Place, distribution, channel, or intermediary.
A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption.
Bucklin - Theory of Distribution Channel Structure (1966)
Another element of Neil H.Borden's Marketing Mix is Place. Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.
There are six basic 'channel' decisions:
Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler).
Single or multiple channels.
Cumulative length of the multiple channels.
Types of intermediary (see later).
Number of intermediaries at each level (e.g. how many retailers in Southern Spain).
Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors).
Selection Consideration - how do we decide upon a distributor?
Market segment - the distributor must be familiar with your target consumer and segment.
Changes during the product life cycle - different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores.
Producer - distributor fit - Is there a match between their polices, strategies, image, and yours? Look for 'synergy'.
Qualification assessment - establish the experience and track record of your intermediary.
How much training and support will your distributor require?
Types of Channel Intermediaries.
There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others. The main modes of distribution will be looked at in more detail.
1. Channel Intermediaries - Wholesalers
They break down 'bulk' into smaller packages for resale by a retailer.
They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas agents do not (see below).
They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
Wholesalers offer reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
A wholesaler will often take on the some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.
2. Channel Intermediaries - Agents
Agents are mainly used in international markets.
An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).
Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate.
3. Channel Intermediaries - Retailers
Retailers will have a much stronger personal relationship with the consumer.
The retailer will hold several other brands and products. A consumer will expect to be exposed to many products.
Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
Products and services are promoted and merchandised by the retailer.
The retailer will give the final selling price to the product.
Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in Portugal.
4. Channel Intermediaries - Internet
The Internet has a geographically disperse market.
The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish Salmon direct from an Inverness fishery.
There are low barriers low barriers to entry as set up costs are low.
Use e-commerce technology (for payment, shopping software, etc)
There is a paradigm shift in commerce and consumption which benefits distribution via the Internet
A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption.
Bucklin - Theory of Distribution Channel Structure (1966)
Another element of Neil H.Borden's Marketing Mix is Place. Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer.
There are six basic 'channel' decisions:
Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler).
Single or multiple channels.
Cumulative length of the multiple channels.
Types of intermediary (see later).
Number of intermediaries at each level (e.g. how many retailers in Southern Spain).
Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors).
Selection Consideration - how do we decide upon a distributor?
Market segment - the distributor must be familiar with your target consumer and segment.
Changes during the product life cycle - different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores.
Producer - distributor fit - Is there a match between their polices, strategies, image, and yours? Look for 'synergy'.
Qualification assessment - establish the experience and track record of your intermediary.
How much training and support will your distributor require?
Types of Channel Intermediaries.
There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others. The main modes of distribution will be looked at in more detail.
1. Channel Intermediaries - Wholesalers
They break down 'bulk' into smaller packages for resale by a retailer.
They buy from producers and resell to retailers. They take ownership or 'title' to goods whereas agents do not (see below).
They provide storage facilities. For example, cheese manufacturers seldom wait for their product to mature. They sell on to a wholesaler that will store it and eventually resell to a retailer.
Wholesalers offer reduce the physical contact cost between the producer and consumer e.g. customer service costs, or sales force costs.
A wholesaler will often take on the some of the marketing responsibilities. Many produce their own brochures and use their own telesales operations.
2. Channel Intermediaries - Agents
Agents are mainly used in international markets.
An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. However, a 'stockist agent' will hold consignment stock (i.e. will store the stock, but the title will remain with the producer. This approach is used where goods need to get into a market soon after the order is placed e.g. foodstuffs).
Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved. They are difficult to motivate.
3. Channel Intermediaries - Retailers
Retailers will have a much stronger personal relationship with the consumer.
The retailer will hold several other brands and products. A consumer will expect to be exposed to many products.
Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
Products and services are promoted and merchandised by the retailer.
The retailer will give the final selling price to the product.
Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart in the USA, and Alisuper, Modelo, and Jumbo in Portugal.
4. Channel Intermediaries - Internet
The Internet has a geographically disperse market.
The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish Salmon direct from an Inverness fishery.
There are low barriers low barriers to entry as set up costs are low.
Use e-commerce technology (for payment, shopping software, etc)
There is a paradigm shift in commerce and consumption which benefits distribution via the Internet
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