Different Types Of Distribution Channels In Marketing
In today’s times, when customers get their ordered products faster, easier and cheaper, it is time to rethink our traditional distribution ways. Distribution channels in marketing help to organize the movement of goods and services from the place of origin to the customer.
There are four ways to reach a customer:
i) Manufacturer/Vendor- Agent- Distributor-Retailer-Customer
iii) Manufacturer/Vendor-Retailer- Customer
The agent works on a commission basis. He doesn’t take title to the goods but gets orders for the vendor and charges his commission. He doesn’t keep any warehouses or godowns but simply passes the orders to the vendor.The distributor takes title to the goods and sells the goods as if they were his own. He buys the goods directly from the vendors at a certain price, keeps the goods in his warehouses and sells it at a profit margin to the retailers. He operates on bigger volumes and lesser margins. The retailer is the point of contact between the vendor and the customer. The retailer operates on lower volumes and more profit margins. In some cases, the middlemen add value to the product and sell it further to the retailer or to the customer directly.
Distribution Channels As Part Of The Marketing Strategy
Without proper distribution, even the best of products or services fail. Distribution is a part of the marketing mix where all the Ps have to work synchronously to make the product available to the customer or end user. Everything from display packaging and outside packaging to the mode of transportation should reflect the market positioning
of the vendor.
The distribution strategy actually guides the marketing strategy as distribution costs are high and can contribute to a large percentage of the market selling price of the goods.Since the aim of the vendor is to make goods or services available to the customer at competitive prices, the cost of distribution becomes a major deciding factor.It can affect the overall profitability of the vendor. Hence, the vendor enters into a strategic alliance with the intermediaries that is based on mutual trust so that the flow of goods and services is not hampered in any way and is smooth.
In case of direct selling, it can be done through the vendor’s sales force or through an intermediary. If the profits far outweigh the expenses on the sales force and if it is more remunerative than the cost of appointing an intermediary, then keeping ones own sales force is ideal.
The strategic decision to have a single channel distribution or a multi-channel distribution depends on the nature of the product and on how fast to deliver it to the end user. if it is a product that has to be distributed intensively, it can be be done directly combined with through intermediaries. If it is a product to be distributed exclusively, then only one mode of distribution may suffice. The levels of channel that a vendor should utilize is again dependent on the nature of the product or service. It is all about placing the product or service intactly in the hands of the end user/customer in a faster, cheaper and safer way. It is ultimately the customer who will guide your business and marketing plans and also the distribution strategy.
Regarding e-commerce or selling through the web, more and more people have started buying through it, making shopping an easy and cheaper experience. Initially, the customers were wary of buying through the web because there was no way of checking or feeling the product until it landed at their place, but with easy return and exchange policies and heavy discounts, the customers have started trusting the web sellers.This is the reason why companies like Amazon, Flipkart, Snapdeal, Shop Clues, Infibeam etc. have seen their annual turnovers growing manifold.