CHANNELS OF DISTRIBUTION
Channels of distribution are defined as network of intermediaries capable of linking the producer to the market. The movement also involves payment, information, and promotion of the business.
There are five principal categories of channels of distribution
Selling directly to consumers is commonly found in industrial market as against consumer market. The industrial chemicals for example are usually sold directly to the ultimate users of the product. The Government on the other hand, can also buy directly from the manufacturers through their purchasing agencies.
REASONS FOR THE USE OF THIS CHANNEL
The need to demonstrate technical goods to prospective purchasers because it is difficult to buy technical goods that need further explanations through advertisement message. There is also the need to give specialized after-sales service to consumers.
Lack of expert knowledge of other channel of distributions
Unduly high intermediary profit margins
Inability of intermediaries to effect physical transportations.
REASONS AGAINST THIS CHANNEL
Lack of financial resources. To actually sell direct, there are difficulties of financial resources.
Lack of a sufficiently wide assortments. Only fewer companies have large product line or differentiated goods.
The expert knowledge of some experienced middlemen of breaking the large units to smaller units may not be provided by the company itself.
Lack of “know-how” in effecting final chain of distribution.
Selling through the post (mail order) connotes that customers buy direct by post, either in response to an advertisement or from a sales promotional catalogue. The post office is the agent of this distribution channel by delivering the goods to the right ownership. If this channel is to be organized on a very large scale basis and it will also be significant that other communication services are in good condition.
One of the greatest advantage of this channel is that the deliveries cost is low when compared with that of in-store retailing. Secondly, it enables the consumer to shop without the convenience of going to the store or shopping centre.
The possible disadvantage associated with this method is the inabilities of not seeing what you want or need to purchase. Secondly, the deliveries cost may be higher than that of in-store retailing and also high promotional support. Lastly, the financing credit and cost of maintaining up-to-date mailing list becomes difficult and hazardous.
Selling directly to retailers. When manufacturers decide to sells directly to retailers, they assume the position of the wholesalers and agents, whose responsibility is to buy in large quantities and re-sells in small quantities to the retailers. When manufacturing firms decide to use this channel in selling their products, they should bear in mind that more salesforce must be employed as to achieve the desired objective. This paves way for some large-scale retailers to buy directly from the manufacturing firms because of the ability of manufactures to establish close merchandising and promotional relations with them. For example, the establishment of supemarkets, departmental stores, multiple or chain sires, and others are living evidence of this phenomenon. Exclusive selling could be dangerous ad difficult in this channel.
The logical sequence of channeling or disseminating information or products is that of the traditional type which involves manufacturers selling to the wholesalers, whose responsibility is to stock large quantities of goods purchase and reselling them at smaller quantities to the retailers, who in turn make it available to the public consumers. This method is also called the progressive method. Basically, it has been agreed upon that the wholesalers are responsible or inflating the prices of every items manufactured or produced.
Distribution through agencies that stand between the manufacturers and the wholesalers. Therefore, between the manufacturers and the wholesalers stands the brokers, manufacturers agents, the commission merchants and export merchants. This channel is commonly used when the manufacturing firms cannot afford the necessary money to recruits able salesmen. This is the channel used to market industrial products.
There are several disadvantages attached to this channel. Firstly, this channel is not a good method of disposing products, especially when the manufacturers are new in business. Secondly, the inability of receiving or getting the response of the market becomes difficult and hampered. Finally, the prices of every manufactured doods may increase in multiple percent before getting to the public consumers.
FACTORS DETERMINING CHOICE OF CHANNEL
The four major determinants of choice of channel to choose are discussed below:
THE MARKET DETERMINANT
THE PRODUCT DETERMINANT
THE MIDDLEMEN DETERMINANT
THE COMPANY DETERMINANT
The market determinant could be summed up in three principal outlooks and these includes:
A market that is conversely small is easier to serve directly than a big market.
A market with few customers needed middlemen than one with broad potential customers.
A product like cigarette which is bought frequently in smaller quantity at a lower cost is more likely to need the services of the middlemen than products that may not be required often.
The product itself also has peculiar determinant on choice of channel to favour. Products that are heavy and bulky or that which needs further explanation before purchase are made should follow direct channel i.e. from manufacturer to the ultimate users. Also, products whose customers are not clearly aware of their needs like life assurance policy or that which requires the attention of the buyers like tailoring are to be directed to the ultimate users.
The middlemen determinant also has adverse effect on type of channel to favoured. Primarily, the middlemen provides the following services to retailers which the manufacturers may not provide themselves such as storage, packaging, depots, delivery vans, servicing arrangements etc. Secondly if the desire middlemen are not available or some dubious attitude of middlemen toward manufacturers can stimulate manufactures to sell directly.
The company itself is the greatest on choice of channel to favoured. Firstly, company entering the market for the first time should sells through intermediaries because of the expertise knowledge of some middlemen.
Conversely, companies that has been established in the market with large potentials customers may eliminate the services of middlemen. Secondly, companies that are financially viable should established (employ) more salesforce to market their product by granting credit, and providing warehousing for the product. On the other hand, companies that are weak financially should sell’s through middlemen that may provides service like storage, packaging, delivery vans, services arrangement etc.
ROLE(S) OF DISTRIBUTIONAL CHANNEL:
By bringing the goods conveniently in various sizes, styles, units, packages, and shapes to the consumers.
They are responsible for breaking the large quantity to a smaller unit, thereby making it more flexible for the consumers to purchase.
They help to move goods from one particular place to another.
They make it simple for their various customers to obtain the goods at a rate of their choice.
They also give helping hand to a small producer in financial management. For example clothing firms may provide the small local producer with the capital needed for expansion.
They may also assist in each stage to obtain information from the public consumers that are passed to the top management (manufacturers/producers) for market intelligence.
Some marketing channels may lead the promotional effort for a particular brand of product, This will therefore portray the goodwill of the company.