Lecture 9: Direct vs. Indirect

Question 1

What is the difference between an Indirect and Direct Distribution channels?

Answer 1

Indirect Distribution - Is when there are multiple intermediaries between the producer of the product and the customer. For example, a company produces a product that is sold to a wholesaler, who sells to a retailer, who sells to the end customer.

Direct Distribution - Is when there are no intermediaries and the producer sells directly to the end customer.

Question 2

What are some of the Pros and Cons of Direct and Indirect Distribution Channels?

Answer 2

Direct Distribution Channels:
- Stronger relationship to customer
- Stronger brand building
- High end user visibility
- More visibility into sales pipeline
- Lower variable costs
- Higher fixed costs
- Slower ramp up

Indirect Distribution Channels
- Lower Fixed Costs
- Wider reach
- Higher Variable Costs
- Weak brand building
- Too much margins lost
- Dependent on partners
- No direct control of sales

Question 3

What are the 3 kinds of Distribution Channels?

Answer 3

1. Separated
   - Distribution channels are split and seperated in order to avoid overlap
   - Meant for reaching multiple different customer segments according to the segment SODs (service of output demands) and the SOSs (service of output supplies)
   - Avoiding channel conflict
2. Hybrid
   - Distribution channels are meant to focus on customer acquisition, retention, and workload shared across channels.
   - Meant to create channel efficiency through synergy and teamwork
   - Attain best possible CRM and gain SOM (share of market)
3. Open-Competition
   - There is competition between all of the channels.
   - Who ever sells to more customers is the winner and the fittest
   - Goal is to reach customers any way you can.

Question 4

What are 3 ways to measure channel width/breath?

Answer 4

Channel width/breadth refers at what scale the product is being pushed through the distribution channels.

Intensive Distribution:
- Intensive distribution pushes the product in every outlet as possible, in order to get the product to the customer in any way possible
- Mostly for conevenience products, everyday products, cheaper end
- Low price
- Low brand loyalty/commodities
- Low technical complexity
- PLC stage: Mature

Selective Distribution
- Selective distribution refers to a product that is only available through select outlets, and some distribution channels
- Shopping products
- Medium price
- Some brand loyalty
- Medium technical complexity
- PLC stage: growth

Exclusive Distribution
- Exclusive distribution is when a product is only available in one or very few outlets.
- PLC stage: New/Intro to the market
- High price
- High brand loyalty