Revel flashcards Chapter 8.1 What re different channel structures?

Question 1

What is a distribution channel?

Answer 1

A channel can be defined as a structure linking a group of individuals or organisations through which a product or service is made available to the consumer or industrial user.

Question 2

What is the channel structure?

Answer 2

The route selected to move a product to market through different intermediaries.

Question 3

What are the 4 most common channel structures in consumer markets?

Answer 3

Producer-Consumer (direct supply)

Producer-Retailer-Consumer (short channel)

Producer-Wholesaler-retailer-Consumer (long channel)

Producer-Agent-Wholesaler-Retailer-Consumer.

Question 4

Producer-Consumer (direct supply):

Answer 4

Manufacturer and consumer deal directly with one another.

Question 5

Producer-retailer-Consumer (short channel):

Answer 5

• Most popular with large retailers since they can buy in large quantities.

Question 6

Producer-Wholesaler-Retailer-Consumer (long channel):

Answer 6

• Adding a wholesaler can benefit both sides, so both small and large manufacturers.
• Wholesaler can split up large quantities of bulk for smaller retailers and provide access to a wider range of manufacturers goods for the small retailer.
• Wholesaler, can act on behalf of relatively large manufacturers trying to sell large volumes of frequently reordered products to a wide retail network.

Question 7

Producer-agent-wholesaler-retailer-consumer:

Answer 7

• Longest most indirect channel.
• May be used when a firm is looking to expand overseas, as an agent will be chosen based on their local knowledge, contacts and expertise of selling in that country.
• Problem, is the manufacturer is totally dependent on the agent and the quality of their knowledge.

Question 8

What affects the type of channel structure often found in B2B markets:

Answer 8

• Type and frequency of purchase.
• Quantity purchased.
• Importance of the product to the buyer.

Question 9

What are the 4 channel structures for B2B goods:

Answer 9

Manufacturer-User.
Manufacturer-Distributor-User.
Manufacturer-Agent-User.
Manufacturer-Agent-Distributor-User.

Question 10

Manufacturer-User (B2B): Direct channel

Answer 10

• Direct channel
• Likely to be a small number of buyers which may be confined to one specific geographical area.

Question 11

Manufacturer-Distributer-User (B2B):

Answer 11

• Less direct channels tend to be adopted when the numbers of customers grows, size of customers decreases and the number of intermediary functions also increases.

Question 12

Manufacturer-Agent-User (B2B):

Answer 12

• Agent introduced for selling expertise and to generate complete transactions.
• Difference between an agent and a broker, an agent is retained on a long term basis on behalf of the client whereas a broker tends to be used in a one off situation to fulfil a certain need.
• Main problem with an agent are the commission that needs to be paid.

Question 13

Manufacturer-Agent-Distributor-User (B2B):

Answer 13

• Structure is particularly useful in fast moving exporting markets.
• Using multiple channels enables more market segments to be reached which can increase penetration levels.