Channels of Distribution

BY:
Selva Swastika
233
L-57
PRINCIPLES OF
MARKETING
Chapter-”CHANNELS OF
DISTRIBUTION”
CHANNELS OF DISTRIBUTION
A DISTRIBUTION CHANNEL CONSIST OF THE

SET OF PEOPLE AND FIRMS INVOLVED IN THE
TRANSFER OF TITLE TO A PRODUCT AS THE
PRODUCT MOVES FROM PRODUCER TO
ULTIMATE CONSUMER OR BUSINESS USERS.
- STANTON
TRADE
CHANNELS
FUNCTIONS OF CHANNELS OF
DISTRIBUTION
• Procurement and Sorting
• Accumulation
• Allocation and Packing in Convenient Lots
• Assortment
• Risk-Taking
• Promotion
• Price Negotiation
SIGNIFICANCE OF CHANNELS OF DISTRIBUTION
• Influence on other marketing mix variables

• Part of price
• Long term implications
• Degree of channel control
FACTORS AFFECTING THE CHOICE OF DISTRIBUTION
CHANNELS
Middlema
Company Product Market
n
considera considera considera
considera
tion tion tion
tion
Production Financial
volume resources
Management’
COMPANY s experience
-
CONSIDERATION &
competence
Desire for Service

control of provided by
channels channels
Unit value Product line
Perishabili PRODUCT Standardize

ty CONSIDERATION d product
Bulk and Technical

weight nature
Availability of
Financial
desired
ability
middlemen
Attitude
Competition MIDDLEMAN of
and legal
constraints
CONSIDERATION middleme
n
Sales
Cost
potential
Consumer or Number of
industrial potential
market customers
MARKET
- Size of order
CONSIDERATION
Geographical
Customer’s
concentration
buying habits
of market
LEVELS OF DISTRIBUTION INTENSITY
Intensity level Objective Example
Intensive Product is sold in as Convenience
distribution many outlets as
possible in the given goods like soap,
region. soft drinks, food
products,
cosmetics etc.
Selective Selling a product at Specialty
distribution select outlets in given
region goods, home
appliance
brands,
furniture,
television
Exclusive Selling a product Heavy industrial
distribution through one or very equipments
few outlets in given
FACTORS CONSIDERED FOR THE SELECTION OF
MIDDLEMEN
Middleman’s
Middleman’s
Middleman’s knowledge
financial
location and
position
experience
Middleman’s
Middleman’s
ability to
capacity to
render after-
promote sale
sales service
CREATING A MARKETING CHANNELS STRATEGY
FOR EUROPEAN MARKET ENTRY: A CASE
STUDY FOR ELOSPACES
Introduction
In the modern business world, it has become
more difficult for companies to get a
sustainable competitive advantage. The
development of global competition,
technology and advertising industry have
made maintenance, pricing and promotion
strategies for the product more complicated.
Concerning these challenges, importance of
marketing channels, as a strategic tool, has
been rapidly growing. Indeed, marketing
channel strategy offers greater potential to
attain unique competitive advantage,
especially when entering new markets
The optimal for eloSpaces would be 1 or
2-level marketing channel so, 1 or 2
intermediaries between eloSpaces and
customers (see Figure 13). According
to Kotler (2016, 730), as a nonstandard
product, eloSpaces should be sold by
sales representatives through
distributors. In the first case, eloSpace
would sell to distributor and the
distributor would close the deals. In
the second scenario, importer would
buy from eloSpaces and resell to
distributors, that deliver the capsule to
end-users.
Marketing channels for Elospaces
Elospaces
Distribut Custome
er r
Two-level channel would be most convenient for
eloSpaces to maintain the relationship with
consumers and get the post-sales data. In would
also allow to have more control over any
intermediary and request sales and user
statistics. If eloSpaces manage to make not just
agreement, but a partnership with an
intermediary, it would guarantee quality and
honest work from the side of intermediary.
There are online platforms and offline investment

fairs where EloSpaces can find dealers. Online
platforms for furniture manufacturers is a great
opportunity, where producers can find dealers
and factories, exchange information on furniture
exhibitions and pubic information about
investment fairs.
It was noticed in B2B survey execution process
that contacting different hotels and business
centers one by one appeared to be not
productive. Chain hotels typically hire design
firms that advise on furnishing and premises
design. Therefore, eloSpaces should focus on
introducing business proposals to them. As
eloSpaces target high-end hotels, they have to
maintain good relationship with design firms.
Design companies directly recommend
furniture vendors or procurement agencies to
hotels. Representatives of design firms are
important decision makers also in the public
bidding process. Important hotel furniture
vendors host hotel design events regularly to
maintain the relationship with design firms.
Same applies to office spaces. Architects and
designers plan offices and, in most of the cases,
it is up to them what furniture pieces will be
bought and used. It is important to contact
design firms and introduce eloSpace as soon as
possible because planners will be able to
implement the item only in the next new project.
Design or architecture company could also play a
role of dealer between eloSpaces and
office/business centers, hotels or other
companies and take care of negotiation process.
Other dealers could be represented by
showrooms, hotel and office suppliers, design
furniture chains. In addition, the qualities of
eloSpace capsule allow to rent it to professional
furniture hire companies, which lease quality
furniture to events, exhibitions and conference
venues.
Before making partnership agreements there
are two types of distribution tasks to be
decided by eloSpaces management – physical
distribution and marketing. When taking care
of logistics and transportation, the most
important aspect for eloSpaces to decide is how
to perform efficient delivery from China to
Europe and further to the distributors or
customers. If eloSpaces are produced only upon
the order, the company can have just small
inventory of 2-3 products ready which don’t
require much storage space. However, there is
an option that dealers would like to order big
batches to decrease manufacturing and
transportation cost, but it would lead to
building a storage place for inventory.
Marketing tasks include pricing strategy and
promotion among potential B2B customers. It
means that eloSpaces have to establish the
pricing conditions with marketing intermediaries.
Agents usually make their profit on commissions
or fees paid for the services they provide to the
company, so eloSpaces would need to agree the
percentage of these commissions. Wholesalers in
their turn would purchase the capsules from
eloSpaces and resell them to other intermediaries
at a higher price. Distributors work in a similar
way as wholesalers but they prefer to maintain
partnerships with producers. Distributors likely to
work on exclusive rights and they would take title
to eloSpaces and store them until they are sold
(Business dictionary 2016).
The other thing to be decided in promotion
ways among potential B2B customers.
According to Bizible research (Nguyen
2015), email marketing is one of the most
effective marketing channels for
manufacturers such as eloSpaces.
Intermediaries could help with email
distribution among their established
network and database. In addition, content
marketing and exhibitions could bring great
value for eloSpaces. eloSpaces can clearly
communicate the value proposition by
participating in different events and
conferences. Face-to-face communication
can help to establish a customer need for
the product, which is crucial for new product
on the market.
CONCLUSION
Based on all data collected and analyzed, it
can be concluded that eloSpaces should work
through various intermediaries in Europe,
such as importers and dealers. The optimal
channel should have 1-2 levels, in order to
have more control over the intermediary and
be able to request user experience data and
feedback. The main benefit of working
through intermediaries, for a startup
company such as eloSpaces, is getting access
to the contacts and established network of
an intermediary, and as a consequence
reaching a wider market and achieving
revenue growth.

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A DISTRIBUTION CHANNEL CONSIST OF THE

SIGNIFICANCE OF CHANNELS OF DISTRIBUTION

• Influence on other marketing mix variables

Desire for Service

Perishabili PRODUCT Standardize

Bulk and Technical

There are online platforms and offline investment

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