Placement

Discussion

Channels of distribution are any series of firms or individuals who participate in the flow of products from producer to final user or consumer. One of the most basic placement decisions that a producer must make is which channel of distribution to use. A company must decide whether to handle the whole distribution itself (direct distribution), or whether wholesalers, retailers and other specialists will be involved (indirect distribution).

1. When would a company distribute its products directly?

2. When would a company distribute its products indirectly?

Direct Distribution

Reading

Read the following article about direct distribution and answer the questions.

Direct Distribution Many firms, including Amway and Nutri-Metics, prefer to distribute direct to the final customer or consumer. One reason is that they want to retain complete control over the marketing function. They may believe that they can serve target customers at a lower cost, or perform more effectively than intermediate parties. If a firm is in direct contact with its customers, it is more likely to be aware of changes in customer attitudes. It is in a better position to adjust its marketing mix quickly because there is no need to convince other channel members of the need for change. A firm may have to go direct if suitable intermediaries are unavailable or will not co-operate. This sometimes occurs with new products. In this case, the intermediaries with the best contacts with the target market may be hesitant to distribute unproven products, especially if these are really new products that do not fit well with their current business activities.

1. Why do companies such as Amway and Nutri-Metics distribute their products directly to the customer?

2. What are the advantages of direct distribution?

3. Can you think of any other companies which distribute their products directly to the customer?

Indirect Distribution

Reading

Read the following article about indirect distribution and answer the questions.

Indirect Distribution Even if a producer wants to handle the whole distribution function, there are times when this is simply not possible. Customers may already have established buying patterns. Electrical contractors, for example, like to make all of their purchases in one convenient visit to the local electrical wholesaler. Therefore, the only practical way for a producer of electrical supplies to reach) most electrical contractors is through the use of wholesalers. Similarly, consumers are dispersed throughout many geographic areas and often already have established places where they shop for certain products. For example, a consumer may view a particular chemist as the place to shop for emergency items because the chemist is conveniently located in the neighbourhood. If retailers who serve target customers make most of their purchases from wholesalers, a manufacturer may have no choice but to work with the wholesalers. The most important reason for using indirect channels of distribution is that intermediaries can often help producers serve customer needs better and at lower costs.

1. When do producers use indirect channels of distribution?

2. What are the advantages for producers of using indirect channels of distribution?

3. The Target Market and the Marketing Mix