Page 219 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes Industries involved with the manufacture and marketing of industrial products are also those
that tend to be highly regulated by state and federal governmental agencies. The channel members
and participants serving these industries must frequently perform services mandated by
governmental regulations. The channel members’ capability of satisfying these regulations
significantly influences the manufacturers’ ability to manage their marketing channels for
compliance and effectiveness. Many consumer products also come under state and federal
regulations. The significant difference for the channel member is that consumer product
regulatory compliance is often completed at the point of processing or packaging, whereas for
industrial products, compliance follows each step in the marketing channel.
Sometimes manufacturers of industrial products work with more than one level of wholesalers.
Four of the most common channels for industrial products are shown in Figure 9.4.
Figure 9.4: The most Common Channels for Industrial Products

Manufacturer Manufacturer Manufacturer Manufacturer

Agent Agent

Industrial Industrial
Distributors Distributors

Industrial Industrial Industrial Industrial
Buyers Buyers Buyers Buyers
P Q R S

A large number of industrial products, particularly producers of expensive and technically
complex equipment sell directly to industrial buyers (Figure 9.4).

Example: IBM sells its mainframe computers direct to business buyers. Companies
producing standard industrial items, such as hand tools, and small operating equipment usually
operate through industrial distributors (Q).
Industrial distributors may carry a wide variety of product lines and items from different
manufacturers, or some may specialise and carry only limited number of lines. James D. Hlavecek
and Tommy J. McCuistion reported that this distribution channel suits producers making
products with broad market appeal, easily stocked, sold in small quantities, and needed on
demand to avoid high losses.
The advantages industrial distributors offer include selling services at low cost, extend credit to
customers and develop close relationship, and provide market intelligence to manufacturers.
They also minimise financial burden of manufacturer by holding adequate inventories in the
market. The disadvantages include lack of control because industrial distributors are independent

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