Distribution Channels and Logistics
Management
1.1 The nature of distribution channels
Why are marketing
intermediaries used?
Why use intermediaries? Means giving up some control over how and to whom
products are sold
– They are used because they have greater efficiency in making goods available to
target markets
– Contacts, experience, specialization, scale of operation
– N-to-M direct selling, N-to-1 + 1-to-M through channel
– Producers make narrow assortments in large quantities, consumers want broad
assortments in small quantities – intermediaries break down the quantities, thus
matching supply and demand
Intermediaries not restricted to tangible products – also for service production
Distribution channel – moves goods and services from producers to consumers
(a.k.a. marketing channel)
Distribution channel
functions
Helping to complete transactions
– Information – gathering and distributing marketing research and intelligence
information about actors and forces in the marketing environment needed for
planning and aiding exchange
– Promotion – developing and spreading persuasive communications about an offer
– Contact – finding and communicating with prospective buyers
– Matching – shaping and fitting the offer to the buyer's needs, including activities
such as manufacturing, grading, assembling, and packaging
– Negotiation – reaching an agreement on price and other terms of the offer so that
ownership or possession can be transferred
Help fulfill completed transactions
– Physical distribution – transporting and storing goods
– Financing – acquiring and using funds to cover the costs of the channel work
– Risk taking – assuming the risks of carrying out the channel work
All functions must be performed – question is who performs them
– If producer does them, its costs and product price go up
– If intermediaries do, they need to add markup so that final price goes up
– => In dividing the work, each function should be assigned...