Industrial users are firms that buy products for internal use or for producing other products or services. They include manufacturers, utilities, airlines, railroads, and service institutions such as hotels, hospitals, and schools. Figure shows various ways marketing intermediaries can be linked.
For instance, a manufacturer may sell to a wholesaler that sells to a retailer that in turn sells to a customer. In any of these distribution systems, goods and services are physically transferred from one organization to the next.
As each takes possession of the products, it may take legal ownership of them. As the exhibit indicates, distribution channels can handle either consumer products or industrial products. For example, manufacturers may decide to use nontraditional channels such as the internet, mail-order channels, or infomercials to sell products instead of going through traditional retailer channels.
Nontraditional channels can also provide another avenue of sales for larger firms. For example, a London publisher sells short stories through vending machines in the London Underground. Instead of the traditional book format, the stories are printed like folded maps, making them an easy-to-read alternative for commuters. Kiosks, long a popular method for ordering and registering for wedding gifts, dispersing cash through ATMs, and facilitating airline check-in, are finding new uses.
Ethan Allen furniture stores use kiosks as a product locator tool for consumers and salespeople. Kiosks on the campuses of Cheney University allow students to register for classes, see their class schedule and grades, check account balances, and even print transcripts. The general public, when it has access to the kiosks, can use them to gather information about the university. With technology rapidly evolving, downloading first-run movies to mobile devices may not be far off.
The changing world of technology opens many doors for new, nontraditional distribution channels. Why do distribution channels exist? Why are go-betweens needed? Channels serve a number of functions. Channels make distribution simpler by reducing the number of transactions required to get a product from the manufacturer to the consumer.
For example, if there are four students in a course and a professor requires five textbooks each from a different publisher , a total of 20 transactions would be necessary to accomplish the sale of the books.
If the bookstore serves as a go-between, the number of transactions is reduced to nine. Each publisher sells to one bookstore rather than to four students. Each student buys from one bookstore instead of from five publishers see Figure. Dealing with channel intermediaries frees producers from many of the details of distribution activity.
Producers are traditionally not as efficient or as enthusiastic about selling products directly to end users as channel members are. First, producers may wish to focus on production. They may feel that they cannot both produce and distribute in a competitive way. On the other hand, manufacturers are eager to deal directly with giant retailers, such as Walmart, which offer huge sales opportunities to producers. Omni-channel retailing with the connected consumer uses all shopping channels from the same database of products, prices, promotions, etc.
Instead of perceiving a variety of touch-points as part of the same brand, omni-channel retailers let consumers experience the brand, not a channel within a brand.
Merchandise and promotions are not channel specific, but rather consistent across all retail channels. The brick-and-mortar stores become an extension of the supply chain in which purchases may be made in the store, but are researched through other channels of communication. With omni-channel retailing, marketing is made more efficient with offers that are relative to a specific consumer determined by purchase patterns, social network affinities, website visits, loyalty programs, and other data mining techniques.
Omni-Channel Retailing : Omni-channel retailing requires constant integration across all marketing channels. A move to omni-channel retailing can create a more knowledgeable consumer, so store employees need to be more knowledgeable about merchandise carried and production processes.
Omni-channel retailers carry merchandise that is customer-centric and is not specific to any channel s. Real-time data may be necessary when moving towards an omni-channel approach. As socially connected consumers move from one channel to another, they expect their stopping point to be bookmarked, allowing them to return through a different channel to finish browsing or purchasing where they left off. A consistent and convenient brand exposure from an omni-channel retailer will create better top of mind awareness from consumers.
Preparing for an omni-channel presence will require a heavy investment of both time and money. Communications between the IT department, marketing department, and sales staff will need to be as smooth as possible with little confusion about goals and strategies. A clear and thorough understanding of the customer, or target market, is required to be able to make appropriate decisions about channel integration and usability. Because brick-and-mortar sales influenced by online search are four times higher than total e-commerce sales, omni-channel retailers need to be informative, personable, always connected, and allow channel transparency.
Privacy Policy. Skip to main content. Marketing Channels. Search for:. Marketing Channel Relationships. Competitive Priorities in Marketing Channels A marketing channel is a set of practices necessary to transfer the ownership of goods from producer to consumer.
Learning Objectives Describe the different types of marketing distribution channels. Key Takeaways Key Points When developing distribution strategies, companies assess how marketing channels link producers to buyers, affect advertising and promotion, and influence pricing.
To sway channel intermediaries to stock their product over other brands, companies engage in promotional tactics including higher profit margins, special deals, premiums and allowances for advertising or display on store shelves.
Key Terms intermediaries : An intermediary is a third party that offers an intermediation service between two trading parties. Channel Power, Control, and Leadership Channels perform better if a party is in charge, providing a level of leadership to coordinate goals and efforts. Learning Objectives Describe why manufacturers, wholesalers and retailers take the lead in channel partnerships. Key Takeaways Key Points In a type of business cold war, manufacturers and retailers are constantly trying to match each other in size.
The manufacturer should lead if the design and redesign of the channel is best done by the manufacturer and if control of the product —merchandising, repair, etc. The retailer should lead when product development and demand stimulation are relatively unimportant, and when personal attention to the customer is important. Key Terms retailer : one who purchases goods or products in large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for a profit dictatorial : In the manner of a dictator, usually with callous disregard for others.
Key Takeaways Key Points Channel partnerships are strategic collaborations between organizations that can potentially provide reciprocal value for both organizations. Channel partners can add value through fulfilling certain needs along a value-chain, as well as providing unique access to an established market or brand. Co-branding is the opportunity for channel partners to represent both of their brands on a given product.
In these situations, both organizations can benefit from the brand equity of the other. Value-added resellers are another example of a channel partnership.
Value-added resellers not only resell the product or service, but also add a unique benefit for potential consumers. This justifies the mark up. Overall, the management of channel partnership relationships as well as the acquisition of new partners is critical to success in most industries in the modern economy. Channel Integration The integration of marketing channels to varying degrees is known either as multi-channel or omni-channel retailing.
Agents work on behalf of companies and deal primarily with wholesalers. From here, the wholesalers sell to retailers who then sell to consumers. Distribution strategies depend on the type of product being sold.
There are three methods of distribution that outline how manufacturers choose how they want their goods to be dispersed in the market. The chain of distribution can get confusing as more people are added into the mix. Distributors, wholesalers, retailers, and agents all work as intermediaries in the sales process. It is important to know the key differences of the individuals who play a role in the distribution process. Distributors: A distributor is a wholesaler who assumes extra responsibility.
In addition to fulfilling retailer orders, they actively sell products on behalf of the producers. From managing orders and returns to acting as a sales representative, they go beyond being the middleman between retailers and producers.
They perform market analysis and are constantly searching for new opportunities to achieve peak sales performance. A distributor focuses on a particular area and market which allows them to cultivate strong relationships with manufacturers.
Unlike a wholesaler, they most likely have a stronger affiliation with particular companies. Distributors have a direct responsibility to making sure products are flying off retail shelves.
For example, one distributor may work out an agreement with a popular beverage company who works with them regularly, whereas wholesalers are used on a need-by-need basis. They have the option to sell to retailers and other sellers, or directly to consumers and businesses. Wholesalers: A wholesaler fulfills orders of retailers, by reselling goods, often in large quantities for manufacturers. Wholesalers purchase in bulk, typically, which lowers the price, from either distributors or manufacturers.
This allows wholesalers to make a profit because they are able to sell the to retailers in smaller packages that yield higher prices. Unlike distributors, wholesalers only deal with the storage and delivery of goods. But, in certain cases, you have to go through a wholesaler to get to a distributor.
Retailers: Retailers are the outlets where consumers can purchase products. This is your local grocery store or Walmart down the street. They can sell through storefront locations or through online channels. Retailers purchase products from distributors or wholesalers.
Brokers and Agents: Make way for agents. They handle the logistics of the sales. Agents handle contracts, marketing, and pulling together specialized shipments. A part of their job is customer relationship management.
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