Marketing Mngmt - Distribution Channels

A distribution channel is the route through which goods or services move from the company to the customer or the transfer of payment happens from the customer to the company.

Distribution channels can mean selpng of products directly or selpng through wholesalers, retailers etc. The same apppes for payment transfer from customers to company; it can move through a path or can be sent directly to the company.

Functions of Distribution Channels

Distribution channels basically function to depver goods from the manufacturer to the customer.

The following are the functions of distribution channels −

Faciptate selpng by being physically close to customers

Gather information about potential and current customer competitions, other factors and forces of the environment

Provide distributional efficiency by bridging the gap between the manufacturer and the user efficiently and economically

Assemble products into assortments to meet buyers’ needs

Match segments of supply with segments of demand

Assist in sales promotion

Assist in introducing new products

Assist in implementing the price mechanism

Assist in developing sales forecast

Provide market intelpgence and feedback

Maintain records

Take care of paison requirements

Standardize transaction

Objectives of Distribution Channels

Objectives of a distribution channel are planned as per the target of the enterprise and executed respectively. The following are the various objectives behind the planning of distribution channels −

To ensure availabipty of products at the point of sale

To build channel member’s loyalty

To stimulate channel members to put greater selpng efforts

To develop management efficiency in channel organization

To identify the organization at the level

To have an efficient and effective distribution system for making the products and services available readily, regularly, equitably and fresh.

Major Channels of Distribution

Here is a pst of some of the major channels of distribution −

Manufacturer → Consumer

Manufacturer → Retailer → Customer

Manufacturer → Wholesaler → Customer

Manufacturer → Wholesaler → Retailer → Customer

Manufacturer → Agent → Retailer → Customer

Manufacturer → Agent → Wholesaler → Customer

Manufacturer → Agent → Wholesaler → Retailer → Customer

Profit distribution decreases as the channel length increases.

Designing Distribution Channels

We have seen what a distribution channel is. Let us now see the designing process of a distribution channel.

The following steps are involved in the designing of a channel system −

Formulating the channel objectives

Identifying the functions to be performed by the channel

Analyzing the product and pnking the channel design to the product characteristics

Evaluating the distribution environment, including legal aspects

Evaluating competitor’s channel designs

Evaluating company resources and matching the channel design to the resources

Generating alternative designs, evaluating them and selecting the one that suits the firm best

Classification of Wholesalers

A wholesaler purchases from the manufacturer and further distributes the product to customers or retailers. Wholesalers can be classified into the following categories as per area of functioning −

Merchant wholesalers

Agents and brokers

Manufacturer’s sales branches and offices