometimes uses an agent in

the other country. The agent sells the products on behalf of the
manufacturer.
v This can allow the manufacturer to have some control over the way the
product is sold to consumers.
v The agent will either put an additional amount on the price to cover their
expenses or will receive a commission on sales.
v The agent may also act as the wholesaler.
§ agent : A marketing intermediary who does not take title to

the products but develops a marketing strategy and
establishes contacts abroad.
§ An agent is an independent person or business that is

appointed to deal with the sales and distribution of a product
or range of products.
§ Channel member : An intermediary that performs some work

in bringing the product and its ownership closer to the final
buyer.
§ Transaction : A trade of values between two parties.

§ Channel length ??
§ Market coverage : Coverage can relate to geographical areas

or the number of retail outlets. Three approaches are
available: intensive, selective or exclusive coverage.
§ Intensive distribution : Stocking the product in as many outlets

as possible.
§ Selective distribution : The use of a limited number of outlets

in a geographical area to sell the products of a supplier.
§ Exclusive distribution : An extreme form of selective

distribution where only one wholesaler, retailer or industrial
distributor is used in a geographical area to sell the products of
a supplier.
Marketing Mix Strategic

Variables with Distribution
Variable Divided into
Channel and Logistics
Components
§ Methods of distribution
The methods of distribution used can include the following:

§ Department stores
§ Chain stores
§ Discount stores
§ Superstores
§ Supermarkets
§ Independent retailers
§ Direct sales
§ Mail order
§ Internet/e-commerce
§
§ Methods of distribution
The methods of distribution used can include the following:
Terms used for marketing intermediaries vary in

specificity and use in consumer and business markets.
Marketing channel intermediaries perform these fundamental functions,

each of which consists of different activities.
Relating logistics management and supply chain

management to supplier networks and marketing
channels.
Figure 11.2
Companies can design their marketing channels to make products and

services available to customers in different ways.
Each layer of intermediaries that performs some work in bringing the

product and its ownership closer to the final buyer is a channel level.
Because the producer and the final consumer both perform some
work, they are part of every channel.
Figure 11.2
§ Using Multiple Channels Often a manufacturer uses different

distribution channels to reach different market segments.
§ For example, candy bars may be sold through channels containing

wholesalers and retailers, as well as channels in which the producer
sells them directly through large retailers.
§ Today, businesses are likely to engage in multichannel or

omnichannel distribution—the use of a variety of marketing
channels to ensure maximum distribution.
§ Multiple channels are also used to increase sales or to capture a

larger share of the market with the goal of selling as much
merchandise as possible.
§ Some products forgo physical distribution altogether: Digital

distribution involves delivering content through the internet to a
computer or other device.
§ The number of intermediary levels indicates the length of a channel. Figure 11.2(a)
shows several consumer marketing channels of different lengths
§ Channel 1, called a direct channel, has no intermediary levels; the company sells
directly to consumers.
§ The remaining channels in Figure 11.2(a) are indirect channels, containing one or
more intermediaries.
§ Figure 11.2(b) presents some common business marketing channels.

§ The business marketer can use its own sales force to sell directly to business
customers. Or it can sell to various types of intermediaries, who in turn sell to these
customers.
§ Consumer and business marketing channels with even more levels can sometimes be
found, but less often. From the producer’s point of view, a greater number of levels
means less control and greater channel complexity.
§ All of the institutions in the channel are connected by several types of flows. These
include the physical flow of products, the flow of ownership, the payment flow, the
information flow and the promotion flow.
§ These flows can make even channels with only one or a few levels very complex.
6.1. Role of distribution channel
§ When companies change raw materials into finished goods,

they are creating form utility desired by consumers.
§ Wholesalers and retailers are instrumental in creating three of

the four forms of utility for customers:
ØThey provide the items customers need in a convenient

location (place utility), they save customers the time of having
to contact each manufacturer to purchase a good (time utility)
ØThey provide an efficient process for transferring products

from the producer to the customer (possession utility).
§ utility :The power of a good or service to satisfy a

human need.
Giá trị gia tăng
Two way define manufacturing: (a) as a technical process and (b)
as an economic process.
Các quy trình để hoàn thành quá trình sản xuất bao gồm sự kết hợp
giữa máy móc, công cụ, sức mạnh và lao động, như được mô tả trong
Hình 1.1(a). Sản xuất hầu như luôn được thực hiện như một chuỗi
các hoạt động. Mỗi thao tác đưa vật liệu đến gần hơn với trạng thái
cuối cùng mong muốn.
Về mặt kinh tế, sản xuất là sự biến đổi vật liệu thành các mặt hàng có
giá trị lớn hơn bằng một hoặc nhiều hoạt động xử lý và/hoặc lắp ráp,
như được mô tả trong Hình 1.1(b).
In addition to creating utility, wholesalers and retailers perform the following
distribution functions:
vMatching buyers and sellers

vProviding market information.
vProviding promotional and sales support.
vGathering assortments of goods.
vTransporting and storing products.
vAssuming risks.
vProviding financing.
vCompleting product solutions.
vFacilitating transactions and supporting customers
§ Matching buyers and sellers. By making sellers’ products available to multiple

buyers, intermediaries such as Costco reduce the number of transactions between
producers and customers. In the business-to-business market, the industrial
distributor Alibaba is a good example of the enormous scale that can be achieved
in bringing buyers and sellers together These customers are saved the time and
trouble of working with multiple suppliers, and the product suppliers get access to
more customers than all but the very largest of them could ever hope to reach on
their own. Although “cutting out the middleman” is sometimes used as a
promotional slogan to suggest lower costs, intermediaries such as Alibaba can
actually make commerce more efficient by reducing the number of contact points
between buyers and sellers
§ Providing market information. Retail intermediaries, such as Amazon and Macy’s,

collect valuable data about customer purchases: who buys, how often, and how
much. For example, e-commerce records and data from “frequent shopper” cards
help retailers spot buying patterns, providing vital market information they can
then share with producers to optimize product mixes and promotional efforts.
• Providing promotional and sales support. Many intermediaries assist with

advertising, in-store displays, and other promotional efforts for some or all
of the products they sell. Some also employ sales representatives who can
perform a number of selling and customer relationship functions.
• Gathering assortments of goods. Many intermediaries receive bulk

shipments from producers and break them into more convenient units
(known as breaking bulk) by sorting, standardizing, and dividing bulk
quantities into smaller packages.
• Transporting and storing products. Intermediaries often maintain

inventories of merchandise that they acquire from producers so they can
quickly fill customers’ orders. In many cases, retailers purchase this
merchandise from wholesalers who, in addition to breaking bulk, may also
transport the goods from the producer to the retail outlets.
Assuming risks. When intermediaries accept goods from manufacturers,
they usually take on the risks associated with damage, theft, product
perishability (in the sense of tangible goods that are vulnerable to rotting,
for instance), and obsolescence.
• Providing financing. Large intermediaries sometimes provide loans to

smaller producers.
• Completing product solutions. In the information technology sector,

manufacturers often rely on a class of intermediaries called value-added
resellers (VARs) or system integrators to complete or customize
solutions for customers. These channel partners can bring specialized
technical expertise or provide geographic reach into smaller markets.
• Facilitating transactions and supporting customers. Intermediaries

can perform a variety of functions that help with the selection, purchase,
and use of products. Commercial real estate brokers, for example, can
negotiate prices and contract terms on behalf of buyers and sellers. In a
variety of industries, intermediaries help customers select the products
that fit their needs and then provide customer support and technical
assistance after the sale.
how intermediaries simplify commerce
• Intermediaries actually lower the price customers pay for many goods
and services because they reduce the number of contacts between
producers and consumers that would otherwise be necessary.
• They also create place, time, and possession utility.
Flows in Marketing Channels
§ When a marketing channel has been developed, a

series of flows emerges. These flows provide the links
that tie channel members and other agencies
together in the distribution of goods and services
1. Product flow
2. Negotiation flow
3. Ownership flow
4. Information flow
5. Promotion flow

§ The product flow refers to the actual physical movement of the product from the
manufacturer (MillerCoors) through all of the parties who take physical possession
of the product, from its point of production to final consumers.
§ The negotiation flow represents the interplay of the buying and selling functions
associated with the transfer of title (right of ownership) to manufacture products.
§ The ownership flow shows the movement of the title to the product as it is passed
along from the manufacturer to final consumers.
§ the information flow, we see that the transportation firm has re-appeared in this
flow and that all of the arrows showing the flow of information from the
manufacturer to consumers are two-directional. All parties participate in the
exchange of information, and the flow can be either up or down.
§ the promotion flow refers to the flow of persuasive communication in the form of
advertising, personal selling, sales promotion, and publicity.
§ the promotion flow refers to the flow of persuasive

communication in the form of advertising, personal selling, sales
promotion, and publicity.
§ a new component, the advertising agency, is included in the flow

because the advertising agency is actively involved in providing
and maintaining the promotion flow, especially the advertising
element of promotion.
§ The two-directional arrow connected by a line between the

manufacturer and the advertising agency is meant to show that
the manufacturer and advertising agency work together closely
to develop promotional strategies.
§ All other arrows show one-directional flow from the advertising

agency or directly from the manufacturer to the other parties in
the marketing channel.

§ Five Flows in the Marketing Channel for Coors Beer

6.2. Distribution channel structure
§ A product can take any of several possible routes to reach the
final consumer. Marketers and consumers each search for the
most efficient channel from many available alternatives.
§ Constructing channels for a consumer convenience good such as

candy differs from doing the same for a specialty good like a
luxury handbag
§ four ways manufacturers can route products to consumers.

When possible, producers use a direct channel to sell directly to
consumers in order to keep purchase prices low.
§ Direct marketing activities— including telemarketing, mail order

and catalog shopping, and forms of electronic retailing such as
online shopping and shop-at-home television networks—are
good examples of this type of channel structure. There are no
intermediaries
§ A product can take any of several possible routes to reach the
final consumer. Marketers and consumers each search for the
most efficient channel from many available alternatives.
§ Constructing channels for a consumer convenience good such

as candy differs from doing the same for a specialty good like a
Prada handbag
§ Four ways manufacturers can route products to consumers.

When possible, producers use a direct channel to sell directly
to consumers in order to keep purchase prices low.
§ Direct marketing activities— including telemarketing, mail

order and catalog shopping, and forms of electronic retailing
such as online shopping and shop-at-home television
networks—are good examples of this type of channel
structure. There are no intermediaries
§ chưa
§ a managerial perspective by viewing channel structure as: The
group of channel members to which a set of distribution tasks has
been allocated.
§ This definition suggests that in developing channel structure, the

channel manager is faced with an allocation decision; that is, given a
set of distribution tasks that must be performed to accomplish a
firm’s distribution objectives, the manager must decide how to
allocate or structure the tasks.
§ Thus, the structure of the channel will reflect the manner in which
he or she has allocated these tasks among the members of the
channel.
§ For example, if after making the allocation decision the channel

structure appears as M àW à R àC, this means that the channel
manager has chosen to allocate the tasks to his or her own firm as
well as to wholesalers, retailers, and consumers.
Three strategies for market coverage

§ Intensive distribution uses all available outlets for distributing a product. Intensive
distribution is appropriate for products that have a high replacement rate, require
almost no service, and are often bought based on price cues.
§ Most convenience products like bread, chewing gum, soft drinks, and newspapers
are marketed through intensive distribution. Multiple channels may be used to sell
through all possible outlets.
§ Selective distribution uses only § Exclusive distribution uses only one

some available outlets in an area to outlet in a relatively large geographic
distribute a product. Selective area. This method is suitable for
distribution is appropriate for products purchased infrequently,
consumed over a long period of time,
shopping products, which include
or that require a high level of customer
durable goods like televisions or service or information. It is also used
computers. for expensive, high- quality products
with high profit margins, such as
Porsche, BMW, and other luxury
automobiles. It is not appropriate for
convenience products and many
shopping products because an
insufficient number of units would be
sold to generate an acceptable level of
profits on account of those products’
lower profit margins.
§ Some products are appropriate for exclusive distribution when first introduced, but
as competitors enter the market and the product moves through its life cycle, other
types of market coverage and distribution channels become necessary.
§ A problem that can arise with exclusive (and selective) distribution is that
Ø unauthorized resellers acquire and sell products or counterfeits,
Ø violating the agreement between a manufacturer and its exclusive authorized dealers.
Three strategies for market coverage

6.3. External determinants of channel
decisions- channel design
§ Customer characteristics
§ Nature of the product
§ Nature of demand/location
§ Competition
§ Legal regulations/local business practices
decisions- channel design
Selecting the distribution channel to use
§ What type of product is it?

§ Is the product very technical?
§ How often is the product purchased?
§ How expensive is the product?
§ How perishable is the product?
§ Where are the customers located?
§ Where do the competitors sell their products?
decisions
• What type of product is it? Is it sold to other businesses (business-to- business) or
to consumers (business-to-consumer)? If it is sold to other businesses, for example,
large printing machines, then direct selling is much more likely to be used than for
most consumer products.
• Is the product very technical? If it is, it should be sold to the customer by someone
with technical knowledge who can explain how it works and what it will do. Direct
selling from the manufacturer will probably be selected in this case. An example
might be an aircraft engine.
• How often is the product purchased? If it is bought every day, it will need to be
sold in many retail outlets. An example would be a product like newspapers which
are purchased daily and are sold in many outlets. If they were not readily available,
customers might not bother to buy them at all.
decisions
• How expensive is the product? Does it have an image of being expensive? If the
product is marketed as being expensive and of high quality, it will probably be sold
through only a limited number of outlets. These shops will be in expensive
shopping areas. For example, if the product is an expensive watch, it is no good
selling it in discount jewellery shops.
• How perishable is the product? If the product goes rotten quickly, such as fruit or
bread, then it will need to be widely available in many shops so that it can be sold
quickly.
• Where are the customers located? If most of the customers are located in cities, it
is no good selling the product only in rural areas. If the customers are located in
another country, then different retail routes might be appropriate. The internet
might be used for online trading.
• Where do the competitors sell their products? The retail outlets that competitors
use will need to be considered. Each manufacturer will probably sell their products
in the same outlets as their competitors so that they can compete directly for
customers.
6.3. External determinants of channel decisions
§ Factors affecting distribution channels

6.3. External determinants of channel decisions
§ Factors That Influence Distribution Channel Choices

6.4. Managing and controlling distribution
channels
§ Marketing channels and supply chains comprise various buying

entities such as retailers and wholesalers, sellers such as
manufacturers or wholesalers, and facilitators of the exchange
such as transportation companies.
§ Similar to interpersonal interactions, their relationships can

range from close working partnerships to one-time
arrangements. In almost all cases, though, interactions occur
because the parties want something from each other.
§ Each member of the marketing channel also performs a

specialized role. If one member believes that another has failed
to do its job correctly or efficiently, it can replace that member.
However, anytime a marketing channel member is replaced, the
function it has performed remains, so someone needs to
complete it
6.4. Managing and controlling
distribution channels
§ Manufacturers and services providers may distribute through
more than one channel, and many retailers are free to strike
agreements with as many producers as capacity permits. In such
cases, channel conflict may arise.
§ Conflicts are resolved through better coordination, and a key

factor in coordinating the activities of organizations is channel
leadership.
§ Channel Leadership Usually one channel member—the

channel captain— can determine the roles and rewards of
the others
§ Channel Captain channel member who is most powerful in

determining the roles and rewards of other members
6.4. Managing and controlling distribution channels
§ Channel Conflict conflict arising when the members of a

distribution channel disagree over the roles they should play or
the rewards they should receive
§ channel conflict Disagreement or tension between two or more members in a
distribution channel, such as competition between channel partners trying to reach
the same group of customers.
§ Vertical channel conflict A type of channel conflict in which

members of the same marketing channel, for example,
manufacturers, wholesalers, and retailers, are in disagreement
or discord.
§ Horizontal channel conflict A type of channel conflict in

which members at the same level of a marketing channel, for
example, two competing retailers or two competing
manufacturers, are in disagreement or discord, such as when
they are in a price war.
channel conflict
channel conflict
Framework for channel design and implementation

6.5 Physical Distribution and Logistics
§ Firm needs to figure out the best way to move those products
so they are available to customers at the right place, at the
right time, and in the right amount
§ Physical distribution encompasses all the activities required to

move finished products from the producer to the consumer,
including forecasting, order processing, inventory control,
warehousing, and transportation
§ logistics The planning, movement, and flow of goods and

related information throughout the supply chain.
Steps in the Physical Distribution Process
Managing the physical distribution system is an attempt to balance a high level of customer service
with the lowest overall cost.
§ Physical distribution may not be the most glamorous aspect of

business, but it is one of the most critical.
§ Behind every luxury storefront or cutting-edge e-commerce

website is a vast network of facilities, vehicles, and information
systems that make sure products arrive at their destinations.
§ The secret to making it all happen on time is logistics, the planning

and movement of goods and information throughout the supply
chain. As managers try to squeeze cost efficiencies and
competitive advantages everywhere they can, logistics has taken
on key strategic importance for many companies.
§ Success in physical distribution requires achieving a competitive level of

customer service at the lowest total cost. Doing so requires trade-offs
because as the level of service improves, the cost of distribution usually
increases.
§ For instance, if your company reduces the level of inventory to cut your
storage costs, your firm runs the risk of being unable to fill orders in a
timely fashion. Or, if your company uses slower forms of transportation,
your firm can reduce your shipping costs, but your firm might aggravate
customers.
§ The trick is to optimize the total cost of achieving the desired level of
service. This optimization requires a careful analysis of each step in the
distribution process in relation to every other step in the process.
§ When companies reduce mistakes and eliminate inefficiencies, they can

achieve lower costs and improve service, which is the goal of every logistics
manager.
6.5. Commercial agency
§ Definition
§ Article 166.- Commercial agency
Commercial agency means a commercial activity whereby the principal and the
agent agree that the agent, in its own name, sells or purchases goods for the principal
or provides services of the principal to customers for remuneration.
(Law on Commerce- Vietnam, 2005)
§ Article 167.- Principals and agents
§ Article 168.- Agency contracts
§ Article 169.- Forms of agency
§ Article 170.- Ownership right in commercial agency
§ Article 171.- Agency remuneration
§ Article 172.- Rights of principals
§ Article 173.- Obligations of principals
§ Article 174.- Rights of agents
§ Article 175.- Obligations of agents
§ https://www.wto.org/english/thewto_e/acc_e/vnm_e/wtaccvnm43_leg_11.pdf

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Chapter 6. Distribution Channel

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Chapter 6.

§ 6.1. Definition and role of distribution channel

§ 6.5. Commercial agency

§ B2B marketers must understand the different needs of these

§ government markets : The federal, state, county, and local

§ producers : The individuals or organizations that purchase

§ business-to-business (B2B) markets : The group of customers

§ If the product is not available to customers in convenient locations and

§ Businesses have to decide where to sell their products.

§ There are several different distribution channels that

§ A distribution channel is the means by which a

§ A channel of distribution (sometimes called a marketing

§ A marketing channel, or channel of distribution, is a group of

§ Marketing channels make products available to buyers when

§ A marketing organization that links a producer and user within

§ Two intermediary organizations are retailers and wholesalers.

§ In many cases, intermediaries handle the product, including its

§ Buyers’ needs and behaviour are important concerns of channel

§ Channels of distribution make products available

by providing such product-enhancing functions as transport, storage

§ Some products pass through few stages, whereas others have

ØReduced distribution costs ØThe price is often higher

Ø Agents will be aware of local conditions

v When products are exported, the manufacturer sometimes uses an agent in

§ agent : A marketing intermediary who does not take title to

§ An agent is an independent person or business that is

§ Channel member : An intermediary that performs some work

§ Transaction : A trade of values between two parties.

§ Market coverage : Coverage can relate to geographical areas

§ Intensive distribution : Stocking the product in as many outlets

§ Selective distribution : The use of a limited number of outlets

§ Exclusive distribution : An extreme form of selective

Marketing Mix Strategic

The methods of distribution used can include the following:

Terms used for marketing intermediaries vary in

Marketing channel intermediaries perform these fundamental functions,

Relating logistics management and supply chain

Companies can design their marketing channels to make products and

Each layer of intermediaries that performs some work in bringing the

§ Using Multiple Channels Often a manufacturer uses different

§ For example, candy bars may be sold through channels containing

§ Today, businesses are likely to engage in multichannel or

§ Multiple channels are also used to increase sales or to capture a

§ Some products forgo physical distribution altogether: Digital

§ Figure 11.2(b) presents some common business marketing channels.

§ When companies change raw materials into finished goods,

§ Wholesalers and retailers are instrumental in creating three of

ØThey provide the items customers need in a convenient

ØThey provide an efficient process for transferring products

§ utility :The power of a good or service to satisfy a

vMatching buyers and sellers

§ Matching buyers and sellers. By making sellers’ products available to multiple

§ Providing market information. Retail intermediaries, such as Amazon and Macy’s,

• Providing promotional and sales support. Many intermediaries assist with

• Gathering assortments of goods. Many intermediaries receive bulk

• Transporting and storing products. Intermediaries often maintain

• Providing financing. Large intermediaries sometimes provide loans to

• Completing product solutions. In the information technology sector,

• Facilitating transactions and supporting customers. Intermediaries

Flows in Marketing Channels

§ When a marketing channel has been developed, a

Flows in Marketing Channels

§ the promotion flow refers to the flow of persuasive