Understanding Distribution

Channels & Analysing

online influence.
What is a Distribution Channel?
● Distribution channels in marketing are one of the classic “4 Ps” (product,
promotion, price, placement a.k.a. “distribution”).

● A distribution channel (also called a marketing channel) is the path or route

decided by the company to deliver its goods or service to the customers.
● The route can be as short as a direct interaction between the company and
the customer or can include several interconnected intermediaries like
wholesalers, distributors, retailers, digital marketing etc.
● Distribution channels are a key element in all the marketing strategies that
revolve around the product.
Functions of Distribution Channels
● Distribution channels provide time, place, and ownership utility. They make the
product available when, where, and in which quantities the customer wants.

● Logistics and Physical Distribution: Marketing channels are responsible for

assembly, storage, sorting, and transportation of goods from manufacturers to
customers.
● Facilitation: Channels of distribution even provide pre-sale and post-purchase
services like financing, maintenance, information dissemination and channel
coordination.
● Creating Efficiencies: This is done in two ways: bulk breaking and creating
assortments. Wholesalers and retailers purchase large quantities of goods from
manufacturers but break the bulk by selling few at a time to many other channels or
customers.
● Sharing Risks: Since most of the channels buy the products beforehand,
they also share the risk with the manufacturers and do everything possible
to sell it.

● Marketing: Distribution channels are also called marketing channels

because they are among the core touch points where many marketing
strategies are executed.

● They are in direct contact with the end customers and help the
manufacturers in propagating the brand message and product benefits to
the customers.
Types of Distribution Channels
Channels of distribution can be divided into the direct channel and the indirect
channels. Indirect channels can further be divided into one-level, two-level, and
three-level channels based on the number of intermediaries between
manufacturers and customers.

Direct Channel or Zero-level Channel (Manufacturer to

Customer)
● Direct selling is one of the oldest forms of selling products. It doesn’t
involve the inclusion of an intermediary and the manufacturer gets in direct
contact with the customer at the point of sale. Some examples of direct
channels are peddling, brand retail stores, taking orders on the company’s
 ● Direct channels are usually used by manufacturers selling perishable goods,
expensive goods, and whose target audience is geographically concentrated.
For example, bakers, jewellers, etc.

Indirect Channels (Selling Through Intermediaries)

When a manufacturer involves a middleman/intermediary to sell its product to
the end customer, it is said to be using an indirect channel. Indirect channels can
be classified into three types:
● One-level Channel (Manufacturer to Retailer to Customer): Retailers buy
the product from the manufacturer and then sell it to the customers.
● Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer):
Wholesalers buy the bulk from the manufacturers, breaks it down into small
packages and sells them to retailers who eventually sell it to the end
● Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to
Customer): Three level channel of distribution involves an agent besides the
wholesaler and retailer who assists in selling goods. These agents come
handy when goods need to move quickly into the market soon after the order
is placed. They are given the duty to handle the product distribution of a
specified area or district in return of a certain percentage commission.

Distribution Channels for Services

Unlike tangible goods, services can’t be stored. But this doesn’t mean that all
the services are always delivered using the direct channels.

With the internet even services now use intermediaries to reach to the final
customers.
Factors Determining the Choice of Distribution Cha­nnels

● Market Characteristics
This includes the number of customers, their geographical location, buying
habits, tastes and capacity and frequency of purchase, etc.

Direct channels suit businesses whose target audience lives in a geographically

confined area, who require direct contact with the manufacturer and are not that
frequent in repeating purchases.
● Product Characteristics
Product cost, technicality,
perishability and whether they are
standardised or custom-made play a
major role in selecting the channel of
distribution for them.

Perishable goods like fruits, vegetables and dairy products can’t afford to use
longer channels as they may perish during their transit. Manufacturers of these
goods often opt for direct or single level channels of distribution.
 ● Competition Characteristics
The choice of the marketing channel is also affected by the channel selected by the
competitors in the market. Usually, the firms tend to use a similar channel as used
by the competitors. But some firms, to stand out and appeal to the consumer, use a
different distribution channel than the competitors. For example, when all the
smartphones were selling in the retail market, some companies partnered with
Amazon and used the scarcity principle to launch their smartphone as Amazon
exclusive.
● Company Characteristics
Financial strength, management expertise, and the desire for control act as important
factors while deciding the route the product will take before being available to the
end user.

A company having a large amount of funds and good management expertise (people
who have sufficient knowledge and expertise of distribution) can create the
distribution channels of its own but a company with low financial stability and
management expertise has to rely on third-party distributors.

The companies who want to have tight control over the distribution prefer direct
channels. Whereas, those companies to whom such control doesn’t matter or those
who are just interested in the sales of their products prefer indirect channels.
Almost all channels and media can be categorized into three groups: Paid,
Owned, and Earned.

1. Paid channels/media are services and placements that have been literally
paid for. You are in control of the content that goes in the paid spaces, but
you don’t own the space.
2. Owned channels are directly influenced by you. You are in control of what
goes where, and how your business is represented in that space. You own the
space (or the account, in some cases).
3. Earned media is free, but it is not controlled by you. It is given at the sole
discretion of others. And it’s the most valuable exposure you can get.
 Online/Digital Marketing: The Essential Channels
The tools in the digital marketing toolbox include websites; search engine
marketing (SEM) – which is an umbrella term that includes search engine
optimization (SEO) and paid search – as well as online display advertising; social
media marketing; mobile marketing; and email marketing.

● Responsive Websites - 40 to 50% (or more) of your website visits are going
to be via mobile device.

Most experts believe it’s best to have a responsive website which uses media
queries to determine the screen size of the device accessing their content,
and automatically adjust to fit the screen.
● Search Engine Marketing (SEM)
A search engine is a web-based tool that scours the World Wide Web to help
users find the information they’re looking for.

Search engine marketing encompasses any activity that attempts to increase

your ranking on these search engines.

SEM includes two activities: search engine optimization (SEO) which

involves earning visibility within search engine results, and paid search
which involves paying to be visible within search engine results.

Both activities have the same objective – to increase visibility by occupying

the top spot within search results
● Online Display Advertising
Online display advertising is, in many ways, a throwback to traditional
advertising. In the old days, you would run an ad in a magazine or newspaper to
provide information about your product or service. Today, you can use display
advertising to accomplish the same thing. However, unlike traditional
advertising, digital advertising comes in several different forms such as banner
ads, video ads, interactive ads, and rich media ads.

With display advertising, marketers have the benefit of targeting audiences based
on website content, geography, and device types.

Display campaigns are typically priced on a cost-per-thousand (CPM) basis,

which denotes the amount you’ll pay for 1,000 ad impressions.
Retargeting / remarketing
Retargeting is a paid channel that helps you convert “window-shoppers” into
purchasing customers. It tracks and targets people who have already visited your
website after they have left your website. Retargeting shows these people a
display advertisement for your product or business. These people are likely
already interested in your product, as they have already visited your website.
Affiliate marketing
Affiliate marketing is a paid channel that brings other people into your business
to help you promote it. With some firm terms and conditions in place, it is
incredibly low risk, and highly effective. Here are the basic steps:

1. You recruit people to become affiliates

2. Affiliates promote your product via an affiliate link/URL to your website.
They share the link with people they know or through their own marketing
channels
3. If a potential customer clicks the affiliate link, and successfully completes a
purchase on your website, the affiliate is paid a commission.
Video
The most common form of video advertising can be found on platforms such as
YouTube and Dailymotion. A video ad typically plays before, during or after the
content an audience intends to watch. You can make the video ads clickable so
that they drive more traffic to your website.

Social Media
Over the past couple of years, social networking platforms have also evolved into
robust advertising platforms. One of the key advantages of social media for
businesses is that it enables you to interact with your customers. Going through
the tweets and Facebook updates that are posted by your customer base gives you
insight into what they need. This is useful for helping your company formulate
marketing strategies that address their needs.
● Specifically, social media features a rich user experience,
dynamic content, scalability, openness and collective
intelligence.

● Different types of social media include social networks,

weblogs, microblogging, content communities, podcasts and
wikis.
● Mobile Marketing
Mobile marketing, a subset of digital marketing, encompasses any marketing activity that
targets users on mobile devices such as a tablets or smartphones.

Many marketers feel that developing a mobile app is absolutely essential to reaching and
engaging with their customers via mobile. However, there are easier and far more
effective channels to reach your target audience on their mobile devices.

These channels could include:

● A mobile website
● Mobile search
● Mobile display ads
● In-app display advertising
Implemented together, these make the perfect starting point for any mobile marketing
campaign.
When running a mobile marketing campaign, you’ll have the choice of different
technologies to reach consumers. These include SMS, MMS, Bluetooth, mobile
applications, the mobile Internet, and social media.

● Email Marketing
Some marketers and industry pundits downplay the importance of email
marketing; however, it turns out, that email is more central to marketing today
than ever before. This is mainly because email is the most personal way brands
can communicate with customers.
Email marketing is effective for numerous reasons:

● Email is one of the most widely used communication methods

● Almost all email users check their email every single day
● You control the content that is included in the email, so tailored messages
can be communicated to specific groups of people, at specific times of day,
in specific locations
● It is more personal than other channels
● It is cost effective, and can be completely free to use
● The people on your mailing list are validated – they have provided you with
their email address so you can communicate directly with them.
● Word of Mouth Marketing
Word of mouth marketing has always been one of the most effective marketing
channels, and that will continue on an on-going basis. You’ll brush it off if a
salesperson tells you that you need that watch, but when your friend points out
how much they love wearing it every day because of all the smart features, you’ll
take more notice.

● Articles and reviews about your business on other sites

Unprompted, positive articles written by other people and posted on their own
websites reflect favorably on your business. Positive reviews impact how people
feel about your business when they are still in the consideration stage.
● Testimonials & social proof
When a customer is over the moon with your product, service, company, or all of
the above, they will be more than happy to provide you with a testimonial,
organically. Glowing testimonials should have pride of place on your website –
put them on your homepage. It’s not arrogance if it’s true!