INTRODUCTION:Distribution Channels also referred as Marketing Channels or Place. Place can be a location where product can be purchased by consumer/customer.

The distribution channel helps to distribute or move product from one place (generally manufacturer) to the place (Consumer or end user or customer etc.). This is a movement of Goods or Services between manufacturer or marketer to the end user or consumer or customer. The main parts or elements of distribution channels are Producers/ marketers, intermediaries and consumers. The main objective is to deliver product or service to the end user at right time in a right quantity with right quality at right place. Intermediaries can improve the efficiency of process by managing all activities of routes of transactions properly.

E.g.:When the lumber is mild and then made into furniture two separate channels are involved. The channel for the lumber might be Mill Broker furniture manufacturer

The channel for the finished furniture might be Furniture manufacturer Furniture Store Customer

DEFINITION: A channel of distribution or marketing channel is a structure of intra- company organization, units and intra company agents and dealers, wholesalers and retailers through which a commodity product or service is marketed. -American Marketing Association A channel of Distribution or Marketing Channels are the distribution networks through which producers products flow to the market." -Cundiff, Still and Govani.
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"This is a route taken by the title to the goods as they move from producer to the ultimate consumers or industrial users." -William J. Stanton

Importance of Distribution: Most producers use intermediaries to bring their products to market. They try to develop a distribution channel (marketing channel) to do this. A distribution channel is a set of interdependent organizations that help make a product available for use or consumption by the consumer or business user. Channel intermediaries are firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user. A companys channel decisions directly affect every other marketing decision. Place decisions, for example, affect pricing. Marketers that distribute products through mass merchandisers such as Wal-Mart will have different pricing objectives and strategies than will those that sell to specialty stores. Distribution decisions can sometimes give a product a distinct position in the market. The choice of retailers and other intermediaries is strongly tied to the product itself. Manufacturers select mass merchandisers to sell mid-price-range products while they distribute top-of-the-line products through high-end department and specialty stores. The firms sales force and communications decisions depend on how much persuasion, training, motivation, and support its channel partners need. Whether a company develops or acquires certain new products may depend on how well those products fit the capabilities of its channel members. Channels of distribution:Agent Retailer

Producer

Consumer 2

Wholesaler

A number of alternate channels of distribution may be available:

Selling direct, such as via mail order, Internet and telephone sales Agent, who typically sells direct on behalf of the producer Distributor (also called wholesaler), who sells to retailers Retailer (also called dealer or reseller), who sells to end customers Advertisement typically used for consumption goods

Distribution channels may not be restricted to physical products alone. They may be just as important for moving a service from producer to consumer in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc. There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services the latter offering anything from televisions through tools. There has also been some evidence of service integration, with services linking together, particularly in the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas.

CHANNEL MEMBERS
Distribution channels can have a number of levels. Kotler defined the simplest level that of direct contact with no intermediaries involved, as the zero-level channel. The next level, the one-level channel, features just one intermediary; in consumer goods a retailer, for industrial goods a distributor. In small markets (such as small countries) it is practical to reach the whole market using just one- and zero-level channels. In large markets (such as larger countries) a second level, a wholesaler for example, is now mainly used to extend distribution to the large number of small, neighborhood retailers.

CHARACTERISTICS OF CHANNELS OF DISTRIBUTION:The main characteristics or elements of channel of distribution may be summarized as under: Route or Pathway:Channel of distribution is a route or pathway through which goods and services flow from the manufacturers to consumers. Flow:The flow of goods and services is smooth and sequential and usually unidirectional.

Composition:It is composed of intermediaries, such as, wholesalers, retailers, agents, distributors, etc.., also called middlemen who participate in the flow voluntarily. Functions:The intermediaries perform such functions which facilitate transfer of ownership, title and possession of goods and services from manufacturers to customers. Remuneration:The intermediaries are paid in the form of commission for the service rendered by them. The same is compensated by the manufacturer in the form of commission allowed by the manufacturer or added in the goods sold. Time utility:As they bring goods to the consumers when needed.

Convenience value:As they bring goods to the consumers in convenient shape, unit, size, style, and package. Possession value:As they make it possible for the consumers to obtain goods with ownership title. Marketing tools:As they serves as vehicles for viewing the marketing organization in its external aspects and bridging the physical and non- physical gaps which exist in moving goods from the producers to the consumers.

Supply and demand linkage:As they bridge the gap between the producers and consumers by resolving spatial (geographical distance) and temporal (relating to time) discrepancies in supply and demand.

OBJECTIVES OF CHANNELS OF DISTRIBUTION: To ensure availability of products at the point of sale. To built channel members loyalty. To stimulate channel members to put greater selling efforts. To develop managerial efficiency in channel organization. To identify the organization at the buyers level. To have an efficient and effective distribution system, to make the products and services available.

ADVANTAGES OF A DISTRIBUTION CHANNEL:Cost Saving:The members of distribution channel are specialized in what they do and perform at much lower costs than companies trying to run the entire distribution channel all by itself. Time Saving:Along with costs, time of delivery is also reduced due to efficiency and experience of the channel members. For example if a grocery store were to receive direct delivery of goods from every manufacturer the result would have been a chaos. Everyday hundreds of trucks would line up outside the store to deliver products. The store may not have enough space for storing all their products and this would add to the chaos. If a grocery wholesaler is included in the distribution chain then the problem is almost solved. This wholesaler will have a warehouse where he can store bulk shipments. The grocery store now receives deliveries from the wholesaler in amounts required and at a suitable time and often in a single truck. In this way cost as well as time is saved. Customer Convenience:Including members in the distribution chain provides customer with a lot of convenience in their shopping. If every manufacturer owned its own grocery store then customers would have to visit multiple grocery stores to complete their shopping list. This would be extremely timeconsuming as well as taxing for the customer. Thus channel distribution provides accumulating and assorting services, which means they purchase from many suppliers the various goods that a customer may demand. Secondly, channel distribution is time saving as the customers can find all that they need in one retail store and the retailer Customers can buy in small quantities:Retailers buy in bulk quantities from the manufacturer or wholesaler. This is more cost effective than buying in small quantities. However they resell in smaller quantities to their customers. This phenomenon of breaking bulk quantities and selling them in smaller quantities is

known as bulk breaking. The customers therefore have the benefit of buying in smaller quantities and they also get a share of the profit the retailer makes when he buys in bulk from the supplier.

Resellers help in boosting sales:Resellers often use persuasive techniques to persuade customers into buying a product thereby increasing sales for that product. They often make use of various promotional offers and special product displays to entice customers into buying certain products. Customers receive financial support:Resellers offer financial programs to their customers which makes payment easier for the customer. Customers can buy on credit, buy using a payment plan etc. Resellers provide valuable information:Manufacturers who include resellers for selling their products rely on them to provide information which will help in improving the product or in increasing its sale. High-level channel members often provide sales data. On all other occasions the manufacturer can always rely on the reseller to provide him with customer feedback.

DISADVANTAGES OF INCLUDING DISTRIBUTION CHANNEL

Revenue loss:-

INTERMEDIARIES

IN

THE

The manufacturer sells his product to the intermediaries at costs lower than the price at which these middlemen sell to the final customers. Therefore the manufacturer goes for a loss in revenue. The intermediaries would never offer their services to the manufacturer unless they made a profit out of selling his products. They are either made a direct payment by the manufacturer, for instance shipping costs or as in the case of retailers by selling the product at costs higher than the price at which the product was bought from the manufacturer (also known as markup). The manufacturer could have sold at this final price and made a greater profit if he had been managing the distribution all by himself.
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Loss of Communication Control:Along with loss over the revenue the manufacturer also loses control over what message is being conveyed to the final customers. The reseller may engage in personal selling in order to increase the product sale and communicate about the product to his customers. He might exaggerate about the benefits of the product this may lead to miscommunication problems with end users. The marketer may provide training to the salespersons of retail outlets but on the whole he has no control on the final message conveyed.

Loss of Product Importance:The importance given to a manufacturers product by the members of the distribution channel is not under the manufacturers control. In various cases like transportation delays the product loses its importance in the channel and the sales suffer. Similarly a competitors product may enjoy greater importance as the channel members might be getting a higher promotional incentive.

CONCLUSION:Thus, trough channels of distribution organization get more benefits like sales is going to be increase through this effective distribution channel, profits of the organization is also increases and loyalty is going to be increase among the consumers and the channel members.