This document explains the concept of distribution channels in marketing, detailing how goods move from producers to consumers through direct and indirect routes. It highlights the importance of aligning distribution strategies with end-user needs and provides insights on building and managing distribution channels effectively. Additionally, it addresses pricing conflicts among multiple channels and emphasizes the necessity of supporting channel partners for revenue generation.

1. Distribution Channel Marketing/Nino Joseph Mihilli
What is a Distribution Channel?
The distribution function of marketing is comparable to the place component of the marketing
mix in that both center on getting the goods from the producer to the consumer. A distribution
channel in marketing refers to the path or route through which goods and services travel to get
from the place of production or manufacture to the final users. It has at its center transportation
and logistical considerations.
Business-to-business (B2B) distribution occurs between a producer and industrial users of raw
materials needed for the manufacture of finished products. For example, a logging company
needs a distribution system to connect it with the lumber manufacturer who makes wood for
buildings and furniture.
Business-to-customer (B2C) distribution occurs between the producer and the final user. For
instance, the lumber manufacturer sells lumber to the furniture maker, who then makes the
furniture and sells it to retail stores, who then sell it to the final customer.
Direct vs. Indirect
In marketing, goods can be distributed using two main types of channels: direct distribution
channels and indirect distribution channels.
Direct Distribution
A distribution system is said to be direct when the product or service leaves the producer and
goes directly to the customer with no middlemen involved. This occurs, more often than not,
with the sale of services. For example, both the car wash and the barber utilize direct distribution
because the customer receives the service directly from the producer. This can also occur with
organizations that sell tangible goods, such as the jewelry manufacturer who sells its products
directly to the consumer.
Indirect Distribution

2. Indirect distribution occurs when there are middlemen or intermediaries within the distribution
channel. In the wood example, the intermediaries would be the lumber manufacturer, the
furniture maker, and the retailer. The larger the number of intermediaries within the channel, the
higher the price is likely to be for the final customer. This is because of the value adding that
occurs at each step within the structure. .
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-user
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.

3.  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.
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