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DISTRIBUTION CHANNEL

A distribution channel is a medium by which goods and services are made available to the consumers for use or consumption. It is means by which goods move from producers or manufacturers to consumers. Speed in product and service delivery and physical location significantly affects efficiency of the distribution channel. Consequently, gaps in the delivery of these goods and services to the consumers may make or break a company.

. Two main categories of marketing intermediaries are retailers and wholesalers.

Wholesalers / Wholesaling Intermediaries Are person and firms that sells primarily to retailers and other wholesalers/ industrial users. They do not sell significant amount to ultimate consumers. Retailers They are person or firms who sell goods or services to individual for their own use rather than for resale. They are marketing intermediaries that consumers are very familiar with.

Hundreds of distribution channels are used to supply, deliver or serve the products and services of companies. No single channel is always the perfect one for a given commodity or service.

TYPES OF DISTRIBUTION CHANNELS

Direct Marketing Channel The first type of Distribution channel. This structure has no middlemen and intermediary level/s. Retailer Marketing Channel The second type of distribution channel. This structure has middlemen and one intermediary level. The market intermediary is the type of marketing channel is the retailer. Wholesaler / Retailer Marketing Channel The third type of distribution channel. This structure has middlemen and two intermediary levels. The market intermediaries is the type of marketing channel are the wholesaler and the retailer. Wholesaler/ Jobber/ Retailer Marketing Channel The fourth type of distribution channel. This structure has middlemen and three marketing channel . The market intermediaries

TYPES OF DITRIBUTION SYSTEM


Before, Distribution was simply groupings of weak and independently- owned and managed companies. Little attention was given to the overall performance of these distribution channels. The vertical marketing system was designed to challenge the conventional distribution channel organization. It improves performance and efficiency, provides opportunities for stronger leadership and maximum customer relationship.

CONVENTIONAL DISTRIBUTION SYSTEM Its often referred to as the traditional/ customary channel for consumer goods, is the most popular and widely used channel organization. In this structure, various channel members make little or no effort to cooperate with each other. VERTICAL MARKETING SYSTEM (VMS)

This type of distribution channel organization system is the vertical marketing system. There are Three(3) types of the vertical marketing system:
Corporate Channel-A firm at one channel level owns the firm at the next level owns the entire channel. Administrative VMS-The channel members informally agree to cooperate with each other. Contractual VMS -The channel members agree by contract to cooperate with each other.

DESIGNING MARKETING CHANNEL


Designing marketing channel involves a series of stages it includes analyzing consumer needs, setting channels objectives and constraints. Identifying major alternatives , evaluating these alternatives and selecting the appropriate distribution channel.

ANALYZING CONSUMER SERVICES NEEDS Consumer needs are very critical to designing a marketing channel structure. An analysis should help the firm to come up with design decision that will bring benefits to the company.

SET CHANNEL OBJECTIVES AND CONSTRAINTS The company should consider their target consumer and their desired service level. In most terms, the company is able to identify these segments and what different levels of channel services are expected, if not demanded.

Variables to consider in setting channel objectives


Company channel objectives will vary depending on the nature of its products, company policies, middlemen competitor and the environment. These are enumerated as follows:

Product Characteristics The channel design chosen will be greatly affective by the characteristic of the product of the company. An example of this food that spoils easily. Company characteristics The size of the company pays a big role in choosing the size of its target market and its ability to get dealer. The companys financial resources will also affect the marketing function in terms of choosing the people who will handle marketing activities or hiring middlemen and marketing intermediaries.

Middlemen Characteristics Channel design is affecting by middlemen characteristics. The ability of the middlemen and what they can do and willing to should be included in criteria for choosing middlemen. Competitors Most of the times, companies situate their outlets near the outlets of their competitors. Other companies, however, find it difficult to do this because of scarcity in the location for intended retail outlet and instead set up door to door selling. Environmental Factors Factors such as the economy and legal constraints affect channel designing decision. If the economy is depressed producers would want to distributes their goods in the most economic way, use shorter channels, and drop unneeded services to reduce total cost.

IDENTIFY MAJOR ALTERNATIVES After Analyzing the needs of the consumers, we learned how to set channel objectives. We likewise studied the constraints existing in the company. Before making a choice let us first find out what are different categories of middlemen and how many middlemen should the company.

Types of Middlemen:

Company Sales force Consist of individuals whose main job is to sell the product of the company. They are salesperson assigned to a particular for the purpose of marketing the company products.

Manufacturer Agencies Are autonomous firms whose business is to sell other companies.

Industrial Distributors They are given exclusive distribution rights to purchase and carry the product line. They are like franchises/ branches of the company.

Number of Middlemen

Intensive distribution- refers to stocking the products in as many outlets as possible. It allows the producers to distribute their producers to distribute their products to as many outlets as possible or as the producers can handle their products to the consumer anytime and anywhere. Exclusive distribution- means authorizing limited number of dealers to exclusively distribute a companys products in their territories. Selective distribution- refers to use of more than one but not all middlemen who are willing to carry the companys product .

EVALUATE MAJOR CHANNEL ALTERNATIVES When company has identified its major channel alternatives, then it continue this process by evaluating each one of these alternatives. It scrutinizing these alternatives, these are criteria to consider. They are ECONOMIC, CONTROL and ADAPTIVE criteria. This criterion will help the company in choosing the best alternative, this arriving at a channel management decision.

SELECT THE APPROPRIATE DISTRIBUTION CHANNEL The choice of distribution is the penultimate stage in designing marketing channels. The selection of a distribution channel depends on several factors:

Market factor- most important consideration in choosing dist. Channel is the market segment that the producers is attempting to reach. Changes in consumer buying behavior may influence a channel decision. Product factor- products that are complicated, expensive, custom made and perishable move through shorter distribution. Producer factor- producers who offer broad product line with adequate financial and marketing resources to distribute and promote their products are likely to use shorter channel od distribution. Competitive factor- producers must consider intermediary performs the marketing functions. how well the