Distribution Channel OverviewMarketers are concerned about distribution because it determines how the customeractually receives a product or service .A customer access in gaining access to theproduct often flags the brand image. DELL, for example maintains complete control ofits distribution, so its customers buy directly from the manufacturer.A distribution channel is a group of interdependent firms that work together to transferproduct and information from the supplier to the customer. Infact it is composed of thefollowing participants –Each channel member perform some of the marketing functions needed to get theproduct from the point of origin to the point of consumption .In addition to matchingbuyers and sellers , intermediaries exist in the channel to perform some of thesefunctions perhaps more effectively & efficiently than other channel participants .Somebenefits of intermediaries include – Mediating transactions between parties Providing cost savings in the form of lowered search, monetary, transaction, andenergy costs.The structure of the distribution channel can either make or impede possibleopportunities for marketing on the internet. In fact there are four major elements thoseare combined to form a company’s channel structure –Producers ,manufacturers or originators of the product orserviceIntermediaries -the firms that match buyers and sellers &mediate the transactions among themConsumers , customers or buyers who consume or use theproduct or service
Types of IntermediariesChannel intermediaries include wholesalers, retailers, brokers, and agents. Wholesalers buy product from the manufacturer 7 resell them to retailers Both brick –and-mortar and online retailers (sometimes called e – tailers) buyproducts from wholesalers and sell them to consumers. Brokers facilitate transactions between buyers and sellers without representingeither party. They are market makers and typically do not take title to the goods. Agents usually represent either the buyer or seller, depending upon who hiresand pays them. They facilitate transactions between buyers and sellers and donot take title to the goods .Manufacturers agents represent the seller whereaspurchasing agents represent the buyer.For some digital products such as software , the entire distribution channel may beinternet based .In most cases however only some of the firms in the channel are whollyor partially web enabled .For example non digital products such as flowers and winemay be purchased online but must be delivered via truck.Distribution channel length and functionsThe length of the distribution channel refers to the number of intermediariesbetween the supplier and the consumer .The shortest distribution channel hasno intermediaries –the manufacturer deals directly with the consumer in thiscase (the way DELL computer sells directly to its consumers ). This is known asthe direct distribution channel.4 Majorelementsof channelstructureTypes ofintermediariesLength of thechannelFunctions of adistributionchannelPhysical orinformational(distribution )system
Most distribution channel incorporates one or more intermediaries in an indirectchannel .A typical indirect channel include s suppliers, a manufacturer,wholesalers, retailers and end consumers. Intermediaries help to performimportant functions.Disintermediation describes the process of eliminating traditionalintermediaries .Eliminating intermediaries can potentially reduce costs sinceeach intermediary must add to the price of the product in order of product.Disintermediation allows the supplier to transfer goods and services directly tothe consumer in a direct channel .Besides complete disintermediation tends tobe the exception because intermediaries can often handle channel function moreefficiently than producers can handle them .An intermediary that specializes inone functions ,such as product promotion tends to become more proficient inthat function than a non specialist .