8_307_Distribution

8_307_Distribution - USC Marketing 307#8 Distribution(Place...

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USC Marketing 307 • #8 Distribution (Place) © 2006 Ira S. Kalb. All rights reserved. 1 1. Definition . Process of making it convenient for market targets to find, buy, and use your product (to achieve the goals of your marketing plan). 2. Channel Options . Similar to waterways, veins, and arteries, products are distributed through channels. 2-1. Direct to end buyer. There are two direct channels (1) Direct Marketing (Internet, mail order, home shopping network, phone sales) where there is no face-to-face contact between buyer and seller, and (2) Selling via your Sales force, where there is face-to-face contact between buyer and seller. 2-2. Distributor (wholesaler) and Dealer (retailer) . The Manufacturer sells to a distributor that sells to a dealer that, in turn, sells to an end buyer . In this case there are two middle people. 2-3. Big Dealer (Big Box) . The Manufacturer sells to a big dealer , such as Wal-Mart, Costco, Home Depot who sells directly to the end buyer . Since this eliminates one of the middle people, end buyers drive longer distances to “save” money by buying directly from big dealers or outlet stores. 3. Levels, types of companies (players), and their added value function . The players that operate in the channels and their added values are… 3-1. Manufacturers — Add value by making the product . 3-2. Distributors — Add value by warehousing the product for the levels above (manufacturers) and below (dealers). 3-3. Dealers — Add value by making it convenient for end buyers (consumers or companies) to find, buy and use the product. Manufacturers  make  products and need to sell  them quickly to make  money.  Dealers  can only  afford to buy in small  quantities to make  money selling in smaller  quantities to  End  Buyers . This creates a  need for  Distributors   who add value by  warehousing  products so  Manufacturers  and  Dealers  can make  money and satisfy the  needs of  End Buyers . It is all about making it  convenient  for end  buyers and enabling  channel players to  make  money  (return on  investment).  
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USC Marketing 307 • #8 Distribution (Place) © 2006 Ira S. Kalb. All rights reserved. 2 4. Distributors versus Agents there are two main types of players that operate in distribution channels — Resellers (distributors) and Agents. 4-1. Resellers All middle people (distributors and dealers)who make up the levels of distribution channels are legally called “distributors” (hence the general term of this building block — Distribution ). These resellers buy the product from the level above, take ownership (they pay for it and are stuck if they don’t sell it), and sell to the level below.
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