1. Distribution Channel Decisions

2. Supply Chain
• The value delivery system that begins at the point of
supply and ends at the point of consumption
– Raw materials
– Component parts
– Finished product
– Middlemen – wholesalers/distributors & retailers
– Final consumer

3. Supply Chain Management
• Supply chain management
– Viewing the supply chain as a single entity
– Managing the supply chain in a way that
maximizes the total value delivered

4. Channels of distribution
• The part of the supply chain that focuses
on making the product available to the
customer.

5. Are channel decisions important?
Consider what consumers pay.
Specialty store price: food item 10.00
Retailer gross margin (50%) 5.00
Price to retailer 5.00
Wholesaler gross margin (25%) 1.25
Selling price to wholesaler (revenue
to manufacturer) 3.75
Note what the consumer pays for
distribution: 62.5% of price paid!

6. Are costs different in lower cost
channels like supermarkets?
Supermarket price: similar item 5.00
Retailer gross margin (25%) 1.25
Price to retailer 3.75
Food broker commission (3%-5%) .19
Revenue to manufacturer 3.56
More efficient, lower price, but the consumer
still pays 29% for distribution!

7. Types of Channel members
• Merchant wholesalers
– Industrial products distributors
• Agent middlemen
– Manufacturer’s agents or manufacturer’s reps
– Sales agents
– Brokers
– E-Hubs

8. Types of Channel
Members (cont’d)
• Retailers
• Facilitating agencies
– Logistics companies
– Trucking companies
– Advertising agencies
– Custom marketing research firms
– Etc.

9. Channel Design Options
for a Consumer Product
Producer
Consumer
Retailer
B
Producer
Consumer
Retailer
Wholesaler
C
Producer
Agents
Wholesaler
Retailer
Consumer
D
Consumer
A
Producer
E
Producer
Agents
Retailer
Consumer
Exhibit 13.5

10. Exhibit 13.6
Channel options for
industrial goods and services
Producer
Industrial Buyer
Wholesaler
B
Producer
Industrial Buyer
Agent
C
Producer
Agent
Wholesaler
Industrial Buyer
D
Industrial Buyer
A
Producer

11. Major Channel Objectives
• Making the right product available to the
right buyer at the right place and time
• Meeting the buyers’ customer service
requirements
• Cost effectiveness

12. Distribution Intensity
• Intensive distribution
• Exclusive distribution
• Selective distribution

13. Exhibit 13. 8
Example of a Hybrid Marketing Channel
Supplier
Company Website
& Sales Force
Wholesale
Distributor
Company
Help Line &
Outside
Service Centers
Customer
Demand Generation
Physical
Distribution
Post-Sale Service

14. Push vs. Pull Strategies
• Push
Manufacturer Wholesaler Retailer Consumer

15. Push vs. Pull Strategies
• Pull
Manufacturer Wholesaler Retailer Consumer