Objective 4.09
Channel of Distribution
Identify factors that affect the choice of channel of distribution
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1. Nature of market- there are many aspects of market which
determine the choice of channel of distribution The most
important consideration in choosing a distribution channel is that
market segment the producer wants to reach. Changes in
consumer buying behavior may influence a channel decision.
2. Nature of product -considerably affects the choice of channel of
distribution.
3. Nature of the company – a firm having enough financial
resources can afford to its own a distribution force and retail
outlet, or both.
4. Middlemen consideration -if the right kind of middlemen
having the necessary experience, contacts, financial strength and
integrity are available, their use is preferred as they can ensure
success of newly introduced products.
Describe how the following factors affect selection of distribution channels
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Nature of product 1. industrial/consumer production – when the product being manufactured and
sold is industrial in nature, direct channel is useful because of the relatively small
number of customers need for personalized attention, customer training
requirements and after sale servicing
2. perishable nature – when products are perishable nature, like milk, dairy
products bread and meat, etc., it is useful to opt for direct channel
3. seasonality – when product sale is subject to seasonal variations like woolen
textile in India. In such cases intermediaries are seldom prepared undertake the
function of inventory carrying and as consequence manufacturer build up indirect
distribution channels
4. technicality – when product is very technical and complex like computers
business machines etc. the direct channel is relatively more useful
1. consumer-the number of consumers,
their geographic location and purchase
pattern considerable affect the choice of
a channel
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Describe
how the following factors affect selection of distribution channels
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2. intermediaries -the relative strengths
& weaknesses of intermediaries and the
differences in the types o unctions
performed and facilities and privileges
desired by them often determine the
choice o channel
3. competitors – the distribution
channel used by competitors also
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Access to channel members
Describe how the following factors affect selection of distribution channels
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1. middlemen/agents-engaged in the
process of transfer of title of goods
2. marketing intermediaries, operating
between the producer and the consumer
or industrial purchaser
3. wholesaling intermediaries, selling
primarily to retailers, other wholesalers,
r industrial users
4. retailers, selling goods and services
to individuals for their own use rather
Explain procedures for selecting channels of distribution
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Steps for selecting distribution include:
1. Identify how competitors' products are
sold.
• 2. Analyze strengths, weaknesses,
opportunities, and threats for your
business.
• 3. Examine costs of channels and sales
force options.
• 4. Determine which distribution options
match your overall marketing strategy.
• 5. Prioritize your distribution choices.
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Demonstrate procedures for selecting channels of distribution.
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The selection of a distribution channel depends on several factors:
the market, the product, the producer, and the competition.
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1. “Market factor -The most important consideration in choosing a
distribution channel is that market segment the producer wants to
reach. Changes in consumer buying behavior may influence a channel
decision.
2. Product factors - Products that are complex, expensive, custommade, and perishable move through shorter distribution channels.
Inexpensive and standardized products are typically sold through
longer channels.
3. Producer factors - Producers that offer a broad product line and
have the financial and marketing resources to distribute and promote
their products are more likely to use a shorter channel of distribution.”
http://faculty.piercecollege.edu/rskidmore/Ghost/library/Chapters/CHPT15-04.pdf
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Types
ofAchannels for consumer goods and services
Channel
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There are five ways in which direct distribution is
used for consumer goods:
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1.
selling products at the production site
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2.
having a sales force call on consumers at home
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3.
using catalogs or ads to generate sales
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4.
having a sales representative call a consume on the
telephone (telemarketing)
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5.
using the internet to make online sales
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Channel B
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most commonly used for merchandise that dates
Types of channels for consumer goods and services
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Channel C
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Channel D
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the most common distribution method for staple goods,
which are items that are always carried in stock and whose
styles do not change frequently – distribution of goods and
services goes from manufacturers/producers to wholesalers to
retailers to consumers
this channel is for manufacturers who wish to
concentrate on production and leave sales and distribution to
others – distribution of goods and services goes from
manufacturers/producers to agents to wholesalers to retailers
to consumers
Types of channels for consumer goods and services
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Channel E
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This channel is chosen by
manufacturers who do not want to
handle their own sales to retailers –
distribution of goods and services goes
from manufacturers/producers to agents
to retailers to consumers
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Channel A
Types of channels for industrial products goods and services
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Channel B
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most common method of distribution
for major equipment used in
manufacturing and other businesses –
goods/services goes directly from
manufacturer/producer to industrial user
used most often from small
standardized parts and operational
supplies needed to run a business –
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Channel C
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Channel D
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Types of channels for industrial products goods and services
small manufacturers who do not
have the time or money to invest in a
direct sales – goods/services goes from
manufacturer/producer to agents to
industrial distributors to industrial users
used when a manufacturer does not
want to hire its own sales once –
goods/services goes from
manufacturer/producer to agents to
Demonstrate procedures for selecting channels of distribution
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4. “Competitive factors - Producers
consider how well an intermediary
performs marketing functions. A
producer may become less competitive
when an intermediary fails to adequately
promote the firm's products.”
http://faculty.piercecollege.edu/rskidmore/Ghost/library/Chapters/CHPT15-04.pdf
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Selective distribution
means
that
you
Distributions
only distribute to a small number of
customers based on
1. Type of store, e.g., boutique or
specialty
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2. Geographic location
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3. Minimum order, and
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4. The image of the store
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Exclusive distribution strategies are
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Limited distribution can create
exclusivity.Distributions
Exclusivity can also be
created by limiting the quantity of goods
available, such as limited editions. For
example, some private label or store
brands, such as Nordstrom's and Saks
Fifth Avenue, are available only at those
stores
Mass distribution is an alternative
distribution strategy. You will use this
strategy if you want to sell to as many
http://www.scribd.com/doc/22784449/307/FACTORS-AFFECTING-THE-CHOICE-OF-DISTRIBUTION-CHANNEL
RESOURCES
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Allen, K.R. & Meyer, E.C. (2006). Entrepreneurship and small business
management (pp. 210-213). Woodland Hills, CA: Glencoe/McGraw-Hill
Farese, L.S.; Kimbrell, G.; & Woloszyk, C.A. (2002). Marketing essentials
(pp. 375-379). Woodland Hills, CA: Glencoe/McGraw-Hill.
http://faculty.piercecollege.edu/rskidmore/Ghost/library/Chapters/CHPT15-04.pdf
http://www.scribd.com/doc/22784449/307/FACTORS-AFFECTING-THECHOICE-OF-DISTRIBUTION-CHANNEL