A distribution channel/marketing channel is the path that a product takes to reach the end consumer

from the producer. A channel consists of several firms which are interdependent on each other. Any
product to get to its customers must move through this system of Distribution channel. The ease of
availability of a product to a customer is dependent on intensive, exclusive and selective distribution.
There are five types of marketing channels; Distributors, master distributors, Value added resellers,
Manufacturer Reps and brokers. Although intermediaries may be eliminated, the function that they
perform cannot be taken out.

Distribution management

Manufacturers would prefer to have a limited number of resellers who are focused and reliable so that
they are able to have control and also attain good market coverage of the product. This kind of
distribution is called as intensive distribution which is often seen for product of low price and mass
customer base. On the contrary in exclusive distribution, manufacturer is associated with an outlet,
where the reseller would only sell the manufacturer’s products and nothing else. Through exclusive
distribution, marketing strategy of the manufacturer and the reseller often are on the same lines. In
between the two kinds of distributions sits selective distribution, depending on the customer base and
the nature of the manufacturer’s product a more or less selective distribution may be adopted.

Most of the manufacturers prefer a wider distribution system so as to have a greater reach for its
product to its customers. This leads to a competition in acquiring the manufacturer’s products between
the resellers and thereby leading to lower margins, lower prices to its customers and high number of
sales for the manufacturer.

Distribution Channel design

 Segmentation: Identifying needs of different segments and configuring a channel to align with it.
 Positioning: In this step, to cater to the identified segment of customers, a channel is selected.
 Targeting: Of the known customer segments, feasibility to serve these segments is analyzed and
segments which are not possible to serve are dropped off.
 Implementation: the final step in which the manufacturer and the channel co-ordinate to serve
the customer.

Conflict of channel occurs when actions of one channel may affect the performance of another channel
and affect the distribution design and implementation. Conflicts arise between a supplier and a reseller
in the same channel, vertical; between channels, horizontal and between supplier, channel and other
reseller, multichannel.

Changing Channel Designs

Factors which cause a change in channel designs:

 When a customer demands more personalized unique solutions. Mass customization is one
approach.
 In case of a channel overpowering another channel, a concentration of power in the channel
system is seen. Such instances will shift the power from the manufacturer to the buyer.
 Change in strategic priorities.
Recent trends in channels of distribution

 Customer self-service: Increasing use of technology, has enabled the customer to be better
informed on the movement of his/her product. This has opened up new gateways for the
distributors to create new value for its customers.
 Strategic sourcing: To continuously improve and re-estimate initial measures taken by a
company to reduce costs.
 Fee-based services: Distributors are developing a fee based model to serve its customers better.
 Logistics and fulfillment: In a bid to optimize the supply chain, backward integration is being
adopted to provide wholesale distribution functionality.
 Technology spending: Use of technology is unavoidable in today’s scenario. Use of technology
would help to improve customer serving and learn to improve on customer performance
metrics.

Channel Incentives:

Distribution margin is a fraction of relevant prices at each stage in the process; difference between the
price received from the buyer and a retailer. Wholesalers usually set their own distribution margins. This
is independent of performance.

In functional discounting, distribution margin is based on performance and not for the role that it plays
in the channel system. Channels incentives are important because of the fact that a distributor would
expect more for the amount of work that he does for the suppliers in addition to complying with some
of the supplier’s strategic intent.

Corporate brand and role of Channel partners:

Manufacturers of well-known brands vary distribution strategies based on the brand image. Working for
a well-known brand, a manufacturer may put in more efforts to have a greater reach for the product by
adopting intensive distribution. A reseller plays the role of delighting the customer as well, because at
the end of the chain it is the reseller where the customer gets the product from.