What does distribution channel mean

Take the test. Distribution Channels in the Digital Age. More generally, the impact of the digital revolution on traditional channels of distribution in the sale of all products and services has been two-fold: 1.

Look at the product itself. Consider your sales goals. Considerations When Developing a Distribution Strategy. Here are some tips for an effective distribution strategy: Think about the needs of your customers. How do they access your products and services? Imagine the process of finding and purchasing your product from their perspective. Base your decisions on sound data and CRM! Beware of channel conflict if you choose to use multiple distribution channels for the same product.

This occurs when your efforts, say, in direct selling via eCommerce, get in the way of the same customers purchasing your product or service through an intermediary like a retailer.

Otherwise known as disintermediating, or kicking distribution partners out of the distribution channel, this can be avoided if you strategise about the customer groups you are likely to reach through different distribution channels, focusing on market segmentation. Channel marketing is a strategy that directs marketing efforts not just to end consumers, but also to distribution partners.

Just as with end users, marketing to B2B buyers is also increasingly a social, content-based game. Pulling it all together: Making distribution channels work for you.

Learn more about CRM now. A distribution channel is a path that a product or service could take on its way to market. A direct distribution channel is one where a company sells directly to the consumer, usually through their website or retail store.

How do I choose a distribution channel? When choosing a distribution channel, consider your audience, your sales goals and the product itself. Different products require different approaches. How do I develop a distribution strategy? Developing a distribution strategy starts with focusing on the needs of the customer, deciding what distribution channels should be used, and conferring with partners on a marketing strategy. How do I get the most out of my distribution channels? Optimise your distribution channels by better managing your data to gain actionable insights.

Channel decisions also require special attention as these involve long-term commitments to other firms with whom marketer enters into a contract.

Chosen channel cannot be terminated overnight. A distribution system is a key external resource, equally important with key internal resources. The problem of selecting the most suitable channel of distribution for a product is complex.

The most fundamental factor for channel choice and channel management is economic criteria, viz. Profit organisations are primarily interested in cost minimisation in distribution and assurance of reasonable profit margin. However, channel decisions are not made entirely on the basis of rational economic analysis.

We have to consider a number of factors such as the nature of the product, market trends, competition outlook, pricing policies, typical consumer needs, as well as needs of the manufacturer himself.

For perishable goods speedy movement needs shorter channel or route of distribution,. In the sale of food products, we need both wholesaler and retailer. Market means people with money and willing to purchase want-satisfying goods. Age, income group, sex, vocation, religion of customers will have to be studied to secure adequate information of market segments or target markets.

Buying habits of customers and dealers will also influence our channel choice. Consumer and dealer analysis will give data on the number, type, location, buying habits of consumers and dealers.

Channel choice needs this information. For example, desire for credit, preference for one stop shopping, demand for personal services, amount of time and effort the customer is willing to spend — all are important factors in channel choice.

When service after sale is required, e. Of course, they must be available,. They must accept marketing policies and programmes of the manufacturers and actively help them in their implementation,. This will minimise distribution cost. A big firm may have shorter channel,. The broader the product line, the shorter will be the channel.

If the product mix has greater depth or specialisation, the company can favour selective or exclusive dealerships,. A weaker company has to depend on middlemen 4o secure financial and warehousing reliefs,. In such cases even a longer chain of distribution can be profitable.

Thus, quantity and quality of marketing services provided by the company can influence the channel choice directly. Marketing environment can also influence the channel decision.

During recession or depression, shorter and cheaper channel is always preferable. In times of prosperity, we have a wider choice of channel alternatives. Technological inventions also have impact on distribution. The distribution of perishable goods even in distant markets become a reality due to cold storage facilities in transport and warehousing.

Hence, this led to expanded role of intermediaries in the distribution of perishable goods. Many a time, similar channels may be desirable to bring about distribution of your products also.

However, sometimes marketers deliberately avoid customary channels dominated by rivals and adopt different channel strategy. For instance, you may by-pass retail store channel usually used by rivals and adopt door-to-door sales Where there is no competition.

Once, the company decides the general channels to be used, it has to decide on the number of middlemen in each channel, i. We have maximum number of retail outlets for mass distribution of convenience goods as consumers demand immediate satisfaction and that too at the most convenient retail shops.

Extensive or broadcast distribution is essential when the price is low, buying is frequent and brand switching is a common phenomenon.

Extensive distribution secures rising sales volume, wider consumer recognition and considerable impulse purchasing. But it creates problem of motivation and control and it may generate unprofitable sales due to higher marketing costs.

When special services are needed, e. The number of outlets at each level of distribution is limited in a given geographic area. If the product has long useful life and consumer brand preference can be established, selective distribution will be more profitable. When final buyers do not need any product service, mass or extensive distribution is adopted. If the amount of product service expected by final buyers is considerable, exclusive distribution is preferable.

Here, we have one wholesaler or one retailer for a given market to handle the right of distribution in that market. Similarly, if your brand has not only brand preference but also brand insistence and consumers refuse to accept substitutes, selective or even exclusive distribution is feasible.

Exclusive distribution creates a sole agency or sole distribution-ship in a given market area. Such types of distribution are very useful in the sale of consumer speciality goods, e. Exclusive distribution privileges offer tremendous loyalty of dealers and substantial sales support from dealers. However, the main sacrifice involved is the rising sales volume that might be obtained through wider or extensive distribution. The manufacturer can have greater control over prices and markets and he can get maximum co-operation from middlemen.

Exclusive dealer can carry complete stock and offer after-sale-service to the buyers of products. When a customer is considering buying a product he tries to access its value by looking at various factors such as its delivery, availability etc. Similarly, a marketer too while choosing his distribution members must access what value the member is adding to the product. Some advantages of distribution channel are as under:. Results in Customer Convenience — Channel distribution provides accumulating and assorting services, which means they purchase from many suppliers the various goods that a customer, may demand.

Customers can buy in small quantities — The phenomenon of breaking bulk quantities and selling them in smaller quantities is known as bulk breaking.

The customers have the benefit of buying in smaller quantities and they also get a share of the profit the retailer makes when he buys in bulk from the supplier. Customers receive financial support — Resellers offer financial programs to their customers which make payment easier for the customer. Customers can buy on credit and using a payment plan etc.

It is Cost Saving — Distribution channel partners are specialists in what they do therefore, they perform at much lower costs than companies trying to run the entire distribution channel all by itself.

It is Time Saving — Time of delivery is reduced due to efficiency and experience of the channel members. For example, the grocery store receives deliveries from the wholesaler in amounts required and at a suitable time and often in a single truck.

In this way cost as well as time is saved. Channel members also help in boosting sales — Resellers often use persuasive techniques to persuade customers into buying a product thereby increasing sales for that product. They often make use of various promotional offers and special product displays to entice customers into buying certain products. Channel members provide valuable information — Manufacturers s rely on the intermediaries to provide information which will help in improving the product or in increasing its sale.

High- level channel members often provide sales data. On all other occasions the manufacturer can always rely on the reseller to provide him with customer feedback.

Bigger Reach — A channel of distribution makes it possible to deal with customers that the company could not economically reach with own sales force or store. A network of distributors or retailers provides ready-made coverage of other regions or the whole country without the company having to invest. Increased Market Knowledge — Distributors provide company with local market knowledge, enabling it to enter new markets quickly and effectively without the cost of market research or marketing programs.

Increased Core Competency — A small business needs to focus its resources on product development and generate revenue. Using channel distribution allows a small business to focus on those core competencies without having to hire new personnel. Follow us. Choose a dictionary. Clear explanations of natural written and spoken English. Usage explanations of natural written and spoken English.

Grammar Thesaurus. Word Lists. Choose your language. My word lists. An example of selling to the end user through a retailer is what Walmart does with Samsung TVs and other home appliances. Samsung makes the products and sells them the Walmart that in turn sells them to consumers. The final example where producers can sell directly to end customers is a fairly modern phenomenon.

Apple, Sony, HTC, and Samsung all produce smart phones that are sold directly to customers on their websites.