1,050-word article Distribution Channel Article Review

What Is a Marketing Channel of Distribution?

You see the results of distribution every day. You may have purchased Lay’s potato chips at a 7-Eleven convenience store, a book online through Amazon.com, and Levi’s jeans at a Kohl’s department store. Each of these items was brought to you by a marketing channel of distribution, or simply a  marketing channel , which consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

Marketing channels can be compared to a pipeline through which water flows from a source to a terminus. Marketing channels make possible the flow of products and services from a producer, through intermediaries, to a buyer. Intermediaries go by various names (see  Figure 15–1 ) and perform various functions. Some intermediaries purchase items from the seller, store them, and resell them to buyers. For example, Celestial Seasonings produces specialty teas and sells them to food wholesalers. The wholesalers then sell these teas to supermarkets and grocery stores, which, in turn, sell them to consumers. Other intermediaries such as brokers and agents represent sellers but do not actually take title to products—their role is to bring a seller and buyer together. Century 21 real estate agents are examples of this type of intermediary.

Direct Channel

Channel A in  Figure 15–4 , represented by IBM’s large, mainframe computer business, is a direct channel. Firms using this channel maintain their own salesforce and perform all channel functions. This channel is employed when buyers are large and well defined, the sales effort requires extensive negotiations, and the products are of high unit value and require hands-on expertise in terms of installation or use. Not surprisingly, IBM’s Watson supercomputer, priced at $3 million, is sold and delivered directly to buyers.

Indirect Channel

Channels B, C, and D in  Figure 15–4  are indirect channels with one or more intermediaries between the producer and the industrial user. In Channel B, an industrial distributor performs a variety of marketing channel functions, including selling, stocking, delivering a full product assortment, and financing. In many Page 412ways, industrial distributors are like wholesalers in consumer channels. Caterpillar uses industrial distributors to sell its construction and mining equipment in over 180 countries. In addition to selling, Caterpillar distributors stock 40,000 to 50,000 parts and service equipment using highly trained technicians.

Channel C introduces a second intermediary, an agent, who serves primarily as the independent selling arm of producers and represents a producer to industrial users. For example, Stake Fastener Company, a producer of industrial fasteners, has an agent call on industrial users rather than employing its own salesforce.

Channel D is the longest channel and includes both agents and industrial distributors. For instance, Harkman Electric, a producer of electric products, uses agents to call on electrical distributors who sell to industrial users.

Internet Marketing Channels

These common marketing channels for consumer and business products and services are not the only routes to the marketplace. Internet marketing channels also make products and services available for consumption or use by consumers or organizational buyers. A unique feature of these channels is that they combine electronic and traditional intermediaries to create time, place, form, and possession utility for buyers.

Figure 15–5  shows the Internet marketing channels for books (Amazon.com), automobiles (Autobytel.com), reservation services (Orbitz.com), and personal computers (Dell.com). Are you surprised that they look a lot like common consumer product marketing channels? An important reason for the similarity resides in the channel functions detailed in  Figure 15–2 . Electronic intermediaries can and do perform transactional and facilitating functions effectively and at a relatively lower cost than traditional intermediaries because of efficiencies made possible by Internet technology. But electronic intermediaries are incapable of performing elements of the logistical function, particularly for products such as books and automobiles. This function remains with traditional intermediaries or with the producer, as is evident with Dell Inc. and its direct channel.