Distribution or Marketing Channels MBA Marketing Notes

Thu, 08/04/2011 - 10:59 -- Umar Farooq

Marketing or Distribution Channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. These are one of the most critical decisions.

Advantages of Distribution Channels

  1. Financial help to producer
  2. Direct marketing may not be feasible. (Bubble gum producers)
  3. It is a usually a costly exercise for producer’s to setup selling points.

Functions of Distribution Channels

  1. Market survey (environment, forces, demand etc)
  2. Dissemination of persuasive communication to stimulate purchase.
  3. Price settlements.
  4. Ordering
  5. Funds for financing inventories at various levels.
  6. They assume risks associated with carrying out channel work.
  7. They provide for the storage and movement of physical products.
  8. They provide for payments by buyers.
  9. They arrange and manage to facilitate transfer of ownership.

Number of Channel Levels

A layer of Intermediaries that perform some work in bringing the product and its ownership closer to the final buyers.

  1. Zero level channel – direct marketing channel has no intermediary levels and company sells directly to consumers. For example, Singer sells its Electric Appliance  in its own stores.
  2. One level channel – Indirect marketing channel contains one intermediary level, which is typically a retailer. For example the cameras, televisions and many appliances sell their products directly to large retailers.

Number Of Intermediaries & Distribution Strategies

  1. Exclusive Distribution. Severely limiting the number of intermediaries. It is used when the producer wants to maintain control over services level and output, offered by reseller.
  2. Selective Distribution. Some channels are used but not all.  Only those are used that give selective and privileged treatment. Cost effective, used by established companies.
  3. Intensive Distribution. Producers stock their products in many outlets and available when and where consumers want. Fast moving consumer goods FMCGs are normally distributed like this. Almost all the channels of distribution are used.