1 Marketing Management SECTION 1 7th Edition Distribution Strategy menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors C H A P T E R T E N Marketing Management 7th Edition J. Paul Peter James H. Donnelly, Jr. 1 Distribution Strategy McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

1 SECTION 1 Channels of Distribution menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Channels of Distribution A channel of distribution is the combination of institutions through which a seller markets products to the user or ultimate consumer 1

1 SECTION 1 Marketing Intermediaries menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Marketing Intermediaries Middlemen – independent link between producers and consumers Merchant middleman – actually buys goods and takes title/ownership Agent – business unit that negotiates purchases and sales but does not take ownership Wholesaler – a merchant who primarily stores and handles goods in large quantities Retailer – merchant middleman who sells to final consumers Broker – middleman who serves as a go-between for the buyer and seller 1

1 SECTION 1 Marketing Intermediaries menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Marketing Intermediaries Manufacturer’s agent – an agent who operates by contract serving a geographic territory Distributor – wholesale middleman in lines with selective or exclusive distribution Jobber – a middleman who buys from manufacturers and sells to retailers Facilitating agent – a firm that performs distribution tasks other than buying, selling and transferring 1

1 SECTION 1 Channel Functions menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Channel Functions Buying – purchase from sellers for use or resale Selling – meeting the mutual benefit of producer and consumer Sorting – bridges gap between the assorted needs of consumers and assorted product of producers Sorting out – breaking down heterogeneous supply in homogeneous supply Accumulation – bringing together many supplies into on homogeneous supply 1

1 SECTION 1 Channel Functions menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Channel Functions Allocation – sorting process of breaking down homogeneous supply into smaller lots Assorting – building an assortment that have an association with one another Concentration – bring goods from various places together Financing – providing credit and funds to facilitate a transaction 1

1 SECTION 1 Channel Functions menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Channel Functions Storage – maintaining inventories to provide timely service Grading – classifying products by degree of quality Transportation – moving product from where it is to where it is needed Risk-taking – assuming risk inherent to the above Marketing research – collecting information within the channels 1

1 SECTION 1 Channel Considerations menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Channel Considerations Selecting a channel of distribution can hinge on one of these factors . . . Distribution coverage required Degree of control desired Total distribution cost Channel flexibility 1

1 SECTION 1 Distribution Alternatives menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Distribution Alternatives Channel selection may depend upon the nature of market coverage desired . . . Intensive distribution – using as many wholesalers and retailers as possible Selective distribution – using only the best available per geographic area Exclusive distribution – selected intermediaries are given exclusive rights within a particular territory 1

1 SECTION 1 Vertical Marketing System menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Vertical Marketing System Vertical marketing systems are channels in which members are more dependent on one another and develop long-term relationships in order to improve efficiency and effectiveness Administered systems – highly dependent on close relationships between channel members Contractual systems – relationships governed by contracts to perform specific functions Corporate systems – single ownership of two or more levels of a channel 1

menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Wholesalers Merchants primarily involved in buying, taking title to, storing and physically handling goods The create value for suppliers and retailers by handing their function efficiently and effectively They seek producers of major brands for which sales and profits are greatest 1

1 SECTION 1 Store Retailing menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Store Retailing Mass merchandisers carry a broad assortment of goods and compete based on selection and price Specialty stores handle deep assortments in a limited number of product categories Convenience stores are retailers whose primary advantage is location 1

1 SECTION 1 Nonstore Retailing Catalog s Direct mail Vending machines menu SECTION 1 Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors Nonstore Retailing Catalog s Direct mail Vending machines Television home shopping Direct sales E-commerce 1

1 SECTION 1 The Authors menu J. Paul Peter, Ph.D. Chapter Ten Channels of Distribution Marketing Intermediaries Channel Functions Channel Considerations Distribution Alternatives Vertical Marketing System Wholesalers Store Retailing Nonstore Retailing The Authors The Authors J. Paul Peter, Ph.D. University of Wisconsin – Madison 3Click image to go to author’s web site James H. Donnelly, Jr., Ph.D. University of Kentucky – Lexington 3Click image to go to author’s web site 1 Marketing Management 7th Edition – McGraw-Hill 3Click on the book to go to the book site PowerPoint design by Lance Fuhrer, MBA PowerPoint content by Larry Fuhrer, MBA, MBA Keller Graduate School of Management of DeVry University