Marketing Aptitude - Channels of Distribution
Category : Banking
Introduction
Most producers do not sell their goods directly to the final users, between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel. So, marketing channels are a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. A channel of distribution is the path a product takes from the producer or manufacturer to the final user.
The main functions of distribution channel are
Through distribution channel producer comes into the contact with the consumer, which is useful to collect some important information regarding product and behaviour of the consumer.
Distribution channels provide satisfaction to the consumer by providing services and by supplying products in different varieties, colours, sizes and according to fashion.
Distribution channel materialises the transfer to product's title. Title is transferred through sales and purchase. It delivers right product, at right place, at right time and at right price to the consumer.
The institutions functioning as distribution channel assist the manufacturer and buyers in determination of price.
The various channels used for distribution can be described as follows
These distribution channels assume that each enterprise working in the channel is separately owned and operated concern.
They are as follows
(i) Direct Channel or Zero Level Channels When the manufacturer instead of selling the goods to the intermediary sells it directly to the consumer, then this is known as zero level channel, e.g., retail outlets, mail order selling, internet selling.
Manufacturer \[\xrightarrow[{}]{{}}\] Consumer
(ii) Indirect Channels when a manufacturer gets the help of one or more middlemen to move goods from the production place to the place of consumption, the distribution channel is called indirect channel.
Following are the more types of it.
(a) One Stage Channel of Distribution In
This case, there is one middleman, i.e., the retailer. The manufacturers sell their goods like refrigerator, air conditioner, washing machine, etc. to retailers who in turn sell it to the consumers.
Manufacturer \[\xrightarrow[{}]{{}}\] Retailer \[\xrightarrow[{}]{{}}\] Consumer
(b) Two Stage Channel of Distribution In this case, there are two middlemen namely, wholesaler and retailer. This is applicable to products where market is spread over a large area, value of individual purchase is small and the frequency of purchase is high.
Manufacturer \[\xrightarrow[{}]{{}}\] Wholesaler \[\xrightarrow[{}]{{}}\] Retailer \[\xrightarrow[{}]{{}}\] Consumer
(iii) Three Stage Channel of Distribution When the number of wholesalers in the chain is large and they are scattered throughout the country, the manufacturers often use the services of mercantile agents who act as a link between the producer and the wholesaler. They are also known as distributors.
Manufacturer \[\xrightarrow[{}]{{}}\] Agent \[\xrightarrow[{}]{{}}\] Wholesaler \[\xrightarrow[{}]{{}}\] Retailer \[\xrightarrow[{}]{{}}\] Consumer
These channels of distribution are the networks in which channel components participate in a full co-ordination and cohesion manner rather than working in a loose manner.
They are of two types
(i) Vertical Distribution Channels these are rationalised and capital intensive networks, designed to achieve technological, managerial and promotional economics through the integration, co-ordination and synchronization of marketing flows from points of production to points of ultimate uses.
They are of three types
(a) Corporate System/Channel In this distribution channel, a single firm owns both production and distribution facilities. e.g., Bata, Tata, Modi, Godrej, DCM, etc. with their own production units and retail outlets.
(b) Administrated Vertical System/Channel These channels are coordination of all the functions of production and distribution achieved through the use of programme developed by one or the number of limited firms throughout the whole marketing system.
(c) Contractual Marketing System/Channel Under this distribution channel, independent channel components manufacturer, wholesalers and retailers are employed on a voluntary basis to develop a more efficient system on a contractual basis, so as to obtain economies of scale and increases market impact.
(ii) Horizontal Distribution Channel System
Horizontal distribution channel is a new trend in distribution in which two or more companies join hands to exploit a marketing opportunity or opportunities, either by themselves or by creating an independent unit. e.g.. Associated Cement Company (ACC), Sugar Syndicate of India, Maruti Udyog and HDFC Bank, etc.
The following factors have to be taken care of in choosing a specific distribution channel
Marketing Middlemen
Middlemen are intermediaries who specialize in performing or rendering services that are directly involved in the purchase and sale of goods and services in the process of their flow from producer to the consumer.
Middlemen are broadly classified into two groups Merchant Middlemen
There are two categories of merchant middlemen and they are
Wholesalers Wholesalers may be defined as the middlemen who operates between the producers (from whom they purchase goods) and the retailers (to whom they sell goods). They deal with goods in bulk and reap the benefit of economies of scale. They provide goods in relatively small quantities to retailers and provide them with facility of credit purchase.
Retailers Retailers are middlemen who procure goods from the wholesalers and sell the product to the end-users or the consumers. They cater to the demand of the customers by providing a variety of products of different companies at one place. They also offer pro and after sales services and communicate to consumers the features of the products. Full service retailer, discount retailer, vending machine and super market are types of retailer.
All agent middlemen of marketing don’t own what they handle i.e., not take title to the goods. They derive their income from the fees they are paid by their clients or commissions given.
There are three categories of agent middlemen
Broker He brings the buyers and sellers together and negotiate between them. He generally specialises in a narrow range of products and possess in-depth knowledge of market condition in his area of specialisation. A broker does not receive payment until the product is sold and has to ensure the best deal for the customer.
Commission Agent They procure goods on consignment and transport them to bigger markets to sell them for the best price in the market. They deduct the commission and the transportation costs and pay the rest of the money earned to the producer. They generally deal with agricultural products, sea foods, etc.
Auctioneer An auctioneer is an agent who sells goods by auction i.e., to the highest bidder in public competition. He has no authority to hold the goods sold and can deliver the goods only on receipt of price. He is the agent of the vendor.
Tit-Bits
You need to login to perform this action.
You will be redirected in
3 sec
