Distribution Channels and Strategies

Study Notes

Indirect Channels

Two-level Channel: Manufacturer sells to wholesaler, who sells to retailer, who then sells to customer, suitable for inexpensive, standardized, durable goods with a broad market
Three-level Channel: Manufacturer sells to agent, then to wholesaler, then to retailer, then to customer, suitable for nationwide products with high demand
- Agents: Facilitate faster market entry for goods after ordering
- Types of Agents:
  - Super Stockiest: Purchase stock from manufacturers and sell it to wholesalers and retailers within their region
  - Carrying and Forwarding Agents: Operate on a commission basis, providing services like warehousing, order processing, and last-mile delivery

Types of Distribution Channels

Direct Channel (Zero-level Channel): The manufacturer sells directly to the customer without intermediaries, suitable for perishable, expensive goods, or goods with a concentrated target audience
- Example: Peddling, Brand retail Stores, Company Websites
One-level Channel: The manufacturer sells to the retailer, who sells to the customer, suitable for shopping goods
Indirect Channels: The manufacturer uses intermediaries to sell products to customers

Functions of Distribution Channels

Facilitation: Offer pre-sale and post-purchase services like financing, maintenance, information dissemination, channel coordination
Creating Efficiencies: Achieved through bulk breaking and creating assortments; wholesalers and retailers purchase large quantities, break them down, and sell to various channels or customers, and offer diverse products at a single location
Sharing Risks: Intermediaries buy products beforehand, sharing risk with manufacturers, incentivizing sales
Marketing: Intermediaries act as marketing channels, executing marketing strategies directly with customers, promoting brand message, product benefits, and services
Types of Distribution Channels:
- Direct channel
- Indirect channels

Direct Sales

Direct sales are a good distribution model for mid-range products that aren't purchased daily, like stationery, air purifiers, or jewelry.
Direct distribution means the manufacturer communicates directly with customers, eliminating intermediaries.
The Internet and e-commerce have popularized direct distribution.
The key to successful direct distribution marketing is clear communication with the customer.

Strategies to Encourage Direct Sales

Features: Emphasize product features and their purpose to capture customer attention.
Advantages: Highlight the product's uniqueness compared to competitors and focus on its value proposition.
Benefits: Explain how the product solves customer problems, saves time, or generates profit.
Intimacy: Establish a personal connection with the customer, maintain their attention, and continually emphasize the value of the product.
Reciprocity: Offer favors to the customer (e.g., free samples, discounts), making the favor feel exclusive. This subconscious feeling can influence a positive outcome for the product.

Dual Distribution

A strategy where a manufacturer uses more than one marketing channel simultaneously to reach the end user.

Description

Explore the various types of distribution channels outlined in this quiz. Understand the differences between direct and indirect channels, including their specific levels and suitable product types. Test your knowledge on agents and their roles in facilitating market entry.