Agent middlemen are of the following kinds. A Channel Of Distribution is the way in which the goods are passed from the manufacturer to the consumer. Environmental Characteristics: The general characteristics of the total environment are a major consideration in channel design. Main environmental forces that affect channel decision include: a. The Climate of the Area- if the area is grassland or forested then it has a low population density because these area are prone to rainfall. Manager must identify relevant provisions affecting distribution activities and, accordingly, an appropriate channel s should be selected. If every manufacturer owned its own grocery store then customers would have to visit multiple grocery stores to complete their shopping list.
Manufacturer Reputation and Financial Stability b. Manufacturers may also feel short of customer-based skills for distribution of goods. The point to be considered is how to get an idea of customers reaction to the product. Following factors relating to the market are particularly significant. In economically poor countries, short or direct channels are used to sell product at low price. Discretion: A factor has discretion as to the terms of sale negotiated by him. Main factors related to market include: a.
Everyday hundreds of trucks would line up outside the store to deliver products. He must compare the benefits received to the amount paid for using the services of this intermediary. Retailers buy in bulk quantities from the manufacturer or wholesaler. For durable products, indirect or multilevel channel is preferable. But in case of industrial buyers there can be less middlemen. Product-related factors are among most relevant and powerful factors affecting channel decision.
If the market is small, direct selling can be utilised. Do they prefer to buy from retailers, locally, via mail order or perhaps over the Internet? Therefore the manufacturer goes for a loss in revenue. Liability: A factor is personally liable for his contracts. That is, Manufacturer - Retailer - Consumer. Possession: A factor is in possession of the goods to be sold. Channels used by competitors are also important. But, the follower companies have to follow market leader.
Factors Related to Products : Product is a prime factor in channel selection. Customer — There is a difference in buying behaviour of consumers and a business buyers. As a result, a company may opt for indirect channel to take help of middlemen in this task. Technical Aspects: Technical products cannot be used without sufficient information and direct supervision. Or the organisation will have to invest to open their own stores, opt for direct selling, etc.
Divisible products can be conveniently distributed by middlemen. To avoid conflicts, a firm can sell products through direct selling if the competitor has its products sold through retailers. Then, the buyer needs for product information, installation and servicing are equally important. Factors Related to Middlemen : Companies consider several middlemen-related factors while deciding on channels. When middlemen do not provide the useful services to customers, companies prefer direct channels. For instance, liquor and drugs can be distributed only through licensed shops. They prefer direct distribution channels.
But, financially weak companies have to opt for indirect channels to share resources and expertise of channel members. A factor enjoys wide powers. That is, Manufacturer - Wholesaler - Retailer - Consumer. Availability of Facilities: Availability, costs, and quality necessary facilities play decisive role in channel selection. A manufacturer may use different channels for different types of buyers. Durable and non-fashion articles are sold through agents and merchants.
Such a channel can be selected by evaluating alternative channels in terms of their costs, sales potential and suitability. The store may not have enough space for storing all their products and this would add to the chaos. When middlemen do not provide the useful services to customers, companies prefer direct channels. As against it, for the smaller manufacturers, it becomes necessary to procure the services of the wholesellers and the retail traders. For simple products, direct channels can be used. Channel partner capabilities — A new gadget from a manufacturer can be sold through internet.
Use of direct and short channel can minimize risk of theft or robbery. Direct distribution gives a producer much more control over these issues. Intensity of Competition: When there exists a severe competition in the market, a company must consider competitors distribution strategies and practices while selecting marketing channels. But a broker has no such lien on goods. In their absence, the organisation will have to opt for an intermediary that is available to them. If both the rival firms sell through the same retailer, intermediaries often influence sale of a product that gives them higher profit margin.
Types of Distribution Channels: Broadly, Channel of distribution is of two types viz. He gets commission on sales at a fixed rate. They are a set of pathways a product or service follows after production, leading to purchase and use by the customer. The manufacturers who are financially sound and are of a larger category, are able to appoint the sales representatives in a larger number and thug could distribute the commodities products in larger quantities. Manager must observe these reforms and innovative practices minutely and accordingly a suitable channel should be selected. If a grocery wholesaler is included in the distribution chain then the problem is almost solved. To select the right distribution channel for your business, you need to consider what a channel can offer, including location and reach, skills and resources, management costs and degree of control.