Distribution Channels and Logistics Management
CHAPTER 8
Distribution Channels and Logistics Management
Objective: examining the nature and role of the channels in attracting and satisfying customers
The Nature of Distribution Channels
• Distribution channels are intermediaries used by the producers to bring their products to the market. • Why? Because the use of intermediaries bring greater efficiency in making goods available to target markets. In other words, they match the supply with the demand. • Most important benefit of using intermediaries is that they provide economies. They reduce the amount of work that must be done by both producers and consumers.
How a distributor reduces the number of channel transactions
• •
A. Number of contacts without a distributor
B. Number of contacts with a distributor
Distribution Channel Functions
• A distribution channel moves goods from producers to consumers. Therefore they;
• • • • • • • give information about the product and consumers promote the offer contact with the consumers match the offer with the consumer’s needs negotiate with the buyers about the price and offer physically distribute (transport) the product may finance the manufacturer to cover the costs of the channel work therefore may take risk.
• All these functions can be carried out by the manufacturers but they then increases their costs and prices.
Number of Channel Levels
• The number of intermediary levels used by the producers vary;
• a direct marketing channel; has no intermediary levels. Here, the producer sells directly to consumers e.g. Avon sells their products door to door or through home parties. • An indirect marketing channel; contains 1 (retailer) ,2 (wholesaler + retailer) or 3 (wholesaler + jobber + retailer) intermediary levels.
Channel Behavior
• All channel firms should work together to be successful. Each channel member is dependent on the others e.g. a Ford dealer (retailer) depends on the Ford Motor Company to design cars that meet consumer needs. In turn, Ford
Distribution Channels and Logistics Management
Objective: examining the nature and role of the channels in attracting and satisfying customers
The Nature of Distribution Channels
• Distribution channels are intermediaries used by the producers to bring their products to the market. • Why? Because the use of intermediaries bring greater efficiency in making goods available to target markets. In other words, they match the supply with the demand. • Most important benefit of using intermediaries is that they provide economies. They reduce the amount of work that must be done by both producers and consumers.
How a distributor reduces the number of channel transactions
• •
A. Number of contacts without a distributor
B. Number of contacts with a distributor
Distribution Channel Functions
• A distribution channel moves goods from producers to consumers. Therefore they;
• • • • • • • give information about the product and consumers promote the offer contact with the consumers match the offer with the consumer’s needs negotiate with the buyers about the price and offer physically distribute (transport) the product may finance the manufacturer to cover the costs of the channel work therefore may take risk.
• All these functions can be carried out by the manufacturers but they then increases their costs and prices.
Number of Channel Levels
• The number of intermediary levels used by the producers vary;
• a direct marketing channel; has no intermediary levels. Here, the producer sells directly to consumers e.g. Avon sells their products door to door or through home parties. • An indirect marketing channel; contains 1 (retailer) ,2 (wholesaler + retailer) or 3 (wholesaler + jobber + retailer) intermediary levels.
Channel Behavior
• All channel firms should work together to be successful. Each channel member is dependent on the others e.g. a Ford dealer (retailer) depends on the Ford Motor Company to design cars that meet consumer needs. In turn, Ford