Business

Channels of Distribution and Types of Marketing Channels

Placing goods and services where they are required and when they are wanted is the area of concern of this unit. All marketing channels decisions are among the most important decisions that management faces. 

A company’s channel decision directly affects every other marketing decision. For example, the company’s pricing depends on whether it uses mass merchandise or high-quality specialty stores. The firm’s sales force and advertising decisions depend on how much persuasion, training, and motivation the dealers need. 

Whether a company develops or acquires certain new goods may depend on how well those products fit the abilities of its channel members. Most producers use intermediaries to bring their products to the market. 

They try to forge a distribution channel by using the existing or creating a new independent channel. The use of intermediates becomes necessary in making goods available to target markets since they cannot have access to the producers directly.

Read Also: Composition and Functioning of the Marketing Environment

Channels of Distribution

The term channel of distribution refers to the various intermediaries who help to move products from the producer to consumers. There are a variety of middlemen and merchants who act as intermediaries between the producers and consumers. 

Stanton (1981:283) defines a channel of distribution for a product as ‘the route taken by the title to the ultimate consumer or industrial users. A channel always includes both the producer and final customer for the product.

Even though agents mid-men do not take actual title to the goods, they are still a part of a distribution channel. It is because they play an active role in the transfer of ownership. 

A distribution channel refers to a system designed to move goods and services from producers to customers, which consists of people and organizations supported by various facilities, equipment, and information resources. 

However, Armstrong and Kotler (1994) reported that a distribution channel is a set of interdependent organizations involved in making a product or service available for use or consumption by the consumer or industrial user’.

Channels of distribution are the powerful element among marketing mix elements. Many new products have died in their infancy because they never had the right road to the market. 

However, developing a distribution network and launching aggressive advertisement campaigns will help a company know its area of specialization.

Study the distribution network before launching a product. Channels of distribution help the movement of goods from one place to another and thus create place utility. 

They make it possible for buyers to get the goods when he wants them and create time utility. They bring goods to the consumer in a convenient shape, unit, size, style, and package and create value. 

Read Also: SWOT Analysis: Determining the Strengths and Weaknesses of Opportunities for and Threats to the Enterprise

They make it possible for the consumer to obtain goods at a price he is willing to pay and under conditions that bring him satisfaction and pride of ownership and thus create possession utility.

The concept of marketing channels is not limited to the distribution of physical goods alone. Producers of services and ideas also face the problem of making their products accessible to their target consumers. 

Channels of distribution have categories which are; Direct Selling by Manufacturers and Indirect Selling through Middlemen.

Distribution

The functions performed by the members of the marketing channels include:

  • Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing levels needed for planning and aiding exchange.
  • Promotion: Developing and spreading persuasive communications about an offer.
  • Contact: Finding and communicating with prospective buyers and suppliers.
  • Matching: 
  • It entails shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging.
  • Negotiation: Reaching an agreement on price and other terms of the offer so that the product sold can get its owner.
  • Physical distribution: 
  • Deals with transferring and storing goods.
  • Financing: Acquiring and using funds to cover the costs of the channel work.
  • Risk-taking: Assuming the risks of carrying out the channel work.

Read Also: Definition of Products and the Different Product Levels

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