Managing Distribution Channels

Channels can be led by any of the channel members, whether they are producers,
wholesalers, or retailers, provided the member concerned has channel power.
Channel co-operation is an essential part of the effective functioning of channels. Since
each member relies on every other member for the free exchange of goods down the channel,
it is in the members interests to look after each other to some extent. Channel cooperation
can be improved in the following ways!
"he channel members can agree on target markets, so that each member can best direct effort
towards meeting the common goal.
"he tasks each member should carry out can be defined. "his avoids duplication of effort, or
giving the final consumer conflicting messages.
# further development is co-marketing, which implies a partnership between manufacturers,
intermediaries and retailers. "his level of cooperation involves pooling of market
information and full agreement on strategic issues.
Channel conflict arises because each member wants to maximise its own profits or power.
Conflicts also arise because of frustrated expectations! each member expects the other
members to act in particular ways, and sometimes these expectations are unfulfilled. $or
example, a retailer may expect a wholesaler to maintain large enough stocks to cover an
unexpected rise in demand for a given product, whereas the wholesaler may expect the
manufacturers to be able to increase production rapidly to cover such eventualities.
Channel management can be carried out by cooperation and negotiation %often with one
member leading the discussions& or it can be carried out by the most powerful member laying
down rules that weaker members have to follow.
Most attempts to control distribution by the use of power are likely to be looked on
unfavourably by the courts, but of course the abuse of power would have to be fairly extreme
before a channel member would be likely to sue.
Sometimes the simplest way to control a distribution channel is to buy out the channel
members. 'uying out members across a given level %for example, a wholesaler buying out
other wholesalers in order to build a national network& is called horizontal integration(
buying out members above or below in the distribution chain %for example a retailer buying
out a wholesaler& is vertical integration. #n example of extreme vertical integration is the
ma)or oil companies, which extract crude oil, refine it, ship it and ultimately sell it retail
through petrol stations. #t the extremes, this type of integration may attract the attention of
government monopoly regulation agencies, since the integration may cause a restriction of
competition.
*roducers need to ensure that the distributors of their products are of the right type. "he
image of a retailer can damage %or enhance& the image of the products sold %and vice versa&.
*roducers need not necessarily sell through the most prestigious retailer, and in fact this
would be counterproductive for many cheap, everyday items. +ikewise a prestigious product
should not be sold through a downmarket retail outlet.
#s the relationship between members of the distribution channel becomes closer power and
conflict still remain important, but they are expressed in otherways, and the negotiations for
their resolution change in nature.
,arious factors that may influence your distribution system can be!
i& Image of Your Organisation: -t is the most important factor for formulating a sound
distribution policy. -f the image is positive and fair, your task would be simple, but if you are
already facing image problem your task is likely to be .uite complicated and complex. -t is
essential that your products/services are pushed strongly through distribution chains to create
the desired image not only for your products/services but also for your company, otherwise
survival in the industry would be very difficult.
ii& Location of Points of Sale PoS!: 0ou can very well manage your distribution system if
you are able to select sensitive points of sale in order to attract the tourists. "hese are
basically target markets where potential tourists live or work. "herefore, it is important for all
tour operators to target these points for creating a favourable image of their products and
services.
iii& Costs of "istri#ution: Cost of distribution is also an important factor in overall policy
formulation exercises. -t is possible that only after this exercise you decide whether you want
to sell your products through travel agents, travel clubs, and other specific organisations.
1hile doing so you shall take into account the commission considerations of intermediaries
that you want to involve. 1hile costing for distribution you must also consider staff wages,
rents, electricity and water charges, telephone, postage as well as profit margins as per the
policy of the company.
iv& $sers% Perceptions &egar'ing Pro'ucts: "he perception of tourists regarding your
products /services is also a factor which you should consider while framing the distribution
policy.
-f products are in line with the tastes and preferences of the tourists and are designed well to
meet their expectations, your task of promotion and distribution is simplified.
v& (ffectiveness of )arketing (fforts: -f marketing efforts by your company are sound then
you can formulate a sound distribution policy too and thus, success is nearer. "his clearly
indicates at whether you have accorded due priority to the different marketing tools in
relation to changing stages of product life cycle or not. -f yes, nothing can stop you from
achieving your ob)ectives and if not, you are advised to do so before drafting your
distribution policy. "hus, these factors mentioned above not only govern the intensity of
success of your organisations distribution system but also maintain flow of products on and
through right path. 0ou should consider all these factors either to optimise the distribution
costs or to rationalise the distribution process.