Channel Participants

Classification of Channel Participants All channel participants Do they perform negotiatory functions? Member participants Nonmember participants Yes No

Do they perform negotiatory functions? Contactual organization (marketing channel) Producers and manufacturers Intermediaries Wholesale intermediaries Retail intermediaries Final users Consumers Industries Yes Do they perform negotiatory functions? Facilitating agencies Transportation firms Storage firms Advertising agencies Financial firms Insurance firms Marketing research firm No

Three Major Types of Wholesalers All wholesale firms Independent middlemen Merchant wholesalers Agents, brokers, and commission merchants Manufacturer owned Manufacturers’ sales branches and offices

Three Major Types of Wholesalers Merchant wholesalers: firms engaged in buying, taking title, usually storing, and physically handling products in relatively large quantities and then reselling the products in smaller quantities to retailers; to industrial, commercial, or institutional concerns; and to other wholesalers. They can be named: wholesaler, jobber, distributor, industrial distributor, supply house, assembler, importer, exporter, and etc.

Three Major Types of Wholesalers Agents, brokers, and commission merchants: independent middlemen who do not take title to the goods in which they deal, but are actively involved in negotiatory functions of buying and selling while acting on behalf of their clients. They are usually compensated in the form of commissions on sales or purchases. Common type are known as manufacturers’ agents, commission merchants, brokers, selling agents, and import & export agents.

Three Major Types of Wholesalers Manufacturers’ sales branches and offices are owned and operated by manufacturers but are physically separated from manufacturing plants. They are used for the purpose of distributing the manufacturer’s own products at wholesale.

Merchant wholesalers’ Distribution Tasks Performed for Manufacturers Manufacturers often rely on merchant wholesalers to secure the necessary market coverage at reasonable cost. Market coverage Manufacturers often rely on merchant wholesalers to reach all significant portion of their customers over large geographical area at a cheaper cost. Sales contact Merchant wholesalers take title to, and usually stock, the products of the manufacturers whom they represent and this can reduce some of manufacturers’ risk associated with holding large inventories. Inventory holding Wholesalers are specifically geared to handle small orders from many customers and this can save more costs on order processing for manufacturers. Order processing Wholesalers can passed on info. about customers’ product and service requirements to manufacturers. Market information Wholesalers assist customers in providing services on behalf of manufacturers: exchange, return, setup, adjustment, repair, or technical assistance. Customer support

Merchant wholesalers’ Distribution Tasks Performed for Customers Product availability Customer service By extending open account credit to customers on product sold, so wholesalers allow customers to use products in their business before pay them. By stocking and providing ready availability for many of the items needed by their customers. Credit and financial assistance Wholesalers’ ability to bring together from a variety of manufacturers an assortment of products, simplifying customers’ ordering tasks. Assortment convenience By buying large quantities from manufacturers and breaking down these ‘bulk’ orders into smaller quantities, customers can buy only quantity they need. Breaking bulk Wholesalers assist customers in providing services to customers: advice and assistance for proper use or technical assistance. Advise and technical support

When merchant wholesalers perform all of the distribution tasks, it will results on more effective and efficient marketing channels (reflected in margins earned by wholesalers).

Distribution Tasks Performed by Agent Wholesalers Manufacturing agents (manufacturers’ representatives or “reps”) specialize in performing market coverage and sales contact distribution tasks for manufacturers. Selling agents perform more distribution tasks such as providing market coverage, sales contact, order processing, marketing info., product availability, and customer services. Brokers perform only 1 distribution task: providing market info. (in practice, they may perform many).

Retail Intermediaries Retailers consist of business firms engaged primarily in selling merchandise for personal or household consumption and rending services incidental to the sale of goods. They range in size from mom-and-pop neighborhood stores to giant mass merchandise chains such as Wal-Mart. (see Table 2.5 for the alternative bases for classifying retailers)

Growing Power of Retailers Three major developments: Increase in size and buying power Application of advanced technologies Use of modern marketing strategies

Distribution Tasks Performed by Retailer Offering manpower and physical facilities that enable producers/manufacturers and wholesalers to have many points of contact with customers close to their places of residence Providing personal selling, advertising, and display to aid in selling suppliers’ products Interpreting consumer demand and relaying this info. back through the channel

Distribution Tasks Performed by Retailer Dividing large quantities into consumer-sized lots, thereby providing economies for suppliers (by accepting relatively large shipments) and convenience for consumers Offering storage, so that suppliers can have widely dispersed inventories of their products at low cost and enabling consumers to have close access to the products of producers/manufacturers and wholesalers Removing substantial risk from the producer/manufacturer (or wholesaler) by ordering and accepting delivery in advance of the season

Facilitating Agencies Facilitating agencies are business firms that assist in the performance of distribution tasks other than buying, selling, and transferring title. They may be viewed as subcontractors to whom various distribution tasks can be “farmed out” based on the principle of specialization and division of labor.

Common Types of Facilitating Agencies Transportation agencies: all firms offering transportation service on a public basis, such as United Parcel Service (UPS) and Federal Express.

Common Types of Facilitating Agencies Storage agencies consist mainly of public warehouses that specialize in the storage of goods on a fee basis.

Common Types of Facilitating Agencies Order processing agencies are firms that specialize in order fulfillment tasks. They relieve manufacturers, wholesalers, or retailers from some or all of the task of processing orders for shipment to customers.

Common Types of Facilitating Agencies Advertising agencies offer the channel member expertise in developing promotion strategy. This can range from providing a small amount of assistance in writing an ad to complete design and execution of the advertising campaign.

Common Types of Facilitating Agencies Financial agencies consists of firms such as banks, finance companies, and factors that specialize in discounting account receivable. Common to all of these firms is that they possess the financial resources and expertise that the channel manager often lacks.

Common Types of Facilitating Agencies Insurance companies provide the channel manager with a means for shifting some of the risks inherent in any business venture, such as fire and theft losses, damage in transit of goods, and in some cases even inclement weather.

Common Types of Facilitating Agencies Marketing research firms: The channel manager can call on these firms to provide info. when his/her own firm lacks the necessary skills to obtain marketing information relevant to distribution.