Distribution channels are the path through which a product reaches the customer from the manufacturer. It can involve a large number of elements including manufacturers/producers, wholesalers, retailers, mediators, and consumers. The length of the company distribution channels can vary based on the number of elements involved in them. Sometimes, you can find direct distribution companies, where the manufacturer chooses to sell the products directly to the customers, whereas, sometimes it can involve wholesalers, retailers, and other mediators.
Channel Of Distribution And Their Importance
Distribution channels are important as they are responsible for distributing the products produced by a manufacturer. Therefore, you have to choose a channel based on the features of your products and services.
A channel of distribution represents three types of flows, that include:
- The flow of goods from the manufacturer to the customer.
- The flow of cash from consumers to the manufacturer.
- The flow of marketing information in both directions.
Here, the downward flow of information from the manufacturer to the customers involves information on new products and services, offers, etc. The upward flow of information from the consumer to the manufacturer includes feedbacks, suggestions, and complaints. Therefore, distribution channels have the responsibility to act as mediators between the manufacturers and consumers. Distribution channels have different characteristics, roles, and functions. You need to be aware of them for choosing the right channels for you. Hence, we list some of the important information you want to know about company distribution channels.
Characteristics Of Distribution Channels
The following are some of the important characteristics of distribution channels you need to know:
- Place Utility: They help to move the products from one place to another.
- Time Utility: Distribution channels bring the products to the customers when needed.
- Possession Value: They allow the customers to get products with ownership titles.
- Convenience Value: They bring the product to the customer’s inconvenient shape, size, unit, style, as well as package.
- Marketing Tools: They can be beneficial for bridging the gap between customers and producers/manufacturers. So distribution channels can help manufacturers to market their products and services.
Role Of Distribution Channels
Distribution channels have a lot of significant roles. Some of them are mentioned below:
- Helps the manufacturers to sell their products and services.
- Distribution channels can supply products based on the required assortments (the combination of different products from various manufacturers) and can help with their assembling too.
- Helps to merchandise the goods at retail shops by display, awareness, and selling effort, etc.
- Provide salesmanship by being physically close to consumers.
- Helps to implement price mechanism by bridging the gap between customer and manufacturer.
- After-sales support.
- Helps in warehousing products.
- Financing the stock, storage of products, and risk sharing, etc.
Functions Of Distribution Channels
Marketing channels have some functions too. They include:
- Market research.
- Promotion of products.
- Finding and communicating with potential buyers.
- Supplying products based on the requirements of the customers like the place, time, and quantity, etc.
- Transporting and storing products.
- Negotiating the price.
- Bearing the risk along with the manufacturers.
Selecting The Distribution Channel
A manufacturer needs to select the right distribution channels that are suitable for their products and services. There are different factors that a manufacturer should consider before selecting distribution channels. Some of them are listed below:
The nature of the products is an important factor to consider. If the products are perishable, it should be quickly delivered to the customers. Hence, it needs a fast root. Here, direct distribution is suitable. However, if you are selling products that are not easily perishable, then you can use a long route which includes wholesalers and retailers.
The type of market is an important factor that has to be considered. For the consumer market, retailers can be necessary, whereas, for the business market, you can eliminate retailers. Also, for large markets, you might need many channels, whereas, for small markets, it is better to avoid retailing. In the case of highly concentrated markets, direct selling is ideal.
This can be referred to as the geographical distribution, average quantity of purchase, frequency of purchase, and the number of prospective customers.
Marketers closely observe the distribution channels used by their competitors. Sometimes, they might use the same channels, whereas, in some other situations, they might completely avoid them. For example, the manufacturers might completely avoid retailers and may choose door-to-door marketing instead.
You have to be aware of the marketing environment for choosing the right channels based on current situations. During the time of recession, cheaper and shorter channels will be the best option. However, during prosperity, you can choose a wide variety of channels based on your needs.
Apart from selling products and services, distribution channels have a large number of other duties including marketing products, storing and transporting them, and sharing the risk with the manufacturers, etc. Therefore, by efficiently utilizing the company distribution channels, you will be able to generate more profit.