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Question
Short Answer Type Question.
Explain the factors determine choice of channels of distribution.
Explain the factors determine choice of channels of distribution.
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Solution
Choice of appropriate channel of
distribution is a very important
marketing decision, which affects the
performance of an organisation.
Whether an organisation will adopt
direct marketing channels or long
channels involving number of
intermediaries is a strategic decision.
The choice of channels depends on
various factors, which are discussed
as follows:
1. Product Related Factors: The
important product related
considerations in deciding the
channels include whether the product is an industrial or a consumer
product, whether it is a perishable or
a non-perishable product, what is the
unit value of the product and the
degree of complexity of the product.2. Company Characteristics: The
important company characteristics
affecting the choice of channels of
distribution include the financial
strength of the company and the degree
of control it wants to hold on other
channel members. Direct selling
involves lot of funds to be invested in fixed assets say for starting own retail
outlets or engaging large number of
sales force. Indirect selling through
intermediary does not involve
deployment of huge funds on these
aspects. Thus, if the firm has plenty of
funds it may go for direct distribution.
If spare funds are not available, it may
go for indirect channels.
3. Competitive Factors: The choice
of channel is also affected by the
channel selected by competitors in the
same industry. If the competitor’s have
selected a particular channel say
Chemist shops for the sale of toiletry
products like hair oil, the other firm
may also like to select the similar
channel. In some cases producers may
want to avoid the channels used by
competitors. For example if other
cosmetic producers have chosen big
retail stores for the sale of their
products, a particular firm may like to
adopt door to door selling. Thus, it will
depend upon the policy of the firm –
whether it wants to go with the
competitors or be different from them.
The changing global marketing
environment has lead to adoption of
newer channels.
4. Market Factors: Important market
factors affecting the choice of channel
of distribution include size of market,
geographical concentration of potential buyers and quantity
purchased. In case the number of
buyers is small, like for most
industrial products, short channels
are used. But if the number of buyers
is large, as in case of most convenience
products like soft drink, toothpaste
etc., longer channels involving large
number of intermediaries are used.
5. Environmental Factors: Other
important factors affecting the choice
of channels of distribution include
environmental factor such as economic
condition and legal constraints. In a
depressed economy marketers use
shorter channels to distribute their
goods in an economical way.
2. Company Characteristics: The
important company characteristics
affecting the choice of channels of
distribution include the financial
strength of the company and the degree
of control it wants to hold on other
channel members. Direct selling
involves lot of funds to be invested in fixed assets say for starting own retail
outlets or engaging large number of
sales force. Indirect selling through
intermediary does not involve
deployment of huge funds on these
aspects. Thus, if the firm has plenty of
funds it may go for direct distribution.
If spare funds are not available, it may
go for indirect channels.
3. Competitive Factors: The choice
of channel is also affected by the
channel selected by competitors in the
same industry. If the competitor’s have
selected a particular channel say
Chemist shops for the sale of toiletry
products like hair oil, the other firm
may also like to select the similar
channel. In some cases producers may
want to avoid the channels used by
competitors. For example if other
cosmetic producers have chosen big
retail stores for the sale of their
products, a particular firm may like to
adopt door to door selling. Thus, it will
depend upon the policy of the firm –
whether it wants to go with the
competitors or be different from them.
The changing global marketing
environment has lead to adoption of
newer channels.
4. Market Factors: Important market
factors affecting the choice of channel
of distribution include size of market,
geographical concentration of potential buyers and quantity
purchased. In case the number of
buyers is small, like for most
industrial products, short channels
are used. But if the number of buyers
is large, as in case of most convenience
products like soft drink, toothpaste
etc., longer channels involving large
number of intermediaries are used.
5. Environmental Factors: Other
important factors affecting the choice
of channels of distribution include
environmental factor such as economic
condition and legal constraints. In a
depressed economy marketers use
shorter channels to distribute their
goods in an economical way.
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