Distribution-activities that make products available to customers when and where they need them. A channel of distribution or marketing channel is a group of individuals and organizations that directs the flow of products from producers and customers. Marketing Intermediaries link producers to other intermediaries or to the ultimate users of the product. Operate between the producer and the final buyer. Types of utility distribution offers: TIME... when the customers want to purchase the product. PLACE... where the customers want to purchase the product.
POSSESSION... facilitates customer ownership of the product. FORM... sometimes, if changes have been made to the product in the distribution channel, i. e. Pepsi/Coke, concentrate to bottlers. Each channel member has different responsibilities within the overall structure of the distribution of the system; mutual profit/success is obtained through cooperation. The distribution system: determines a product's marketing presence and the buyers' accessibility to the product entails a long-term commitment, easier to change other aspects of the marketing mix.
Justification for Intermediaries "we've eliminated the middle man and we're passing on the savings to you"-a typical broadcast from Supermarket XYZ Why do we use intermediaries? Without intermediaries: May be able to reduce distribution costs, if the supermarket can perform those functions more efficiently than a wholesaler, but the supermarket inventory costs may increase as a consequence, therefore no savings and less efficient. Number 1 Reason Improve exchange efficiency.
There are certain costs associated with an exchange, therefore need to try to reduce the number of transactions (exchanges): *Chicken *Customer1 With 1 intermediary---10 transactions *Potatoes *Customer2 With no intermediaries---25 transactions *Carrots * *Customer3 *Plates *Customer4 *Silverware *Customer5 Without an intermediary, each buyer has to negotiate and exchange with each seller. With one intermediary, each buyer negotiates with one intermediary (as opposed to 5 sellers), and each seller negotiates with one intermediary (as opposed to 5 buyers). Number 2 Reason
Intermediaries are specialists in the exchange process, provide access to and control over important resources for the proper functioning of the marketing channel. Division of labor. Still need services that intermediaries (wholesalers, retailers etc. ) provide; if they were eliminated then someone else would have to assume the tasks (either producer or customer). Functions can be shifted and shared among channel members, but cannot be eliminated, unless the buyer assumes them. "you can eliminate the middle man, but you can't eliminate their functions"-a well accepted maxim in marketing. Functions of Intermediaries