Marketing Distribution Channel Partners

A marketing distribution channel is the avenue through which goods or services are delivered from the marketer to the target customer. Spanning the pathway between manufacturer and customer could be various intermediaries such as wholesalers, distributors, retailers and agents. The former 3 take title to goods and are considered resellers: wholesalers purchase products from manufacturers or other wholesalers and in turn sell to other (resellers) wholesalers or retailers; retailers purchase from manufacturers or wholesalers and resell to consumers.

Unlike resellers, specialty service firms don’t take title to goods; they include agents and brokers who facilitate transactions between buyer and sellers for a fee; also distribution service firms provide order processing, transportation and storage. Other firms may be included to provide transportation routing, security, or insurance.

One may question why a marketer would consider using intermediaries. Wouldn’t controlling all aspects of the distribution channel by being independent save costs?  It turns out that many benefits and efficiencies are gained by involving other parties. Below are several benefits from utilizing distribution channel partners.

Benefits of Specialization: Partners in the distribution channel are specialized in performing certain functions; FedEx and UPS, for example, are specialized in transportation. A manufacturer would save costs by using members’ transportation services as the alternative involves developing an extensive transportation system entailing the purchase of trucks, facilities, and routing systems-such an alternative would be inefficient as the manufacturer would not likely have the capabilities or experience to develop this transportation system. By utilizing partners’ specialized services, the manufacturer is left to do what it does best.

Reduced Transaction Time & Number: Imagine if a grocery store (retailer) received shipments directly from all its manufacturers daily. The grocer would be bombarded with hundreds of shipping trucks each carrying a few products; it would be very disrupting to coordinate these deliveries. Instead, a better arrangement would be for the grocer to purchase from a wholesaler that stocks the assortment and quantity of goods the grocer needs. The wholesaler would employ a warehouse specialized to take on shipments. From the manufacturer’s perspective, delivering to a single wholesaler versus delivering to many retailers, cuts the number of deliveries; costs savings are gained by making fewer shipments in bulk and reducing the paperwork for each transaction. An improved distribution scheme means less hassle and faster delivery of product onto store shelves-customers get their products when they want it.

Convenient Access to A Variety of Goods (Sorting Function): Retailers make consumers’ lives much easier by purchasing many different goods from multiple manufacturers and placing that assortment in a single location; in this respect, retailers perform a sorting function that collects a mix of goods and services that would meet the needs of the grocery shopper (target market).  If retailers did not perform the sorting function, then consumers would have to visit hundreds of manufacturers, one for each item needed. Big Box retailers, and warehouse clubs such as Costco, have massive assortments of goods under one roof, emphasizing convenience shopping to bring value to the consumer.

Resellers Buy in Bulk & Resell in Small Quantities: Manufacturers save transportation costs when they ship in large volumes of various products to wholesalers or retailers. Intermediaries then, resell these volumes in much smaller quantities that consumers prefer-a convenient option.

Intermediaries Aid in Pushing Products: Retailers perform an active selling role by promoting the merchandise through sales representatives who educate consumers, and perform in-store demonstrations. The retail facility also contains a layout for strategic product placement, in-store displays, and for storage of merchandise.

Intermediaries are Sources of Market Information: Retailers can provide useful sales data and feedback to the manufacturer on target market characteristics such as shopping habits (psychographics), preferred products in certain locations (geographic), and loyal consumer traits (demographics). Intermediaries can share computer network systems (and information) between themselves to coordinate all marketing efforts to bring better value to consumers.