Producers use marketing intermediaries because they

Distribution Strategy I. The Need for Marketing Intermediaries • A channel of distribution is the combination of institutions through which a seller markets

products to organizational buyers or ultimate consumers. • The need for other institutions or intermediaries in the delivery of goods is sometimes

questioned, particularly since the profits they make are viewed as adding to the cost of the product.

• However, this reasoning is generally fallacious, since producers use marketing intermediaries because the intermediary can perform functions more cheaply and more efficiently than the producer can.

II. Classification of Marketing Intermediaries and Functions • There are a great many types of marketing intermediaries. • Figure 10.1 presents the major types of marketing intermediaries common to many

industries. • Figure 10.2 is a listing of the more common marketing functions performed in the channel. • The managerial question is not whether to perform the functions, but who will perform

them and to what degree. III. Channels of Distribution • A channel of distribution is the combination of institutions through which a seller markets

products to the user or ultimate consumer. • The conventional channel of distribution patterns for consumer goods markets are shown

in Figure 10.3. • Some manufacturers use direct channels, selling directly to a market. • Using a direct channel, called direct marketing, increased in popularity as marketers found

that products could be sold directly using a variety of methods. • A common channel for consumer goods is one in which the manufacturer sells through

wholesalers and retailers. • Channels with one or more intermediaries are referred to as indirect channels. • In contrast to consumer products, the direct channel is often used in the distribution of

organizational goods. • As in the consumer market, agents are used in organizational markets in cases where

manufacturers do not wish to have their own sales forces. • The final channel arrangement in Figure 10.4 may also be used by a small manufacturer or

when the market consists of many small customers. Under such conditions, it may not be economical for sellers to have their own sales organization.

IV. Selecting Channels of Distribution • Given the numerous types of channel intermediaries and functions that must be performed,

the task of selecting and designing a channel of distribution may at first appear to be overwhelming.

• All too often in the early stages of channel design, executives map out elaborate channel networks only to find out later that no such independent intermediaries exist for the firm’s product in selected geographic areas.

• In general, there are six basic considerations in the initial development of channel strategy. These are outlined in Figure 10.5.

A. Specific Considerations • The preceding characteristics play an important part in framing the channel selection