distribution (marketing)



Distribution (or place) is one of the four elements of the
marketing mix The term "marketing mix" is a foundation model for businesses, historically centered around product, price, place, and promotion (also known as the "4 Ps"). The marketing mix has been defined as the "set of marketing tools that the firm uses to ...
. Distribution is the process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service provider or using indirect channels with distributors or
intermediaries An intermediary (or go-between) is a third party that offers intermediation services between two parties, which involves conveying messages between principals in a dispute, preventing direct contact and potential escalation of the issue. In law ...
. The other three elements of the
marketing mix The term "marketing mix" is a foundation model for businesses, historically centered around product, price, place, and promotion (also known as the "4 Ps"). The marketing mix has been defined as the "set of marketing tools that the firm uses to ...
are product,
pricing Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...
, and
promotion Promotion may refer to: Marketing * Promotion (marketing), one of the four marketing mix elements, comprising any type of marketing communication used to inform or persuade target audiences of the relative merits of a product, service, brand or ...
. Decisions about distribution need to be taken in line with a company's overall strategic
vision Vision, Visions, or The Vision may refer to: Perception Optical perception * Visual perception, the sense of sight * Visual system, the physical mechanism of eyesight * Computer vision, a field dealing with how computers can be made to gain und ...
and mission. Developing a coherent distribution plan is a central component of
strategic planning Strategic planning is an organization's process of defining its strategy or direction, and making decisions on allocating its resources to attain strategic goals. It may also extend to control mechanisms for guiding the implementation of the s ...
. At the strategic level, there are three broad approaches to distribution, namely mass, selective and exclusive distribution. The number and type of intermediaries selected largely depend on the strategic approach. The overall distribution channel should add value to the consumer.


Distribution is fundamentally concerned with ensuring that products reach target customers in the most direct and cost-efficient manner. In the case of services, distribution is principally concerned with access. Although distribution, as a concept, is relatively simple, in practice distribution management may involve a diverse range of activities and disciplines including detailed
logistics Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics manages the flow of goods between the point of origin and the point of consumption to meet the requirements of ...
transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipel ...
ation, warehousing, storage,
inventory management Field inventory management commonly known as inventory management is the function of understanding the stock mix of a company and the different demands on that stock. The demands are influenced by both external and internal factors and are bal ...
as well as channel management including selection of channel members and rewarding distributors.


strategies Strategy (from Greek στρατηγία ''stratēgia'', "art of troop leader; office of general, command, generalship") is a general plan to achieve one or more long-term or overall goals under conditions of uncertainty. In the sense of the " ...

Prior to designing a distribution system, the planner needs to determine what the
distribution channel Distribution (or place) is one of the four elements of the marketing mix. Distribution is the process of making a product or service available for the consumer or business user who needs it. This can be done directly by the producer or service p ...
is to achieve in broad terms. The overall approach to distributing products or services depends on a number of factors including the type of product, especially perishability; the market served; the geographic scope of operations and the firm's overall mission and vision. The process of setting out a broad statement of the aims and objectives of a distribution channel is a strategic level decision. Strategically, there are three approaches to distribution: * ''Mass distribution'' (also known as ''an'' ''intensive distribution''): When products are destined for a mass market, the marketer will seek out intermediaries that appeal to a broad market base. For example, snack foods and drinks are sold via a wide variety of outlets including supermarkets,
convenience store A convenience store, convenience shop, corner store or corner shop is a small retail business that stocks a range of everyday items such as coffee, groceries, snack foods, confectionery, soft drinks, ice creams, tobacco products, lottery ti ...
vending machine A vending machine is an automated machine that provides items such as snacks, beverages, cigarettes, and lottery tickets to consumers after cash, a credit card, or other forms of payment are inserted into the machine or otherwise made. The ...
cafeteria A cafeteria, sometimes called a canteen outside the U.S., is a type of food service location in which there is little or no waiting staff table service, whether a restaurant or within an institution such as a large office building or scho ...
s and others. The choice of distribution outlet is skewed towards those that can deliver mass markets in a cost efficient manner. * ''Selective distribution:'' A manufacturer may choose to restrict the number of outlets handling a product. For example, a manufacturer of premium electrical goods may choose to deal with department stores and independent outlets that can provide added value service level required to support the product. Dr. Scholl orthopedic sandals, for example, only sell their product through pharmacies because this type of intermediary supports the desired ''therapeutic'' positioning of the product. Some of the prestige brands of cosmetics and skincare, such as Estee Lauder,
Jurlique Jurlique International Pty Ltd, is an Australian cosmetics manufacturer specialising in natural botanical-based skincare and cosmetics under the Brand name Jurlique. Jurlique is considered ethical and environmentally friendly, although internatio ...
Clinique Clinique Laboratories, LLC () is an American manufacturer of skincare, cosmetics, toiletries and fragrances, usually sold in high-end department stores. It is a subsidiary of the Estée Lauder Companies. As of 2019, Clinique has over 22,000 cust ...
, insist that sales staff are trained to use the product range. The manufacturer will only allow trained clinicians to sell their products. * ''Exclusive distribution:'' In an exclusive distribution approach, a manufacturer chooses to deal with one intermediary or one type of intermediary. The advantage of an exclusive approach is that the manufacturer retains greater control over the distribution process. In exclusive arrangements, the distributor is expected to work closely with the manufacturer and add value to the product through service level, after sales care or client support services. Another definition of exclusive arrangement is an agreement between a supplier and a retailer granting the retailer exclusive rights within a specific geographic area to carry the supplier's product. Summary of strategic approaches to distribution

Push vs pull strategy

In consumer markets, another key strategic level decision is whether to use a push or pull strategy. In a ''push strategy'', the marketer uses intensive advertising and incentives aimed at distributors, especially retailers and wholesalers, with the expectation that they will stock the product or brand, and that consumers will purchase it when they see it in stores. In contrast, in a ''pull strategy'', the marketer promotes the product directly to consumers hoping that they will pressure retailers to stock the product or brand, thereby pulling it through the distribution channel. The choice of a push or pull strategy has important implications for advertising and promotion. In a push strategy, the promotional mix would consist of trade advertising and sales calls while the advertising media would normally be weighted towards trade magazines, exhibitions, and trade shows while a pull strategy would make more extensive use of consumer advertising and sales promotions while the media mix would be weighted towards mass-market media such as newspapers, magazines, television, and radio.

Channels and intermediaries

Distribution of products takes place by means of a marketing channel, also known as a distribution channel. A marketing channel is the people, organizations, and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. It is the way products get to the end-user, the consumer. This is mostly accomplished through merchant retailers or wholesalers or, in the international context, by importers. In certain specialist markets, agents or brokers may become involved in the marketing channel. Typical intermediaries involved in distribution include: * Wholesaler: A merchant intermediary who sells chiefly to retailers, other merchants, or industrial, institutional, and commercial users mainly for resale or business use. The transactions are B2B (Business to Business). Wholesalers typically sell in large quantities. (Wholesalers, by definition, do not deal directly with the public). * Retailer: A merchant intermediary who sells direct to the public. There are many different types of retail outlet - from hypermarts and supermarkets to small, independent stores. The transactions in this case are B2C (Business to Customer). * Agent: An intermediary who is authorized to act for a principal in order to facilitate exchange. Unlike merchant wholesalers and retailers, agents do not take title to goods, but simply put buyers and sellers together. Agents are typically paid via commissions by the principal. For example, travel agents are paid a commission of around 15% for each booking made with an airline or hotel operator. * Jobber: A special type of wholesaler, typically one who operates on a small scale and sells only to retailers or institutions. For example, rack jobbers are small independent wholesalers who operate from a truck, supplying convenience stores with snack foods and drinks on a regular basis.

Channel design

A firm can design any number of channels they require to reach customers efficiently and effectively. Channels can be distinguished by the number of intermediaries between producer and consumer. If there are no intermediaries then this is known as a ''zero-level'' distribution system or
direct marketing Direct marketing is a form of communicating an offer, where organizations communicate directly to a pre-selected customer and supply a method for a direct response. Among practitioners, it is also known as ''direct response marketing''. B ...
. A ''level one'' (sometimes called ''one-tier'') channel has a single intermediary. A ''level two'' (alternatively a ''two-tier'') channel has two intermediaries, and so on. This flow is typically represented as being manufacturer to retailer to consumer, but may involve other types of intermediaries. In practice, distribution systems for perishable goods tend to be shorter - direct or single intermediary, because of the need to reduce the time a product spends in transit or in storage. In other cases, distribution systems can become quite complex involving many levels and different types of intermediaries.

Channel mix

In practice, many organizations use a mix of different channels; a direct sales force may call on larger customers. This may be complemented with other agents to cover smaller customers and prospects. When a single organization uses a variety of different channels to reach its markets, this is known as a ''multi-channel'' distribution network. In addition, online retailing or
e-commerce E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the Internet. E-commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain manage ...
is leading to
disintermediation Disintermediation is the removal of intermediaries in economics from a supply chain, or "cutting out the middlemen" in connection with a transaction or a series of transactions. Instead of going through traditional distribution channels, whic ...
, the removal of intermediaries from a supply chain. Retailing via smartphone or m-commerce is also a growth area.

Managing channels

The firm's marketing department needs to design the most suitable channels for the firm's products, then select appropriate channel members or intermediaries. An organization may need to train staff of intermediaries and motivate the intermediary to sell the firm's products. The firm should monitor the channel's performance over time and modify the channel to enhance performance.

Channel motivation

To motivate intermediaries the firm can use positive actions, such as offering higher margins to the intermediary, special deals, premiums and allowances for advertising or display. On the other hand, negative actions may be necessary, such as threatening to cut back on margin, or hold back delivery of product. Care must be exercised when considering negative actions as these may fall foul of regulations and can contribute to a public backlash and a public relations disaster.

Channel conflict

Channel conflict can arise when one intermediary's actions prevent another intermediary from achieving their objectives. Vertical channel conflict occurs between the levels within a channel, and horizontal channel conflict occurs between intermediaries at the same level within a channel. Channel conflict is a perennial problem. There are risks that a powerful channel member may coordinate the interests of the channel for personal gain.

Trends in distribution

Channel switching

Channel-switching (not to be confused with zapping or channel surfing on TV) is the action of consumers switching from one type of channel intermediary to a different type of intermediary for their purchases. Examples include switching from brick-and-mortar stores to online catalogues and e-commerce providers; switching from grocery stores to convenience stores or switching from top tier department stores to mass market discount outlets. A number of factors have led to an increase in channel switching behaviour; the growth of e-commerce, the globalization of markets, the advent of
Category killer A category killer is a retailer, often a big-box store, that specializes in and carries a large product assortment of a given category. Their wide merchandise selections, deep supply, large buying power, and a comparative advantage to other retai ...
s (such as Officeworks and Kids 'R Us) as well as changes in the legal or statutory environment. For instance, in Australia and New Zealand, following a relaxation of laws prohibiting supermarkets from selling therapeutic goods, consumers are gradually switching away from pharmacies and towards supermarkets for the purchase of minor analgesics, cough and cold preparations and complementary medicines such as vitamins and herbal remedies. For the consumer, channel switching offers a more diverse shopping experience. However, marketers need to be alert to channel switching because of its potential to erode market share. Evidence of channel switching can suggest that disruptive forces are at play, and that consumer behaviour is undergoing fundamental changes. A consumer may be prompted to switch channels when the product or service can be found at cheaper prices, when superior models become available, when a wider range is offered, or simply because it is more convenient to shop through a different channel (e.g. online or one-stop shopping). As a hedge against market share losses due to switching behaviour, some retailers engage in multi-channel retailing.

Customer value

The emergence of a service-dominant logic perspective has focused scholarly attention on how distribution networks serve to create customer value and to consider how value is co-created by all the players within the distribution chain, including the value created by customers themselves. This emphasis on value-creation is contributing to a change in terminology surrounding distribution processes; "distribution networks" are often termed ''value-chains'' while "distribution centers" are often termed '' customer fulfillment centers.'' For example, the retail giant Amazon, which utilizes both direct online distribution alongside bricks and mortar stores, now calls its distribution centers "customer fulfillment centers". Although the term, "customer fulfillment center" has been criticized on the grounds that it is a
neologism A neologism Ancient_Greek.html"_;"title="_from_Ancient_Greek">Greek_νέο-_''néo''(="new")_and_λόγος_/''lógos''_meaning_"speech,_utterance"is_a_relatively_recent_or_isolated_term,_word,_or_phrase_that_may_be_in_the_process_of_entering_com ...
, its use is becoming increasingly mainstream as it slowly makes its way into introductory marketing textbooks.


Disintermediation occurs when manufacturers or service providers eliminate intermediaries from the distribution network and deal directly with purchasers. Disintermediation is found in industries where radically new types of channel intermediaries displace traditional distributors. The widespread public acceptance of online shopping has been a major trigger for disintermediation in some industries. Certain types of traditional intermediaries are dropping by the wayside.Armstrong, G., Adam, S., Denize, S. and Kotler, P., ''Principles of Marketing,'' Asia-Pacific ed., Australia, Pearson, 2014, pp 315-316

See also


External links

pierce college.edu PDF, Product DistributionDifference between an agent, distributor and franchise
{{Authority control Business terms Service industries Trade