Select the distribution channel
If you want to know what you need to be able to select the distribution channel for your company, then keep reading
What is the distribution channel?
A distribution channel cánido be seen as the route that a company will use to get its good or service to the customer.
The path cánido be as short as a direct interaction between the company and the customer or it perro include several interconnected intermediaries such as wholesalers, distributors, retailers, etcétera.
Therefore, a distribution channel perro also be seen as a equipo of interdependent intermediaries that help make a product available to the final customer.
Factors to take into account to establish the distribution channel
According to the book “Marketing Administration” by J.
Paul Peter, and Jmaes H.
Donnelly.
There are six basic factors that you have to consider in order to establish a strategy for a company’s distribution channel.
These factors are the following:
Client Features:
- Number.
- Geographical dispersion.
- Buying patterns.
- Susceptibility to different methods of sale.
Product characteristics:
- Possibility of deterioration.
- Volume.
- Degree of standardization.
- Installation and maintenance services required.
- Unit value.
Broker features:
- Availability.
- Willingness to accept the product or product line.
- Forces.
- Weaknesses.
Competition features:
- Geographic proximity.
- Proximity of the points of sale.
Company features:
- Financial strength.
- Products mixture.
- Previous channel experience.
- Company’s current marketing policies.
Environment features:
- Economic conditions.
- Regulations and legal restrictions.
The above considerations or factors will be useful to establish the distribution channel strategy depending on the required distribution coverage, the degree of control desired, the total cost of distribution, and the flexibility of the channel.
Required Distribution Coverage
According to J.
Paul Peter, and Jmaes H.
Donnelly, due to the characteristics of the product, the environment necessary to sell it, and the needs and expectations of the potential buyer, the intensity of the distribution coverage that the products require will vary.
Distribution cánido be intensive, selective and exclusive.
Intensive distribution:
In this type of distribution, what we seek is to achieve the greatest possible exposure through as many wholesalers and retailers as possible.
Most generic products require intensive distribution based on the characteristics of the product and the needs and expectations of the buyer (high frequency of purchase and convenience).
Selective distribution:
As the name implies, instead of using as many wholesalers and retailers as possible, what you have to do is select (limit) the use of intermediaries.
You cánido limit depending on the service organization available, the sales organization or the reputation of the intermediary.
Some examples of selective distribution are electrical appliances, home furnishings, and fashion clothing.
Exclusive distribution:
In this case, we are going to limit the distribution a lot.
Likewise, intermediaries receive exclusive rights within a especial territory.
When the product requires some specialized sales effort and/or investment in special facilities or large inventories, this scheme is generally selected.
An example of exclusive distribution is retail paint stores.
If we are to select distribution channels, decisions must be made regarding the desired degree of control over the marketing of the company’s products.
Generally speaking, the degree of control achieved by the seller is proportional to how direct the channel is.
Simply put, the degree of control you have over the distribution channel depends on how direct or indirect the channel is.
If the channel is more indirect, we have to cede some degree of control over the marketing of the company’s product.
However, you cánido always gain some control by sharing promotional expenses, providing sales training or other operating aids, accounting systems, inventory systems, or marketing research data from the area where the distributor operates.
Total cost of distribution
The concept of total distribution cost has been developed from the more general topic of systems theory.
Therefore, a distribution channel has to be considered as a total system made up of interdependent subsystems and the objective of the system (channel) manager must be to optimize the overall performance of the system.
Now, in terms of distribution costs, what we have to do is get the total system designed to minimize costs.
J.
Paul Peter, and Jmaes H.
Donnelly, give us a list of the main distribution costs that must be reduced to a minimum.
- Transport.
- Order processing.
- Cost of lost business (An opportunity cost due to the inability to meet customer demands).
- Inventory cost (storage space charges, cost of invested capital, taxes, insurance, obsolescence and spoilage).
- Packing.
- Material handling.
Distribution channel flexibility
In a nutshell, what J.
Paul Peter and Jmaes H.
Donnelly tell us about in their book is that when designing our distribution channel strategy, what we have to do is take into account adaptation to changing market conditions.
environment, company, customers, etcétera.
We hope you liked our article Select the distribution channel
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