Page 580 - Business Principles and Management

Chapter 21 • Product Development and Distribution

Producers need distribution channels whether they make products for
consumers or for other businesses. The channels that products follow may be
quite simple and short or long and complex. The shortest path is for the pro-
ducer to sell directly to the user; the longest path can include a retailer, a whole-
saler, and even other businesses.
When producers sell directly to the ultimate consumer, it is called direct
distribution. When distribution takes place through channel members, it is called
indirect distribution. Figure 21-3 illustrates different types of distribution channels.

DIRECT DISTRIBUTION
Direct distribution (sometimes called direct marketing) is accomplished in a
number of ways. One way is for sales representatives to call on users in person.
This is the primary method businesses use when selling to other businesses. An-
other popular form of direct distribution is the use of the mail. Businesses send
letters and advertising brochures or catalogs to prospective customers through
the mail or e-mail. Customers can use a mail-order form, telephone, fax, or on-
line order form to make purchases directly from the manufacturer.
Today, one of the most popular methods of direct distribution is telemarket-
ing. Telemarketing is marketing goods and services by telephone. It combines
telephone sales with computer technology. Salespeople at computer terminals
make and receive calls to and from prospective customers. Some telemarketing
simply involves taking orders from customers who have seen merchandise ad-
vertised on television or in direct-mail advertising. When making a sale, the
salesperson completes an order form displayed on the terminal screen, then
routes the form to the company’s distribution center for shipment. Telemarket-
ing is an extremely efficient method of direct marketing, although its misuse by
some consumer-marketing companies has given it a bad name. Poorly prepared
salespeople and calls placed at an inconvenient time for products that customers
don’t want are not elements of effective business practices.
An increasingly popular method of direct distribution is through the Inter-
net. A manufacturer can develop a Web site on which to feature its products.
Customers order the products online from the site, and the company ships the
products directly to the purchaser. Internet sales are expected to become a large

FIGURE 21-3 Types of Distribution Channels for Consumer Products

DIRECT DISTRIBUTION INDIRECT DISTRIBUTION

PRODUCER PRODUCER PRODUCER

WHOLESALER

RETAILER RETAILER

CONSUMER CONSUMER CONSUMER

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