Chapter 15

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University of Toronto Scarborough
Management (MGM)
Ingrid L.Stefanovic

INTRODUCTION Adding more intermediaries to the distribution channel can make distribution more efficient than selling direct Marketing channels create time, place, and ownership utility in a direct way Products if the highest quality will fail to generate adequate sales unless it is delivered to the right place, at the right time, and with appropriate legal requirements Distribution channels (marketing channels) are the paths that goods and title to these goods follow from producer to consumer o Provides purchasers with a convenient means of obtaining the products they want to buy Marketing intermediary is a business firm operating between the producer and the consumer or business purchaser Wholesaling is the activities of intermediaries who sell to retailers, other wholesalers, and business users but not in significant amounts to ultimate consumers Confusion can result from the practices of some firms that operate both wholesaling and retailing operations Also another source of confusion is the misleading practice of some retailers who claim to be wholesalers Retailers is a store that sells products purchased by individuals for their own use and not for resale THE ROLE OF DISTRIBUTION CHANNELS IN MARKETING STRATEGY Distribution Channels Perform Important Functions Facilitating the exchange process As market economies grew, the exchange process itself became complicated With more producers and more potential buyers, intermediaries came into existence to facilitate transactions by cutting down the number of marketplace contacts Sorting to alleviate discrepancies in assortment A producer tends to maximize the quantity of a limited line of products The buyer needs a minimum quantity of a wide selection of alternatives Sorting is the process that alleviates discrepancies in assortment by reallocating the outputs of various producers into assortments desired by individual purchasers Standardizing transactions Distribution channels standardize exchange transactions in terms of the product, such as grading of apples into types and grades, and the transfer process itself Holding inventories Hold a minimum of inventories to take advantage of economies of scale in transporting and to provide a buffer for small changes in demand Assisting in the search process
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