Module 05 Online Distribution

5 th Synchronous Class

Channel of
Distribution for
Marketing
Associate Professor
Sheryl R. Morales
 A new landscape
The marketing landscapes has been
dramatically altered by digitization,
but some things never change.

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 Marketing Distribution

For example, the marketing mix, also

known as the "four P's of marketing,"
is still as relevant today as it was in
the 1950s and 1960s. The model's
core ideas – namely, that successful
marketing is driven by product,
price, promotion, and placement –
remain valid.

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Bucklin - Theory
of Distribution
Channel
Structure
A channel of distribution comprises a set of
institutions which perform all the activities
utilized to move a product and its title from
production to consumption.
The 4P’s:
Marketing
Mix

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 • Marketers will argue about which “P” in the marketing mix is
the most essential, but there’s no denying that each one is
important in its own way. If you’re trying to sell an inferior or
How inherently flawed product, for instance, you’re already coming
at your competitors from a disadvantage.

important • Place, or distribution, is a critical consideration for marketers,

whether you’re selling a physical product, software application
is the or digital service. Where are people going to find your
products and services? Where can they purchase them? Where

Distribution are they going to use them? How are you going to manage
inventory?

mix? • E-commerce, digital distribution and other internet-age

developments have made these questions far more
complicated. Businesses might operate brick-and-mortar
shops as well as online stores. Digital-only services may be
downloaded directly from the provider or distributed through
a value-added reseller.

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 • To get an idea of how complex “place” has become, consider
the enormous shift in distribution methods witnessed in the
video game industry over the past two decades. Twenty years
How ago, customers would need to travel to a physical store to buy
games or use a mail-order service.

important • Then the internet came along, and retailers started selling
those products online. The rise of e-commerce markets like
is the Amazon added another major distribution channel to account
for.

Distribution • With faster networks, gamers can cut out the middleman – and
physical media entirely – by downloading video games
mix? through distribution services like Steam. Brick-and-mortar
stores, e-commerce retailers and online shops remain viable
distribution channels, and video game companies need to
factor in all of them to reach the widest audience.

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• Distribution channels are the methods by which companies
deliver products and services to customers and end users.
Some businesses sell directly to their customers, while others
might use a retailer or wholesaler to serve as an intermediary.
Companies may also use agents or brokers to facilitate the
movement of products to distributors that sell those wares to the
customer.
Why is a
• Why so many choices? Consider a clothing manufacturer: It distribution
might have its own brand stores, but those would be
expensive to expand to achieve optimal market penetration. channel
Selling through retail outlets increases the brand’s presence
and visibility, reaching more customers in more varied
locations. In this way, the company can maximize its revenue
important?
potential without overextending resources by exclusively
maintaining its own storefronts.

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 What are the
different
channel of
distribution?
• There are several
approaches brands
can take to distribute
their goods, products
and services –
especially now that
digital channels stand
shoulder to shoulder
with traditional,
physical outlets.
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 1. Direct Sales

» A direct sales business model eliminates any » A more rigid example of direct sales would be
intermediary in the distribution process, a business that creates products and goods
leaving the brand to sell products to on-site and sells to the customers in the same
customers on its own. That means there’s no location. For instance, bakeries employ a
retailer or third-party outlet to stock inventory strict, direct sales business model, assuming
and promote products. their goods can only be found in their stores.

» Arguably the most visible example of a direct

sales approach comes courtesy of Apple. In
many cases, customers need to go through
the brand itself to buy software, devices and
other products. Apple manages its own
physical shops and digital stores where it
prefers to sell its wares. It does have a
presence in third-party brick-and-mortar retail
outlets, but the company tries to direct
potential and returning customers to its
branded stores.
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 2. Retailer

» Retail is the most common distribution

channel for consumer brands, using third-
party outlets to bring products to market.
Supermarkets, big-box stores, convenience
stores and department stores all act as
intermediaries and the point of contact for
customers. You don’t go to the Jif store to
buy peanut butter, after all.

» Not all retail distribution strategies take the

same approach, however. Depending on the
brand, product and audience, they may aim
for the widest market penetration possible,
while others focus on establishing exclusivity
by limiting availability.

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 3. Intensive Distribution
» Consumers are probably most familiar with
this form of retail distribution, where products
are sold through as many outlets as possible.
Take Jif, for instance. You can find the brand
in virtually any grocery store and convenience
store in the United States, regardless of the
market or location. Jif has an enormous
market penetration, and is one of a handful of
peanut butter brands that are ubiquitous
across the country.
» This style of retail distribution is best-suited
for goods and products that rarely command
a great deal of brand loyalty. If a customer’s
preferred brand is unavailable, they are
perfectly fine buying another product at a
similar price point. For most consumers, if
Skippy’s sold out, Jif’s an acceptable
alternative.
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 3. Intensive Distribution
» Intensive distribution gives brands the largest
presence possible, reaching more potential
customers across disparate markets. Only a
select few brands can achieve that high level
of distribution. Inventory management, supply
chain logistics and marketing demands all
become incredibly complicated with an
intensive distribution strategy, and many
companies simply do not have the resources
or capabilities to make this approach work.
» This approach is a poor fit for niche products
with limited appeal. Those brands require a
more targeted strategy that zeroes in on their
target audiences. Luxury products with high
price points may also suffer with intensive
distribution, as lower quality offerings can
easily undercut them and better appeal to
less discerning shoppers.
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How has the Digital Age changed
Distribution?

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 4. Selective Distribution
» Not all companies that sell through retailers
are looking to achieve the widest distribution
possible. Luxury brands are often highly
selective about where their products are
placed and how they are represented. You
won’t find Hermes handbags in a big-box
store, for instance. For those companies, the
in-store experience is part of their brand and
they tightly regulate retail displays and even
how clerks describe or demo their products.

» Selective distribution makes sense when

brands and products cannot be swapped out
interchangeably. Target audiences are
extremely discriminating and are willing to
travel to specific outlets where their preferred
brands are available.
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 5. Exclusive Distribution
» Selective distribution strategies still use a variety
of intermediaries and outlets to sell wares, but
brands have an even more discerning option to
consider: exclusive distribution. Under this
business model, companies partner with a single
wholesaler or retailer in a particular market. The
idea is to restrict availability to protect brand
equity and project a more selective and exclusive
brand image.
» Rolex is one of the more famous examples of
exclusive distribution. The company partners with
one wholesaler in each market to control precisely
where its products are sold and how they are
represented. Even though a third party is the final
point of contact with the end user, Rolex can still
dictate the in-store experience, creating strict
brand guidelines for clerks and agents to follow.

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 5. Exclusive Distribution
» Brands also tend to have more leverage in
exclusive distribution relationships since
wholesalers, retailers and distributors are
dependent on the presence of luxury, high-quality
products to appeal to their upscale and
discerning clientele. Manufacturers are in a
stronger position to negotiate distribution and
marketing costs with their intermediaries since
there are few alternatives to take their place on
store shelves.
» An exclusive distribution partner agency can also
be a huge asset when expanding into new
markets. Distributors already have a presence in
these markets and understand what motivates
local customer bases. That means less risk for
businesses that want to reach international
audiences, but are concerned about the logistics
involved in such a move.
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 6. Dual Distribution
» Many businesses choose to use a variety of
distribution channels to sell their products,
working with wholesalers and retailers while also
maintaining brand storefronts to sell directly. This
approach is known as dual distribution. The Apple
example we cited earlier is one instance of dual
distribution, although it leans more toward the
direct-to-customer end of the spectrum.
» Smartphones, in general, highlight this approach,
as manufacturers sell their devices through big-
box stores, telecom partners, e-commerce
markets and their own online store fronts.

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 7. Wholesaler
» Like retailers, wholesalers act as middlemen that
buy products from manufacturers and then sell
those goods to end users at an increased price
point. The biggest differences between these
business models are scale and audience.
» Although consumer-facing membership
warehouses are the most visible examples of
wholesale distribution channels, most wholesalers
sell to other businesses. Restaurants, for instance,
buy their equipment from wholesale providers.
Certain retailers may purchase products in bulk
from a wholesaler and then sell those goods to
consumers individually at a higher price point.
» Brands benefit from wholesale distribution by
moving large volumes of products at once. The
tradeoff is wholesalers expect discounts and
reduced rates in exchange for buying in bulk.
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 7. Wholesaler
» Another factor to consider is that manufacturers
can avoid the logistical challenges of selling
directly to customers. There’s no store to manage,
on-site personnel to train or inventory to stock.
Once products have changed hands, those issues
are someone else’s concern.
» That also means brands have limited – if any – say
about how their products are handled and
displayed. They can address those concerns by
creating brand guidelines for distributors to
follow, but there is some added cost to conduct
on-site reviews and assess compliance.

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 8. Channel partners or value-added resellers
» Many B2B companies sell through the channel.
That is, they don’t sell directly to end users, but
work with channel partners that buy their wares,
repackage them and then sell to their own
customers.
» How is that any different from the wholesaler
models discussed earlier? As the name suggests,
value-added resellers (VARs) include new features
and services to improve a product and appeal to
their target audience. The manufacturer provides
a basic foundation to work with, and the VAR adds
the secret sauce to distinguish its offerings from
the competition’s goods.
» Software-based B2B products are often sold
through the channel, with VARs providing
support, training, additional features and other
offerings their target audiences might need.
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 8. Channel partners or value-added resellers
» The appeal of working through the channel is that
companies can focus on creating a product that
has a strong core functionality and let another
organization worry about refining it to attract
specific audiences. An accounting software
manufacturer, for instance, might sell its platform
to different VARs that operate in disparate
industries like healthcare, education and retail.
Each channel partner can then determine the best
way to package that solution to appeal to their
customers and end users.
» Companies can dramatically simplify marketing
requirements when they sell through the channel
rather than attempt to create campaigns and
strategies that target various industries and
audiences.

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 Let your distribution channel guide marketing strategies

The most effective marketing strategies for your business will heavily depend on the
distribution channels you use. Some examples include:

• Companies that sell through the channel need to develop messaging that resonates
with valued-added resellers (VARs) rather than end users.
• Luxury brands using exclusive distribution strategies should create product scarcity to
help drive demand with upscale audiences.
• Businesses that sell directly to consumers should refine every aspect of their digital
and physical touch points to create a holistic brand experience.

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THANK YOU!

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 References:

Keleher, Jeff (10 May 2021). 8 Channels of Distribution for Marketing

(Infographic). Brafton Fuel Brand. Retrieved from
https://www.brafton.com/blog/distribution/channels-of-distribution/

Llyas, Maria (4 January 2021). Wholesale Distribution Trends For 2021. B2BWoo.
Retrieved from https://b2bwoo.com/blog/wholesale-distribution-trends/

Channel Management Distribution. Caldwell County Schools. Retrieved from

https://www.caldwellschools.com/cms/lib/NC01811136/Centricity/Domain/44
1/Mktg%203_07%20PPT%20STUDENTS_1.ppt

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