1. Channels of Distribution
Channel Members

2. Objectives
 Define distribution.
 Explain the concept of a channel of
distribution.
 Identify channel members.
 Distinguish between direct and indirect
channels.
 Explain distribution channels for consumer
products and services.
 Describe distribution intensities.

3. Distribution
 The process of deciding how to get goods in
customer’s hands.
 One of the 4 P’s of marketing-place.

4. Distribution
 Channels of Distribution- the path a
product takes from its producer or
manufacturer to the final user.
 Industrial user-final user when a product
purchased for business use
 Consumer-final user when a product
purchased for personal use

5. Direct and Indirect Channels
 Direct distribution:
 When the producer sells goods or services
directly to the customer, with no intermediaries.
 Indirect distribution:
 Involving one or more intermediaries.

6. Channel Members
 Intermediaries- (middlemen); businesses
involved in sales transactions that move
products from the manufacturer to the
final user.
 Reduces number of contacts required to reach
the final user
 Classified by whether they take ownership of
goods and services

7. Contact Efficiency
With no intermediaries 25 transactions needed.
MFG MFG MFG MFG MFG
Consumer Consumer Consumer Consumer Consumer

8. Contact Efficiency
With 1 intermediary 10 transactions needed.
MFG MFG MFG MFG MFG
Consumer Consumer Consumer Consumer Consumer
Intermediary

9. Channel Members
 Wholesalers
 Businesses that buy large quantities of goods
from manufacturers, store the goods, and then
resell them to other businesses.
 Take title to goods they buy for resale.
 Rack jobbers-wholesalers who manage inventory
and merchandising for retailers by counting stock,
filling it in when needed and maintaining store
displays.
 Drop shippers-own the goods they sell but do not
physically handle the actual products.

10. Channel Members
 Retailers
 Sell goods to final consumer for personal use.
 Brick-and-mortar retailers-sell goods to the
customer from their own physical stores.
 Buy products from manufacturers or wholesalers.
 Non-store retailers
 Takes title for goods.
 E-tailing-online retailing; selling products over the
Internet

11. Channel Members
 Agents
 Intermediaries that bring buyers and sellers together.
 Independent Manufacturer’s Representative
 Work with several related, but noncompeting
manufacturer’s in a specific industry.
 Paid commission on what they sell.
 Brokers
 Negotiate a sell, paid a commission, and look for new
customers

12. Channels
 Manufacturer Directly to Consumer
 Selling products at the production site
 Having a sales force call on consumers
 Using catalogs or ads to generate sales
 Using telemarketing
 Using the internet to make online sales
 Manufacturer to Retailer to Consumer
 Used for merchandise that dates quickly or needs
servicing

13. Channels
 Manufacturer to Wholesaler to Retailer to Consumer
 Most commonly used for staple goods, which are
items that are always carried in stock and whose
styles do not change frequently
 Manufacturer to Agents to Wholesaler to Retailer to
Consumer
 For manufacturers who wish to concentrate on
production and leave sales and distribution to others

14. Channels
 Manufacturer to Agents to Retailer to
Consumer
 Used by manufacturers who do not want to
handle their own sales.

15. Distribution Intensity
 Exclusive Distribution:
 Protected territories for distribution of a product in a given
geographic area
 Characteristics: prestige, image, channel control, and high
profit margins
 Selective Distribution:
 A limited number of outlets in a given geographic area are
used to sell the product
 Select channel members that maintain the image of the
product and are good credit risks, aggressive marketers,
and good inventory planners.

16. Distribution Intensity
 Intensive Distribution
 The use of all suitable outlets to sell a product
 Objective/Goal: complete market coverage and to
sell to as many customers as possible

17. Summary
 Distribution
 Channels of distribution
 Channel Members
 Direct/Indirect distribution
 Distribution Intensities