Channels of distribution or placing

The success of a company depends not only on how well it performs in respect of production but also on how well its entire channel of distribution. Channel of distribution play an important role in marketing because well managed channel provide sound competitive advantage to companies. The channel of distribution is required because the product has to move from factory to the customer, at right time, at right place and in right quantity.

 Functions of channels of distribution

1. Channels provide market information to the manufacturers as they are in touch with the customers.

2. Channel of distribution helps the manufacturers in promotion as retailers arrange window displays or may employ salesman.

3. Channel of distribution helps the manufacturers in making contacts with the customers as they are in touch with them.

4. Channel of distribution helps the manufacturers in breaking bulk as the manufacturers made in bulk quantity and channel of distribution meet the small needs of the customers.

5. Channel of distribution helps the consumer by supplying them different products.

6. Channel of distribution helps the manufacturers in buying negotiation with the customers.

7. Channel of distribution helps the manufacturers in risk taking due to obsolesce or change in the price of the product.

8. Channel of distribution helps the manufacturers in selling the product easily to the customers.

 Channel levels

1. Zero level channel consists that manufacturer selling products directly to the customers. It is also known as direct marketing channel.

                                    Manufacturer———–customers

2. One level channel consists that manufacturer selling products to retailers then they sell the products to the customers.

                                    Manufacturer———–retailers———customers

3. Two level channel consists that manufacturer selling products to whole sellers then they sell the product to the retailers and then they sell the products to the customers.

                           Manufacturer———–whole sellers——–retailers———customers

4. Three level channel consists that manufacturer selling products to whole sellers then to jobbers they sell the product to the retailers and then they sell the products to the customers. It is also known as indirect marketing channel.

      Manufacturer———–whole sellers——–jobbers——retailers———customers

Selection of channel of distribution / design process

1. Determining the channel objectives- for effective channel planning it is necessary to find out the channel objective. The channel objective differs from company to company so their channel design also differs. It means whether the company wants to cover the entire market then the company requires two to three level channels but if the company wants to cover only a few customers then they can use direct marketing.

2. Identifying functions- then it has to be decided which function to be performed by the channel like provide market information, promotion, buying negotiation, risk taking etc.

3. Matching product attributes to channel design – each product differs from one another. The channel system that is best suited for the product should be selected.

4. Checking distribution environment and legal rules- the proposed channel should be compatible to the environment and legal rules.

5. Finding out competitor’s strength- the competitors strength should be checked before finalizing the channel of distribution.

6. Checking company’s strength- the company’s strength should be checked before finalizing the channel of distribution.

7. Final selection of best design- after evaluating all the above aspects the best suited channel of distribution should be selected.

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