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10.1. Distribution Introduction

Producing something that consumers would like to buy is only part of the story; people can only buy products that are available and easily obtained. In terms of the seven Ps distribution is the means by which place is determined. Marketers therefore spend considerable effort on finding the right channels of distribution, and on ensuring that the products reach consumers in the most efficient way. In business-to-business marketing, distribution is often the real key to success. Business buyers may buy through agents or wholesalers rather than direct from producers, so that tapping into a good distribution network is the most important step a company can take.

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Distribution strategies are concerned with the channels that a company may engage to make its goods and services available to consumers. Channels are the organized structures of buyers and sellers that bridge the gap of time and space between manufacturer and the customer. There are hundreds of ways goods and services can be distributed to customer. These may be identified from direct bulk shipments in railcars or pipelines to the use of complex arrangements of brokers, wholesalers, and retailers. No single distribution satisfies the needs of every firm, and many organizations use several channels to reach different market segments. A paper mill, for example may contact large users directly, whereas independent wholesalers service smaller customers. Distribution channels help conquer the time and distance intervals that divide users from the merchandise they need. Channel members initiate and complete many of the following vital activities:

  • Communication: Dispense product information to customers and report on market potentials, competitors, and market conditions
  • Bargaining: Negotiate agreements on prices and terms with potential
  • Reordering: Transmit orders for merchandising back to manufacturers
  • Financing: Acquire funds to finance inventories and distribution facilities
  • Maintain inventories: Assume the risk of storage and movement of the channel.
  • Cash settlements: Collect money from buyers and deliver it to sellers.
  • Ownership: Transfer title for goods and services from one firm to another

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Some of these activities flow forward (title, inventories) and some move backward (ordering, market data). All of them need to be performed by someone who does the work of distribution depending on the costs different channels and the efficiencies of specialization. If the manufacturer assumes these functions, the selling prices must be adjusted to cover the costs.

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