Factors affecting the choice of distribution channel
Distribution is an activity that involves effecting the flow of goods and services from the point of production to end users or consumers. It is the means or process by which goods and services move from the point of production to the point of consumption. The primary importance of distribution is to help bridge the gap in time and place that separates goods and services from those who need them.
The distribution channel is the means by which goods and services are made available to consumers in the marketplace. It is an organized system of agencies and institutions, which in combination carry out all the activities required to link producers with consumers in order to fulfill the desired marketing task.
TYPES OF DISTRIBUTION CHANNEL
There are two main types of channel system which are;
1) Conventional Marketing System – This includes an independent producer, wholesaler and retailer. Each is a separate business entity seeking to maximize its own profits. It’s more or less a highly fragmented network in which loosely aligned manufacturers, wholesalers and retailers have haggled and negotiated terms of sale.
2) Vertical Marketing System: This is a type of distribution channel where coordination is achieved because the producer, wholesaler, and retailer act as a unified system. Any member owns the others, and no individual member can dominate the system. It is also effective in controlling channel behavior and eliminating conflicts that arise when independent channel members pursue their own goals.
FORMS OF DISTRIBUTION CHANNEL
Any of the types mentioned above can take any of these forms.
There are three forms of distribution channel which are;
I. Direct Channel – It is when producers decide to sell directly to consumers. It is especially common in the sale of industrial and perishable consumer goods. It is a zero level method. That is, Manufacturer – Consumer. This form is primarily service based. For example, hairdresser, doctor, etc. There is no intervention of intermediaries in this form of distribution channel.
II. Indirect channel: implies the intervention of intermediaries to carry out the movement of goods to final consumers. It is a single-tier method. That is, Manufacturer – Retailer – Consumer.
third party Multi-channel: uses one or more channel systems to reach the market. It is a two-tier method. That is, Manufacturer – Wholesaler – Retailer – Consumer.
Factors affecting the choice of distribution channel
The choice of the channel is based on the analysis of the consumer, the type of company, the characteristics of the product and the consideration of the company’s environment.
1. Consideration of the market: the following analyzes must be carried out at the market level:
I. Consumer or industrial market
II. Number of potential consumers
third Geographic concentration of the market.
IV. order size
2. Product Consideration: A thorough analysis of the product features should be done as this affects the choice of channel. These include:
I. Unit volume
II. bulk and weights
3rd Perish ability
IV. Product Line Extension
3. Company Consideration: The company’s reputation, resources, experience, and desire to control the channel are important factors that can affect channel choice. For example, companies with adequate financial and non-financial resources will be less obliged to use intermediaries.
4. Consideration of intermediaries: Under this, we consider the type of service provided by the intermediaries, the availability of the desired intermediaries and the sales volume opportunities.
5. Environmental Consideration: Environmental factors to consider include economics, technology, legal, competition, etc. In most cases, when economic conditions are depressed, producers resort to the shortest and cheapest channel.