Distribution
channels is a set of independent organizations involved in a process of making
a product or service available for consumption. It facilitates the flow of
goods from Producer to consumers in right time and right place.
Need,
Role and Importance of Distribution Channels
- Serves as a connecting link between Producer and Consumer
- Creating time and place benefits or utilities
- Increase the efficiency of marketing process
- Facilitate the consumers in the buying process
- It converts Potential buyers to Actual buyers
- Help for reducing the cost transactions
- Act as a promotional tool and represent the company in the market Help for maintaining good relationship with consumers It facilitates the flow of goods.
Factors
affecting choice of Distribution Channels
Product
Factors
- Product
Feature – Quantitative and qualitative aspect of the
product
- Technicality
of the Product – such as Product specifications
- Range
of Products – Variety of product produced by an
organization
- Product
Price – Depends on the Length of the distribution
channels
Institutional
Factors
- Financing
Capacity – Investment in organizing and development of
channels
- Promotional
Ability – Creating awareness and motivate the consumers
- After
Sales Service – Add on services for the product
- Channel
cost
– Consideration for the distribution channels
- Reputation
and Prestige – Attractions and Values of the
distribution channels
- Marketing
Policies – No of Retailers and Wholesalers in the distribution
channel and availability of the goods.
Market
Factors
- Target
Market – Depends on Development, Level, and Importance of
the Places
- Availability
of Channels – Permanent and Temporary in Nature
- Buyer’s
Behaviour – It depends on Attention, Customized service, Credit
facilities etc
- Legal
Constraints – It depends on various regulation and
standards lay down by the Government and regulatory bodies For Ex: Licenses for
the Liquor items.
Types
of Distribution Channels
Producer
have many alternative levels channels available for distributing the product, a
channel levels indicates number of distinct categories of intermediaries in a
distribution channel. These channels vary in the number and types of middlemen
involved. The producer and consumer are part of every channel. Some channel
provides direct link and others indirect link between producers and consumers.
The distributions are generally divided into four types as follows:
Zero
Level Channel - Producer ------------------------------------------------------
Consumer
First
Level Channel – Producer ----------------------------------------Retailer----
Consumer
Second
Level Channel – Producer ------------------Wholesaler-----Retailer---- Consumer
Third
Level Channel – Producer ---Distributor----Wholesaler-----Retailer----
Consumer
- A
zero channel comprises of producer and customer. It
also called as Direct distribution channel where product directly sells from
producer to consumer without any middlemen. The major examples are Door to door
sales, Telemarketing, Logistics provided by the organizations to transport
capital goods.
- First
level channel contains only one middleman called as
Retailer. In this channel the prouder sells products to retailer who usually
buys in bulk quantities and sells the same to ultimate consumers in different
qualities. Sometime retailer also acts as wholesaler. This channel best
suitable for the consumer durables such as Electronics
- Second
level channel is the most common and traditional
channel of distribution. A two-level channel contains two intermediaries such
as Wholesaler and Retailer. This channel is best suited for producers with
limited resource. It also ideal for the products with widely scattered market.
- Third
level channel of distribution in which
three intermediaries are engaged. Under the producer has to transfer the
distribution work for Distributing Agents. Distributing agents simply
facilitate the process of sale and so not take possession or title of products.
This channel is suitable for wider distribution of various industrial products.
The distributor exclusively appointed by the producer based on the experience
and requirement of the market.
- Logistic
Management – Is a process of planning, organizing, designing and
controlling the transport activities of the organization. It includes
activities like Acquisition, Storage and transportation, delivery of goods,
etc.
Functions
of Channel Intermediaries
- Procurement and Assembling
- Warehousing and Storing
- Grading and Packing
- Selling
- Assumption of Risk
- Financing
- Supply of Market Information
- Advertising and Communication
