Distribution channels

(The famer in the picture is actually the producer. It can also be a miner or anyone else that produces goods.)

A distribution channel is the flow of a product or service in one direction (Producer to consumer). On the other hand, the money flows in the other direction (consumer to vendor).

Stages of the distribution channel

There are 6 different distribution channels

1.Producer to Consumer:

-Often seen in farms where products are directly sold to the client.

2.Producer to Retailor to Consumer:

-The clients buy the products from a retail outlet but it did NOT produce the product, the outlet only bought the product from the producer and it is often large to store a large quantity of products.

3.Producer to Wholesaler to Retailer to Consumer:

- The wholesaler buys a big quantity of products then breaks it into smaller bulks (that's why it's called breaking bulks) for the retailers to buy. Many small retailers don't want to buy large quantities of products since some can expire quickly and they don't have enough space to store the goods.

4.Producer to Agent to Wholesaler to Retailer to Consumer:

-The agent sells the product on behalf of the producer. This is often seen when the producer is from a foreign country and isn't familiar with the local market, the agents knows the market therefore knows how to sell the products in the right way.

How to select which channel to use?

You have to look at the following aspects:

-What type of product is it?

-Is it technical? If yes, then it should be sold by someone with technical knowledge.

-Where are the customers located? If most customers are located in the city then the products shouldn't be limited to rural areas.

-How perishable is the product? Food and flowers perish easily so it should be widely available to be sold off quickly.

-How expensive is the product? The image of the product is important as it affects the price so it should only be sold through a number of retailers.

Marketing Mix - Products

Types of Products

Products can be tangible or intangible. A Blackberry is a tangible product, but a real estate agent that helps find a house is also a product, or so called service, which is intangible.

tangible: physical asset; something that is perceived by the sense of touch.

There are three types of products:
1. Convenience goods
2. Shopping goods
3. Specialty goods

Convenience goods are NOT products found in 7-11 or other convenience stores, they are things like food, clothes…etc. Customers are unwilling to spend time and effort so the products have to be ready for selling and the brand has to be well known.

Shopping goods are those which customers are willing to invest a LOT of their time in. For example, a customer would spend a great deal of time to choose the perfect car or house because if he/she makes a bad decision then it is almost impossible to get a refund or regret it afterwards.

Specialty goods are targeted to a narrow segment of the population as these often require special skills or training. Drilling machines and industrial goods are good examples, a general housewife or bank manager won’t go into a store and ask for a drilling machine, would they?


Products can also be categorised in this way:
1.Consumer goods
2.Consumer services
3.Producer goods
4.Producer services

Consumer goods are products normal people buy. Some goods do not last long, like food. Some last longer like furniture and computers. These directly satisfy human wants.

Consumer services are services produced by people like a real estate agent or a hair dresser.

Producer goods are products produced for other businesses to use, they help the production process. They indircetly satisfy human wants. For example, trucks and machinery.

Producer services are services provided for manafacturing and other tertiary services like accounting and advertising agencies.

The Product Life Cycle

Different kinds of products have different life spans, some may stay popular throughout time (Coca Cola), some may be popular at the beginning and decline quickly (Cherry Coke) and some may be a failure since the moment they were introduced to the public.

From this we can see that even well known and successful company can also make mistakes and produce the wrong products that don’t meet the public’s demands.


A successful product has to match these 6 requirements:

1.Satisfies current needs of customers
2.Design and quality should match the brand image
3.Stimulates new wants from the customers
4. Not too expensive to produce (relative to the price)
5.Being the first company to introduce or produce it
6.Something special that makes it stand out from other products