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DISTRIBUTION CHANNELS
1. Marketing deals with the creation of form, time, place and possession
utilities.
2. Distribution channels deals with the firms effort to create place utilities
successfully.
3. Even before a product is ready for the market, the management should
determine what methods and routes will it use to get the product to the
customer?
4. This basically means establishing strategies for the product's distribution
channels and physical distribution.
Middlemen and Distribution channels:
1. Ownership of a product has to be transferred somehow from the firm to
the consumer who needs and buys it.
2. Products must be physically transported from where they are produced to
where they are needed.
3. The most important activity of getting the product from the producer and
arranging it for sale to the customer, where and when he wants it is the
major role of the distribution channel.
Middlemen:
1. Middlemen are independent individual firms that render services directly
related to the sale or purchase of a product as it flows from the producer
to the consumer.
2. Middlemen are commonly classified on the basis of whether or not they
take title to the products they distribute.
3. Merchant middlemen actually take the title and possession of the
products they help to market.
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4. Agent Middlemen never actually take title or possession of the products,
but they only arrange the transfer of title. E.g.: - Real estate brokers,
travel agents and manufacturers agents.
5. Facilitators: - besides producers. Middlemen and final customers. There
are other institutions that help the distribution process.
6. Among these intermediaries are banks. Transport companies, storage
firms and insurance companies.
7. However. because the above intermediaries do not take title to the
Importance of Middlemen:
desired
by customers and then putting the various items
together in the assortment wanted.
To Consumer
1. Anticipate wants
2.Buying specialist
3. Bulk breaking
4.Transportation
5. Installation & Service
6. Financing & Credit
7. Guarantees the product
To Producers
1. Interprets wants
2. Selling specialist
3. Bulk breaking
4.Transportation
5. Storage
5. Financing & Insurance
6. Risk bearer
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b) Wholesaling: - includes the sale and activities directly incident to the sale,
of products or services to those who are buying for resale or for business
use.
i) Going by the above interpretation it is pertinent to understand that a
retail store is engaged in wholesaling when it sells pencils or stationery to
a restaurant.
ii) At this juncture it is important to understand that it is the purpose
for which a product or a service is purchased that determines
whether it is a whole sale or a retail sale and not the quantity of a
product or service purchased.
Selecting Channels of Distribution for Consumer Goods
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Producer
2
Producer
Consumer
Retailer
3
Producer
4
Producer
Wholesaler
Agent
Consumer
Retailer
5
Producer
Agent
Retailer
Wholesaler
Consumer
Retailer
Consumer
Consumer
Producer
Producer
Industrial distributor Agent
User
User
4
Producer
Agent
Industrial
Distributor
User
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door to door selling becoming more popular as the size of working women
population is increasing.
Conflicts between manufactures and wholesalers
From Manufacturers Point of view:
1. Wholesalers fail to promote products aggressively.
2. Wholesalers are no longer performing the storage services that producers
were accustomed to earlier.
3. Some wholesalers promote their own brands that are in direct competition
with the manufacturers brands.
4. Wholesalers services are too expensive.
5. Manufacturers want closer contact with their market and customers.
6. Some products may need rapid physical distribution.
7. Large-scale retailers usually prefer to buy directly from manufacturers.
Conflicts from wholesalers point of view:
1. Manufacturers do not understand that the primary obligation of
wholesalers is to serve their customers. Serving producers is only
secondary.
2. Manufacturers expect too much. Wholesalers discounts are not high
enough to justify the level of warehousing and promotion expected by
producers.
3. Manufacturers skim the cream off the market.
Options open to Manufacturers:
1. Sell directly to retailers
2. Establish sales offices or branches
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3. Sell directly to consumers
4. Use missionary sales force