Leeds University Business School
Place: Distribution Channels and Channel
Management
Dr. Verdiana Giannetti
LUBS - 2021
Session Outline
• Distribution Channels;
• Channel Design Decisions;
• Channel Management Decisions.
• Refer to Principles of Marketing:
Chapter 12
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Distribution Channels
How do we make our product/service available to buyers?
• Some companies sell directly to consumers (direct
channels);
• Most companies use (indirect) distribution channels.
• Distribution Channel: A set of interdependent
organizations that help make a product or service
available for use or consumption by the consumer or
business user.
• Distribution Channels cover all the activities needed to
transfer the ownership of goods and move them from the
point of production to the point of consumption.
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Key Actors
Key Actors in a Distribution Channel:
1) Manufacturer (i.e., firm, farmer, craftsman, etc.).
2) Middleman at the wholesale and/or retail level (i.e., agent, retailer,
wholesaler, etc.).
3) User (i.e., individual, household, business buyer, institution,
government, etc.).
Channel decisions are crucial:
• They have to be coherent with decisions on product, price, and
promotion;
• They often represent long-term commitment;
• Intermediaries increase efficiency and provide specialist services.
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Distribution Channels: Functions
• Information: Gathering and distributing information about consumers, manufacturers, etc.;
• Promotion: Developing persuasive communications to stimulate purchases;
• Contact: Finding and engaging prospective buyers;
• Matching: Shaping offers to meet buyers’ needs;
• Negotiation: Reaching agreement on price and other terms before completing the purchase;
• Physical Distribution:Transporting and storing goods;
• Financing: Acquiring and using funds necessary to carry out channel work;
• Risk-taking: Assuming risks of carrying out channel work (and, often, buying goods themselves).
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B2C Channels
Direct Channel: Buying an I-Pad from
the Apple Store, buying lipstick from
Avon’s sales rep.
Buying Adidas Trainers from JD Sport
Buying groceries from a convenience
store, which got them from a
wholesaler
Common for international trade.
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Some definitions…
• Direct Channel: A distribution channel that has no intermediary levels (e.g., farmer’s market, Apple,
etc.).
• Indirect Channel: A distribution channel containing one or more intermediary levels.
• Retailer: A company in the channel that focuses on selling directly to consumers (e.g., Amazon online
store, Tesco, etc.)
• Wholesaler: A company in the channel that focuses on buying, storing, and physically handling goods
in large quantities, which are then resold (usually in smaller quantities) to retailers or business users
(e.g., restaurant food suppliers).
• Agent: Agents are different from wholesalers in that they do not take title to the merchandise. In other
words, they do not own the merchandise because they neither buy nor sell (e.g., estate agents).
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B2B Channels
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Services
Hairdresser, car repair, plumber…
University using agents to attract
international students, letting
agencies, etc.
No tangible goods -> No stock holding
Inseparability of production and consumption -> High variability
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Channel Design
Channel Design: Designing effective
marketing channels by (1) analyzing
customer needs, (2) setting channel
objectives, (3) identifying major channel
alternatives, and (4) evaluating those
alternatives.
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(1) Analysing Customer Needs
What do customers want?
Understanding what customers
need, where they buy, when they
buy, why they buy from certain outlets,
how they buy…
- Do they want to buy online or offline?
- Are they willing to travel?
- Do they want many add-on services?
- Sometimes you need to make trade-offs.
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(2) Setting Channel Objectives
What must the channel achieve?
- Growth in sales by reaching new markets
and/or increasing sales in existing markets;
- Maintenance or improvement of market
share;
- Achieve a pattern of distribution by a certain
time, place, and form;
- Reduce costs or increase profits by creating
an efficient channel.
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(3) Identifying Major Alternatives
- Types of intermediaries (e.g., no intermediaries, retailer only, wholesaler and
retailer, etc.);
- Number of intermediaries:
• Intensive (e.g., toothpaste, snacks) – ;
• Exclusive: (e.g., luxury brands) –very limited number of dealers in each territory;
• Selective (e.g., appliances).
- Responsibilities of each intermediary (e.g., delivering goods, handling product
returns, providing after-sale support, providing credit, etc.).
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(4) Evaluating the Major Alternatives
- Economic Criterion: Expected sales, costs, profitability;
- Control Issues: Retaining/giving away control;
- Potential Conflicts: Conflicts across overlapping and distinct channels.
- Desired Flexibility: Adapting to environmental changes.
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Channel Management
(1) Selecting intermediaries: Identifying suitable
intermediaries and convincing them to carry your
products;
(2) Managing and motivating them: Forging
mutually beneficial relationships;
(3) Evaluating their performance over time.
Intermediaries are independent business firms. These
firms may be reluctant to change their practices.
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