The series of companies, distributors, or other intermediaries through which your goods must pass before reaching your final consumers is known as your distribution channel. This series can include wholesalers, brick and mortar stores, online marketplaces, or shipping companies that sell your goods directly to customers, depending on your company and products.
Choosing the right distribution channel is critical for your company’s success. What you choose influences how your products are managed, how easily they are distributed, and how effective you are in bringing your products into the hands of customers.
Choosing a right Distribution Channel depends upon the following:
Perishable products require quick movement and a shorter delivery path. Longer and more diverse channels may be needed for durable and standardised products. Direct sale to consumers or industrial users may be preferable for custom-made products.
We also have the shortest channel for technical goods that need advanced selling and serving talent. High-value products are distributed directly by travelling sales people rather than by middlemen.
(a) Retailers are important in the consumer market, but they can be replaced in the business market.
(b) We have several outlets for large markets, while direct sale can be profitable for small markets.
(c) Direct sale is favoured in highly concentrated markets, while we have several distribution networks in widely dispersed and diffused markets.
(d) The size and average frequency of customer orders have an effect on the channel option. Both wholesalers and retailers are needed in the selling of food products.
Customer and dealer research can provide details on the number, form, location, and purchasing behaviours of customers, and dealers will influence channel selection in this case. For example, a customer’s desire for credit, demand for personalised service, and the amount of money, time, and effort he or she is willing to invest all play a role in channel selection.
(a) Preference will be given to middlemen who can provide desired marketing services.
(b) Middlemen who can have the most cooperation in terms of promotional services are also favoured.
(c) Priority is given to the channel that produces the highest sales volume at the lowest unit cost.
(a) The market size, the size of its larger accounts, and its ability to set middlemen’s cooperation are all determined by the company’s size. A large corporation’s channel could be shorter.
(b) The channel pattern is influenced by the company’s product mix. The channel will be shorter as the product line expands.
The business may choose limited or exclusive dealerships if the product mix is more specialised.
(c) An organisation with significant financial resources may not depend on middlemen and may be able to reduce distribution levels. A business with a poor financial position must depend on middlemen.
(d) Due to a lack of expertise, new businesses depend heavily on middlemen.
(e) An organisation that wants to have more channel control prefers a shorter channel because it allows for improved coordination, contact, and control.
(f) In a sales campaign, intense advertising and selling promotion will inspire middlemen. In such cases, a longer distribution chain is preferable.
As a consequence, the quantity and quality of marketing services offered by the organisation will directly affect channel selection.
Shorter and less expensive outlets are favoured during a crisis or depression. During times of prosperity, we have a larger selection of channel options. Because of cold storage facilities in shipping and warehousing, perishable goods can be shipped even to far-flung markets. As a result, the role of intermediaries in the distribution of perishable goods is expanding.
Marketers keep a close eye on the platforms that competitors use. Similar networks are often suitable for bringing a company’s goods to market. Marketers often avoid competitors’ networks on purpose. For example, a business may choose to bypass the retail store channel (which is used by competitors) and instead use door-to-door sales (where there is no competition)
This relates to geographic distribution, sales frequency, average purchase quantity, and the number of potential customers.
This entails doing a cost-benefit study. Apart from channel compensation, shipping, warehousing, warehouse protection, material handling, logistics personnel’s compensation, and interest on inventory held at various sale points are all major components of distribution costs. In marketing cost analysis and control, distribution cost analysis is a rapidly growing and perhaps the most rewarding field.
How to Select a Distribution Channel
You must choose a particular choice once you have a sense of the type of distribution channel that will work best for your company and customers. You may need more than one, depending on your company and where your customers are located. To select the appropriate channels, you must:
1. Think of your competitors
What strategies do your rivals employ? What is the explanation for this? Is it a qualitative advantage over other outlets, or is it just the way the industry has always done business? You may gain an advantage by using a distribution channel that your rivals have ignored. If your rivals predominantly sell their goods via big-box stores, for example, taking advantage of direct sales through the internet will provide you with a distinct advantage.
2. Study about the cost and benefits
Creating the support structures that go with a delivery method after settling on one is time-consuming and costly. It’s impossible to change your mind once your business is focused on a particular distribution channel. Before devoting resources to a particular alternative, carefully consider the costs and benefits.
3. Choose your options carefully
After reviewing the various methods available to you, rank them in order of choice based on which will generate the most revenue at the end of the year, minus any related costs. Select the choice that allows you to reach the greatest number of people while staying within your budget.
4. Have a growth plan
You may find that sticking to one distribution channel doesn’t stop you from adding more as your company grows, or that you need more ways to link customers with products as your company grows. Keep up with your competitors and rivals so that as your market grows, you can make more informed distribution decisions.
When it comes to selecting a distribution channel, the most important thing to remember is to carefully weigh the choices rather than choosing one simply because it is the industry norm or the most convenient choice for your business. If you challenge the rationale behind your decision from the start, you might uncover overlooked benefits, secret disadvantages, or new ways to reach consumers that are both cost-effective and creative.
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