Marketing Channels and Distribution

Study Notes

A set of interdependent organizations and individuals that facilitate the movement and transfer of ownership of commodities from producers to ultimate users
Major focus of marketing channel is delivery
Distribution makes public and private goods and services available for use and consumption

Agents: sales representatives of manufacturers and wholesalers, hired on a commission basis, do not own or take possession of goods
Brokers: entities that bring buyers and sellers together, hired on a commission basis, do not own or take possession of goods
Industrial distributors: independent wholesalers that buy related product lines from many manufacturers and sell them to industrial users
Wholesalers: firms that sell finished goods to retailers, manufacturers, and institutions
Retailers: firms that sell goods to consumers and to industrial users for their own consumption

Routinization of Decisions: provides manufacturers with a reduced number of people to contact when transactions are made
Financing: helps manufacturers with financing of sales calls, selling equipment, display stores, credit extension, and salesperson training
Pricing: distributors provide important information regarding setting of a realistic factory price
Channels of Communication: distributors relay changing user requirements to manufacturers
Assistance in Promotional Activities: distributors complement manufacturers' promotional activities
Minimization of Number of Transactions: distributors reduce the number of transactions within the system

Consumer Channels:
- Direct Channel: producer sells goods or services directly to consumers
- Retail Channel: one middleman interposes between the producer and the consumer
- Wholesale Channel: wholesaler and retailer provide linkage between the producer and the consumer
- Agent Channel: agent apart from wholesaler and retailer provides linkage between the producer and the consumer
Industrial Channels:
- Channel A: manufacturer sells directly to industrial users
- Channel B: manufacturer assigns industrial distributors who sell directly to industrial buyers
- Channel C: manufacturer deals with agents who call on industrial users

Nature of the product: determines the best-suited channel of distribution
Nature of the market: affects the choice of channel, e.g., scattered buyers require a specific channel
Nature of the Company: company size and organizational set-up influence channel selection