Marketing Management. Different Types of Distribution Channels

Table of Contents

1. Introduction

2. Distribution Channel
2.1. Importance of Distribution Channels
2.2. Function of Distribution Channels
2.3. Channels
2.4 Channel members

3. Direct Marketing as Distribution Channel

4. Conclusion

List of References

Table of Figures

Figure 1: Distribution Channel

1. Introduction

The present essay deals with the different types of distribution channels. Also, the importance for business companies is highlighted. The first part describes different distribution channels in general. The second part relates the distribution channel “Direct Marketing”͘ Finally, the conclusion summarizes the results of the essay.

2. Distribution Channel

What is categorized as a channel of distribution is generally the route which goods are shipped from the manufacturers and then ultimately to the consumers (Tybout, A., Calder, B. 2010:235). In a distribution network system, the producer places his product directly in the hands of actual users. The cycle of distribution involves the initial producer, the eventual buyer, and any intermediaries - to include a wholesaler or retailer (Kotler, P., G. Armstrong, J. Saunders & V. Wong, 2007:1012).

A middleman is a term that refers to any company or individual in the cycle which either acquires rights to the goods, deals with price negotiations, or sells in the same capacity as an agent or broker (Tybout, A., Calder, B. 2010:237). Facilitating agencies that assist in functions concerning marketing are not classified as middlemen in the cycle of distribution.

2.1. Importance of distribution

Intermediaries are used by producers in order to distribute their products to any given market (Meffert, H., C. Burmann, M. Kirchgeorg, 2008: 577).

The intent of the producer is to establish a cycle of distribution, or often referred to as a distribution channel, in order to accomplish this goal.

The decision that a company makes, in regards to its proper selection of a channel, weighs heavily on the outcome of any and all other marketing decisions made. The strategies, pricing objectives, and distribution processes of a marketer, who deals with mass producing companies, as apposed to product distribution to a novelty shop, would reflect stark contrasts. The decision of which retailers to select, along with certain intermediaries, depends mainly upon the actual product. The role of the mass merchandiser is to sell middle-priced products and simultaneously distribute high-end products to novelty shops, like a furniture store for example.

The true effectiveness of a firm’s communication and sales prowess falls largely on the amount of training and motivation is required from the support channel (Crawens, David W., Nigel F. Piercy, 2009: 319). Acquiring a particular product may also have a direct correlation to the capabilities of the channel members themselves. Many companies have often made the mistake of paying not enough attention to their channels; in the meantime, other companies such as Apple Inc., UPS, and Merrill Lynch flourish.

2.2. Functions of Distribution Channels

A Distribution channel creates an even flow of possibilities for goods to get from the original producer to the customers themselves. The functions alone, which must be performed by someone within the channel and may not be disregarded, vary amongst different channels (Rolnicki, K., 1998:227).

Channels provide ownership utility and they make products available at the specificity and quantity that the customer requests (Armstrong, Harker, Kotler, Brennan, 2009: 61). The various distribution channels create a level of efficiency that steadily increases the open stream of products exchanged between producers and customers.

Distribution channels are, therefore, made to reduce the amount of unwarranted transactions in order to necessitate larger incoming product flow (Dent, J., 2008:25).

2.3. Channels

Alternate means for distribution channeling:

- Direct Marketing or selling, e.g. via mail order, Internet and telephone sales
- An Agent directly selling on the behalf of the producer
- Distributor (wholesaler), who sells to retailers
- Retailer (dealer), who sells to end customers
- Advertisement

Distribution channels are not solely restricted to physical products. They could also hold just as much importance, if not merely for shipment purposes from the producer to the consumer, then for the fact that both are able to use direct and indirect channels (Runia, P., 2007: 194-200).

An excellent example of direct and indirect channels applies to some hotels who generally sell their services by way of rooms, either through airlines, tourist’s organizations, or many other ways of promotions.

Because of the latest innovative tools in the service of distributions, there has been a steady increase in rental and franchising services. Within the tourism industry, there has been much evidence found indicating that many travel services have been integrated in order to broaden the market of distribution. Proofs of the existence of these links are evident in the promotions and special offers that now connect services like hotels, airlines, and car rentals.

2.4. Channel members

Throughout the distribution channels are several levels, which Kotler defines the simplest level as that of direct contact with no intermediaries involved, as the “zero- level” channel.

The following level, the “one-level” channel; generally a retailer handles consumer goods, and a distributor handles industrial goods. In small markets or small countries, for example, there is a possibility that the entire market can be entered using only the one- and zero-level channels.

In larger markets, or such as in a larger country, even a second level channel, which a wholesaler is now being primarily used to extend distribution out to the large number of small, neighborhood retailers.

illustration not visible in this excerpt

Figure 1: Distribution Channel

Available at: http://tutor2u.net/business/images/customer_marketing_channels.gif

3. Direct Marketing as Distribution Channel

In most of the bibliographic, direct marketing has been discussed as a marketing channel and a form of promotion (Katzenstein and Sachs 1986).

When there is a direct connection that is developed because of the “producer” connecting with the end customer, which is the result of direct marketing (Stone,B., Jacobs, R., 2008: 173-201).

It is a possibility that the end user could be a consumer or a business. A final user or buyer can be a consumer or a firm.

The direct marketing method applies to non-profit, service and product structured businesses. Because there is no intermediary in any of the situations, direct marketing is so described as a communicative interaction between the producer and the end user.

There are numerous ways that organizations may use to gain leverage through direct marketing as they extend an avenue of communication to their customers. Using many platforms for communicating to their clients, companies may use the following techniques to effectively sell their products: online means, through the mail, telemarketers, or seminars (Stone,B., Jacobs, R., 2008: 173-201).

With the growth of internet marketing, a lot of the dynamics of marketing methods have been dramatically altered. The reports of responses to direct mail being below 1% even further affirms the evidence of the changing pattern of a +5% response rate, most commonly experienced.

Some companies have chosen to exclusively utilize direct marketing. Examples:

- Tupperware
- Mary Kay Cosmetics
- Monavie

Other businesses utilize direct marketing in conjunction with other marketing channels.

Some examples are:

- Dell Computers
- NordicTrack
- General Electric

Advantages are:

- No intermediaries (e.g. retailers) to split profits with
- Costs of distribution
- Producer can control one’s marketing methods
- Opportunity to expand client base beyond shops

Disadvantage
- Additional expenses (e.g. catalogues, trainings)

4. Conclusion

As the needs, market and other factors constantly change, companies needs to quickly adapt to it and keep their distribution channels optimized and up to date. Distribution Analysis is important for a company to gain competitive advantages. It supports one’s company to :

- Addresses the needs of buyers and eventually increase income,
- Improve efficiency within a competitive market,
- Preserve their role in channel structure.

List of References

Armstrong,G.,Harker,M., Kotler,P., Brennan,R.,(2009), “Marketing: n Introduction”, Financial Times Prentice Hall (30th April, 2009)

Busch, R., Fuchs, W., Unger, F., (2008): “Integriertes Marketing“, 4th Edition, Gabler Publishing, 2008.

Crawens, David W., Nigel, F. Piercy, (2009) “Strategic Marketing”, 9th Edition, Mc Graw Hill, 2009.

Dent,J., (2008). “Distribution Channels: Understanding and Managing Channels to Market”, Kogan Page Ltd͘, 2008.

Kotler, P., G. Armstrong, J. Saunders & V. Wong (2007), “Grundlagen des Marketing”, 4th Edition, Pearson, 2007.

Meffert, H., Burmann, C., M. Kirchgeorg (2008), “Marketing”, 10th Edition, Gabler, 2008.

Rolnicki, K. (1998), “Managing channels of distribution”, US , Kenneth Rolnicki, 1998.

Runia, P., et al, (2007) “Marketing”, 2nd Edition, Oldenbourg, 2007.

Stone,B., Jacobs, R., (2008), “Successful Direct Marketing Methods”, 8th Edition, US , McGraw Hill, 2008.

Tybout,A., Calder, B. (2010), “Kellogg on Marketing” , US , Northwestern University, 2010.

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