Entrepreneurship and Small Business (ESB) Certification Practice Exam

Which term is commonly used for a system that utilizes only the manufacturer and the customer in distribution?

1. Multi-level distribution

2. Hybrid distribution

3. Direct distribution

4. Indirect distribution

The correct answer is: Direct distribution

The term "direct distribution" refers to a system where products or services move directly from the manufacturer to the customer, with no intermediaries involved. This distribution method often allows manufacturers to have more control over the sales process, pricing, and customer relationships. It can lead to a more personal connection with customers and can be particularly effective for businesses that sell customized or high-value products. In direct distribution, the manufacturer can gather immediate feedback from customers, which can be valuable for product development and marketing strategies. This approach is distinguished from other distribution methods where intermediaries such as wholesalers, retailers, or agents play a significant role in the transaction, which can complicate communication and control over the customer experience. The other distribution methods, like multi-level, hybrid, and indirect distribution, involve varying degrees of intermediaries and can complicate the relationship between the manufacturer and the customer. These methods may introduce additional layers in the supply chain, potentially impacting margins and customer engagement.