Distribution Decisions

Overall Distribution Design

Mindful of the factors affecting distribution decisions (i.e., marketing decision issues and relationship issues), the marketer has several options to choose from when settling on a design for their distribution network.  We stress the word “may” since while in theory an option would appear to be available, marketing decision factors (e.g., product, promotion, pricing, target markets) or the nature of distribution channel relationships may not permit the marketer to pursue a particular option.  For example, selling through a desired retailer may not be feasible if the retailer refuses to handle a product.

For marketers the choice of distribution design comes down to selecting between direct or indirect methods, or in some case choosing both.

Direct Distribution System

With a direct distribution system the marketer reaches the intended final user of their product by distributing the product directly to the customer.  That is, there are no other parties involved in the distribution process that take ownership of the product.  The direct system can be further divided by the method of communication that takes place when a sale occurs.  These methods are:

• Direct Marketing Systems – With this system the customer places the order either through information gained from non-personal contact with the marketer, such as by visiting the marketer’s website or ordering from the marketer’s catalog, or through personal communication with a customer representative who is not a salesperson, such as through toll-free telephone ordering.
• Direct Retail Systems – This type of system exists when a product marketer also operates their own retail outlets.  As previously discussed, Starbucks would fall into this category.
• Personal Selling Systems – The key to this direct distribution system is that a person whose main responsibility involves creating and managing sales (e.g., salesperson) is involved in the distribution process, generally by persuading the buyer to place an order.  While the order itself may not be handled by the salesperson (e.g., buyer physically places the order online or by phone) the salesperson plays a role in generating the sales.
• Assisted Marketing Systems – Under the assisted marketing system, the marketer relies on others to help communicate the marketer’s products but handles distribution directly to the customer.  The classic example of assisted marketing systems is eBay which helps bring buyers and sellers together for a fee.  Other agents and brokers would also fall into this category.