Unit-IV- Channels of Distribution

Distribution Channels
Distribution channels in marketing are one of the classic “4 Ps” (product, promotion, price,
placement a.k.a. “distribution”). They’re a key element in your entire marketing strategy —
they help you expand your reach and grow revenue.
B2B and B2C companies can sell through a single distribution channel or through multiple
channels that may include:

 Wholesaler/Distributor

 Direct/Internet

 Direct/Catalog

 Direct/Sales Team

 Value-Added Reseller (VAR)

 Consultant

 Dealer

 Retail

 Sales Agent/Manufacturer’s Rep

Distribution Channels Concepts & Steps

Before you begin
You can evaluate a new distribution channel or improve your channel marketing /
management at any time. It’s especially important to think about distribution when you’re
going after a new customer segment, releasing a new product, or looking for ways to
aggressively grow your business.

Evaluate how your end-users need to buy

Your distribution strategy should deliver the information and service your prospects need.
For each customer segment, consider:

How and where they prefer to buy

 Whether they need personalized education and training
 Whether they need additional products or services to be used along with yours
 Whether your product needs to be customized or installed
 Whether your product needs to be serviced
 Match end-user needs to a distribution strategy
If your end-users need a great deal of information and service, your company can deliver it
directly through a sales force. You can also build a channel of qualified resellers or
consultants. The size of the market and your price will probably dictate which scenario is
best.
If the buying process is fairly straightforward, you can sell direct via a website/catalog or
perhaps through a wholesale/retail structure. You may also use an inbound telemarketing
group or a field sales team.
If you need complete control over your product’s delivery and service, adding a channel
probably isn’t right for you.
Identify natural partners
If you want to grow beyond the direct model, look for companies that have relationships
with your end-users. If consultants, wholesalers or retailers already reach your customer
base, they’re natural partners.

Build your distribution channel

If you’re setting up a distribution channel with one or more partners, treat it as a sales
process:

 Approach the potential channel partner and “sell” the value of the partnership.
 Establish goals, service requirements and reporting requirements.
 Deliver inventory (if necessary) and sales/support materials.
 Train the partner.
 Run promotions and programs to support the partner and help them increase sales.
 Minimize pricing conflicts
If you use multiple channels, carefully map out the price for each step in your channel and
include a fair profit for each type of partner. Then compare the price that the end-user will
pay; if a customer can buy from one channel at a lower price than from another, your
partners will rightfully have concerns. Pricing conflict is common, and it can jeopardize your
entire strategy, so do your best to map out the price at each step and develop the best
solution possible.

Drive revenue through the channel

Service your channel partners as you’d service your best customers and work with them to
drive revenue. For example, provide them with marketing funds or materials to promote
your products; run campaigns to generate leads and forward them to your partners.

After Designing Your Distribution Channels

As you’re creating a new channel you’ll need a pricing strategy and a sales process. When
your channel is up and running, you can start launching marketing campaigns to channel
partners and end-users.
Types of Channel of Distribution – Channels of Distribution Related to Consumer Products
and Industrial Products
The flow of goods from the producer to the ultimate consumer may take place through
different types of distribution channels. The structure of distribution channel describes the
arrangement and linkages of its members. The marketing experts have described different
types of distribution channels for consumer and industrial products.

1. Channels of distribution related to consumer products.

2. Channels of distribution related to industrial products.

Type # 1. Channels of Distribution Related to Consumer Products:

i. Conventional Distribution Channels:

In conventional distribution channels, it is assumed that each enterprise working in the

channel is separately owned and operated concern. Conventional distribution channels are
the fragmented network wherein the manufacturer and the consumers are loosely linked by
intermediaries in the process of exchange.

Conventional channels are of two types:

a. Direct Distribution Channels

b. Indirect Distribution Channels

a. Direct Distribution Channels:

A producer of consumer goods may distribute his products direct to his consumers. This is
the shortest and simplest channel where no middlemen are involved.

There are three alternatives in making direct sales to ultimate consumers:

(1) By own sales shops i.e., multiple shops.

(2) By mail order or by telephone.

(3) By traveling sales representatives.

b. Indirect Distribution Channels:

Indirect Channel is one in which the manufacturer sells his products with the help of
intermediaries. A chain is followed to complete the distribution process.

Some of the indirect channels are as follows:

(1) One Level Channel of Distribution:

A producer may take help of middlemen for the distribution of his products; Middlemen
may be a retailer or wholesaler. In this distribution channel manufacturer allows the
retailers / wholesalers to have direct access to him. This is also simplest, easiest, oldest and
most popular type of distribution channel.
These channels are most suitable where the merchandise require elaborate outlets and are
sold in bulk. It is also suitable for perishable products which are of everyday use and the
demand for the product is constant.

(2) Two Level Channel of Distribution:

A manufacturer may choose to distribute his goods with the help of two middlemen. These
two middlemen may be wholesaler and retailer. This is the most traditional channel for
many of the consumer goods. Under this channel the producer sells his products in large
quantities to the wholesalers.

The wholesalers distribute the products to the retailers as per their requirements in small
quantities. The retailers finally sell the same to the ultimate consumers. In areas where the
size of the retailing institutions is small and widespread, a wholesaler is essential to co-
ordinate the retailers. Products requiring a balanced or an equitable distribution also
require this elaborate channel.

(3) Multi Level Channel of Distribution:

A manufacturer may distribute his goods to consumers with the help of more than two
middlemen. These middlemen may be agents, wholesalers and retailers. This is an extension
of the above described channel and is needed when elaborate distribution arrangements
are required.