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Distribution Channel
The link between the manufacturer and the customer is called the Channel of
Distribution.
The channel accomplishes all the tasks necessary to get the product/service to
market
Geographical Distribution:
Industrial Intermediaries are highly concentrated geographically. They are found where industrial market exist, i.e. in large cities or towns with industrial estate.
Channel Size:
Industrial Channels are short and involve a type of intermediary for selling and handling the products. Sometimes the channels are direct from the manufacturers to the customers, without intermediaries. The reason for the shorter channels in industrial markets is that the Org buyers expect product availability, technical expertise and service capabilities.
Characteristics of intermediaries:
Industrial intermediaries are often technically qualified and close relationship with the industrial organizations.
Mixed System:
IM use a mixture of direct & indirect channels in order to meet the requirements of different market segment or when the company has resource constraints.
B u s i n e s s C u s t o m e r s
By Prof. Raghavendran V
Indirect Channel
Distributors
Brokers
Indirect Channels Commission Merchants
Jobbers
By Prof. Raghavendran V
B u s i n e s s C u s t o m e r s
10
Direct Retail System In this type of system the marketer operates his own retail stores. A perfect example of this system is
Starbucks.
Personal Selling Systems In this system the distribution of the product is carried forward by people whose main responsibility is creating
and managing sales (for instance a salesperson).
Assisted Marketing System In this form of distribution system the marketer handles the distribution of his product and helps it reach
directly to the end user.
Complete control over the distribution/sales process Some products are very complex, that service a niche selection of customers. These products
can be explained and sold better through the companies marketing and sales team than intermediaries.
Direct distribution allows company employees to build relationships directly with customers.
Which could possibly be stronger, and allow for better supply chain management, and the possibility for co-developed to occur.
An example can be when the product is sold through large store-based retail chains or through online retailers. In this case the distribution system is also referred to as trade selling system.
This is most likely to happen when a wholesaler buys the product from the manufacturer and
then sells it to the retailer.
Increases profitability by making low transaction amounts viable Due to the limitations of capacity with in house marketing/direct distribution it is sometimes only
viable to work on large client orders.
The payment mechanism that some intermediaries use, e.g. percentage of sales makes smaller clients
more viable.
Primary Intermediaries
There are two primary intermediaries: 1. Industrial distributors 2. Manufacturers representatives These two groups handle a very sizeable share of B2B sales.
Distributors
Industrial Distributors are:
Generally about 75% of all business marketers sell some product through
distributors.
Most are small, independent businesses serving narrow geographic markets. Distributors are full-service intermediaries, that is they take title (carry inventory)
for the products they sell.
They provide credit, deliver, offer an assortment, offer technical skills, maintain
customers and find new ones.
Distributors
Distributors are in every industry.
Food and Beverage Maintenance, Repair and Operations supplies Hardware, Electronics and Fabrication Furniture, Clothing, and Personal products
Distributor Classification
General-Line Distributors Stock extensive variety of low tech (commodity) products Specialists Focus on one or few related lines geared around high tech or industries demanding
complex customer requirements
Manufacturers Reps
Manufacturers Reps fill a different role than Industrial Distributors.
They: Perform a much higher level of service. Are more technically advanced Know their territory better Are able to sell professionally Are experienced in the industry Usually represent several companies
Manufacturers Reps
Used by small, medium and large firms. Often, small and medium firms cannot support a full time salesperson. Large firms use them to supplement their direct force for introducing new
products to an area not covered by their sales force.
3. Commission rates can range from 3%, 20% or more 4. Gross margin is not large 5. Relatively few customers or concentrated geographically or concentrated in few
industries
6. Customers order relatively infrequently and allow fairly long lead times
E-Channels
There are a number of different distribution channels available on the Internet which could be utilised
efficiently.
The current trend of the Internet is social interactions, and the trend is here to stay for a while.
2. Social bookmarks (del.icio.us, Stumble Upon, Digg)
Social bookmarks enable users to share, organise and store URLs of websites they like and/or find
useful.
As with social networks and social bookmarks, social media has become increasingly popular among Internet users for the same reasons.
4. Blogs
Blogs are popular because they provide up-to-date information and enables readers to engage in
discussions via comments.
E-Channels
5. Widgets and gadgets (Yahoo! widgets, Google gadgets, Facebook APIs)
Widgets and gadgets deliver dynamic and updated content to the users at any time.
6. Browser extensions
Browser extensions such as customised search engine, add-ons, and toolbars provide users with an easy access to your website and the functionalities that it offers instantly from their favourite browser.
7. Search engines
According to a survey conducted in 1998 by Georgia Institute of Technology, 85% of users found websites through search engines (Tri-Media). Therefore, the power of search engine optimisation (SEO) and search engine marketing (SEM) should be used to drive targeted and qualified traffic to your website and improve visibility of your business.
the alternatives are numerous marketing goals differ the variety of business market segments often requires that separate channels must
be employed concurrently. Second, once the channel structure has been specified, the business marketer must manage the channel to achieve prescribed goals.
Channel design is the dynamic process of developing new channels where none existed and modifying existing channels.
Channel Design
It is a dynamic process. It deals with developing new marketing channels and
modifying the existing ones. For designing a channel, the industrial marketer must go through certain steps: A. Developing the channel objectives B. Analyzing channel constraints C. Analyzing channel tasks D. Identifying the feasible channel alternatives E. Evaluation of alternatives F. Selecting the marketing channel
Types of Intermediaries:
VARs Industrial Distributors' dealers Manufacturer's representatives or agents Brokers Commission merchants Jobbers
Number of Channels: The IM use of more than one marketing channels. The benefits of multichannel marketing are:
Increased marketing coverage Lower channel costs more customized selling
By Prof. Raghavendran V
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Selecting Intermediaries Motivating channel members Controlling or managing channel conflicts Evaluating performance of channel members
By Prof. Raghavendran V 39
Selecting intermediaries
General applicable criteria for selecting intermediaries are:
Channel Administration
Channel participants must be selected, and arrangements must be made to
ensure that all obligations are assigned.
Conflict within the channel must be properly controlled. Performance must be controlled and evaluated.
Difference in objectives Dealings with customers Difference in interests Difference in perception Compensation Unclear territory boundaries
Sales achieved Vs Sales Quota Average inventory levels Customer delivery performance Customer Complaints Cooperation in market feedback Support for new products New customers generated