Chapter 9: Place / Distribution

Learning Objectives

1. Student will be able to explain why marketing channel decisions can result in the success or failure of products.
2. Students will be able to describe the channel types in business-to-consumer (B2C) and business-to-business (B2B) markets.
3. Students will be able to describe the activities performed by channel members.
4. Students will be able to explain the marketing strategy as it applies to retailers.

Introduction

Today, marketing channel decisions are as important as the decisions companies make about the features and prices of products (Littleson, 2007). Consumers have become more demanding. They are used to getting what they want. If you can’t get your product to them when, where, and how they want it, they will simply buy a competing product. In other words, how companies sell has become as important as what they sell¹.

The firms a company partners with to actively promote and sell a product as it travels through its marketing channel to users are referred to by the firm as its channel members (or partners). Companies strive to choose not only the best marketing channels but also the best channel partners. A strong channel partner, like Walmart, can promote and sell the product that might not otherwise turn a profit for its producer. In turn, Walmart wants to work with strong channel partners it can depend on to continuously provide it with great products with a built-in demand, and can ensure proper inventory levels. By contrast, a weak channel partner can be a liability.

The simplest marketing channel consists of just two parties—a producer and the end user. Your haircut is a good example. When you get a haircut, it travels straight from your hairdresser to you. No one else owns, handles, or remarkets the haircut to you before you get it. However, many other products and services pass through multiple organizations before they get to you. These organizations are called intermediaries (or middlemen or resellers).

Companies partner with intermediaries not because they necessarily want to (ideally they could sell their products straight to users) but because the intermediaries can help them sell the products better than they could working alone. In other words, they have some sort of capabilities the producer needs: contact with many customers or the right customers, marketing expertise, shipping and handling capabilities, and the ability to lend the producer credit are among the types of help a firm can get by utilizing a channel partner. This add value to the end user.

One important channel partner is retailers.  Retailers are entities to sell to the end user for personal usage.  Many organizations sell to businesses and consumers so how do we determine if they are considered a ‘retailer’? We look at their sales.  If the majority of the sales dollars comes from consumer sales, the organization is classified as a retailer.

Over the last two decades, retailing has changed dramatically.  Some have said that ‘retail is dead’. That is ridiculous. As long as purchases are made for personal usage, retailing will always be around. However, how retailers reach the consumer, what functions they perform, and how they compete has gone through many changes and is likely to continue to do so.

Littleson, R., “Supply Chain Trends: What’s In, What’s Out,” Manufacturing.net, February 6, 2007, http://www.manufacturing.net/articles/2007/02/supply-chain-trends-whats-in-whats-out (accessed April 13, 2012).