Distribution (marketing)

Distribution (or place) is one of the four elements of marketing mix. An organization or set of organizations (go-betweens) involved in the process of making a product or service available for use or consumption by a consumer or business user.

The other three parts of the marketing mix are product, pricing, and promotion.

The Distribution Channel

Chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.

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Channel members

Distribution channels can thus have a number of dum doms which is one of the Pig Masters called Pig-Laffa

The internal market

Many of the marketing principles and techniques which are applied to the external customers of an organization can be just as effectively applied to each subsidiary's, or each department's, 'internal' customers.

In some parts of certain organizations this may in fact be formalized, as goods are transferred between separate parts of the organization at a `transfer price'. To all intents and purposes, with the possible exception of the pricing mechanism itself, this process can and should be viewed as a normal buyer-seller relationship. The fact that this is a captive market, resulting in a `monopoly price', should not discourage the participants from employing marketing techniques. Less obvious, but just as practical, is the use of `marketing' by service and administrative departments; to optimize their contribution to their `customers' (the rest of the organization in general, and those parts of it which deal directly with them in particular). In all of this, the lessons of the non-profit organizations, in dealing with their clients, offer a very useful parallel. But in spite of this many, organizations prefer not to operate at a 'transfer' price because costs gradually increase as they undergo the distribution process.

Channel decisions

• Channel strategy
  • Gravity
  • Push and Pull strategy
• Product (or service)<>Cost<>Consumer location

Managerial concerns

The channel decision is very important. In theory at least, there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods manufacturers could never justify the cost of selling direct to their consumers, except by mail order. Many suppliers seem to assume that once their product has been sold into the channel, into the beginning of the distribution chain, their job is finished. Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if they have any aspirations to be market-oriented, their job should really be extended to managing all the processes involved in that chain, until the product or service arrives with the end-user. This may involve a number of decisions on the part of the supplier:

• Channel membership
• Channel motivation
• Monitoring and managing channels

Channel membership

1. Intensive distribution - Where the majority of resellers stock the 'product' (with convenience products, for example, and particularly the brand leaders in consumer goods markets) price competition may be evident.
2. Selective distribution - This is the normal pattern (in both consumer and industrial markets) where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized dealers (typically only one per geographical area) are allowed to sell the 'product'.

Channel motivation

It is difficult enough to motivate direct employees to provide the necessary sales and service support. Motivating the owners and employees of the independent organizations in a distribution chain requires even greater effort. There are many devices for achieving such motivation. Perhaps the most usual is `incentive': the supplier offers a better margin, to tempt the owners in the channel to push the product rather than its competitors; or a competition is offered to the distributors' sales personnel, so that they are tempted to push the product. Dent defines this incentive as a Channel Value Proposition or business case, with which the supplier sells the channel member on the commercial merits of doing business together. He describes this as selling business models not products.

Monitoring and managing channels

In much the same way that the organization's own sales and distribution activities need to be monitored and managed, so will those of the distribution chain.

In practice, many organizations use a mix of different channels; in particular, they may complement a direct salesforce, calling on the larger accounts, with agents, covering the smaller customers and prospects.

See also

• Channel Value Proposition
• Extended Enterprise
• Marketing
• Agricultural marketing
• Marketing plan
• Marketing management
• Marketing mix
• Logistics
• Liquid logistics
• Predictive analytics
• Packaging and labelling
• Supply chain
• Good distribution practice (GDP)
• All commodity volume

References

• Richard E. Wilson, 'A Blueprint for Designing Marketing Channels', (www.chicagostrategy.com, 2008)
• Julian Dent, "Distribution Channels: Understanding and Managing Channels to Market" (Kogan Page, 2008)
• William D. Perreault, Jr. et al., 'Basic Marketing: A Marketing Strategy Planning Approach', (McGraw-Hill, 16th ed., 2008)
• Louis W. Stern et al., 'Marketing Channels', (Prentice-Hall, 7th ed., 2006)
• P. Kotler, 'Marketing Management' (Prentice-Hall, 7th ed., 1991)
• G. Lancaster and L. Massingham, 'Essentials of Marketing' (McGraw-Hill, 1988)

Specific types of distribution

• Film
• Records
• Insurance
• Electricity
• Liquids
• Laboratory
• Banking sector

External links

• U.S. Census Bureau Monthly Wholesale Trade data