TABLE OF CONTENTS The routes marketing companies take to ensure that their goods and services reach the intended market or market segments is now examined. The term distribution system refers to a complex of agents, wholesalers and retailers through which manufacturers move products to their intended markets. Marketing channels are usually made up of independent firms who are in business to make a profit. These are known as marketing intermediaries or middlemen. Distribution outlets can include combinations of owned and independent outlets or arrangements like franchising (see Ivey, 2002, p. 13).
In designing a distribution system, a manufacturer must make a policy choice between selling directly to customers and employing salespeople and using intermediaries, that is, selling through agents, wholesalers and retailers. Initially, the decision is usually based on cost factors. Distribution costs are largely a function of:
the number of potential customers in the market;
how concentrated or dispersed they are;
how much each will buy in a given period;
costs associated with the practical side of the distributive operation (e.g. transport, warehousing and stockholding all of which are dealt with in detail in Chapter 9).
If the manufacturer has a large enough potential sales volume, there may be a case for selling direct and employing a sales force. Industrial goods manufacturers tend to use direct selling and often deliver direct to the customer, although in some cases wholesalers or factors' are used. Consumer goods manufacturers tend to use a network of marketing intermediaries because...
