This document discusses distribution channels and channel of distribution. It defines distribution channels as the set of pathways a product takes after production to reach the consumer. It then discusses various characteristics of channels of distribution like route, flow, composition, functions, and remuneration. It also discusses factors that influence the selection of distribution channels like whether the product is industrial or consumer, perishability, unit value, style obsolescence, and more. Finally, it discusses common channels of distribution, methods of determining distribution intensity, and problems in determining marketing channels.

2. Distribution channels is the process of making the
product or service available for use or
consumption.
Distribution channels are the set of pathways a
product or service follow after production.

3. A Channel of distribution (sometime a trade channel) for a
product is the route taken by the title to the goods as they
move from the producer to the ultimate consumer or industrial
user.
Distribution Channels are the systematic economic institutions
through which a producer of goods delivers them into the
hands of their users.” Philip Kotler
Any sequence of institutions from the producer or consumer
including none or any number of middlemen is called channel
of Distribution.” Prof. McCarthy

4. CHARACTERISTICS OR ELEMENTS OF CHANNEL
OF DISTRIBUTION
1. Route or Pathway : Channel of distribution is a
route or pathway through which goods and
services flow from the manufacturers to
consumers.
2. Flow : The flow of goods and services is
smooth and sequential and usually
unidirectional.
3. Composition : It is composed of
intermediaries, such as wholesalers, retailers,
agents, distributors etc, also called middlemen

5. CON’D
4. Functions : The intermediaries perform such
functions which facilitate transfer of ownership
title and possession of good and services from
manufacturers to consumers.
5. Remuneration : The intermediaries are paid in
the form of commission for the services rendered
by them. The same is compensated by the
manufacturer in the form of commission allowed
by the manufacturer or added in the price of the
goods sold.

7. CHANNELS OF DISTRIBUTION ON PRODUCT CHARACTERISTICS.
1) INDUSTRIAL/CONSUMER PRODUCTS.
2) PERISHABILITY.
3) UNIT VALUE.
4) STYLE OBSOLESCENCE.
5) WEIGHT AND TECHNICALITY.
6) STANDARDIZED PRODUCTS.
7) PURCHASE FREQUENCY.
8) INNOVATIVE AND MARKET ACCEPTANCE.
9) SEASONALITY.
10) PRODUCT BREADTH.

8. 1. Industrial/Consumer Product :- When the product being
manufactured and sold is industrial in nature, direct channel
of distribution is useful because of the relatively small number
of customers need for personal attention, salesman technical
qualifications and after sale servicing etc. However, in case of
a consumer product, indirect channel of distribution, such as
wholesalers, retailers is the most suitable.
2. Perishable goods, such as vegetables, milk, butter, bakery
products, fruits, sea foods etc. require direct selling as they
must reach the consumers as easily as possible after
production because of the dangers associated with delays and
repeated handling.

9. 3.Unit Value :- When the unit value of a product is high, it is
usually economical to choose direct channel of distribution
such as company's own sales force than middlemen. On the
contrary, if the unit value is low and the amount involved in
each transaction is generally small, it is desirable to choose
indirect channel of distribution, i.e. through middlemen.
4. Style Obsolescence :- When there is high degree of style
obsolescence in products like fashion garments, it is desirable
to sell direct to retailers who specialize in fashion goods.
5. Weight and Technicality :- When the products are bulky,
large in size and technically complicated, it is useful to choose
direct channel of distribution.

10. 6. Standardized Products :- When the products are standardized
each unit is similar in shape, size, weight, colour and quality etc.
it is useful to choose indirect channel of distribution. On the
contrary, if the product is not standardized and is produced on
order, it is desirable to have direct channel of distribution.
7. Purchase Frequency :- Products that are frequently purchased
need direct channel of distribution so as to reduce the cost and
burden of distribution of such products.

11. 8. Newness and Market Acceptance :- For new products with
high degree of market acceptance, usually there is need for an
aggressive selling effort. Hence indirect channels may be used
by appointing wholesalers and retailers as sole agents. This
may ensure channel loyalty and aggressive selling by
intermediaries.
9. Seasonality :- When the product is subject to seasonal
variations, such as woolen textiles in India, it is desirable to
appoint sole selling agents who undertake the sale of
production by booking orders from retailers and direct mills to
dispatch goods as soon as they are ready for sale as per the
order.

12. 10. Product breadth :- When the company is
manufacturing a large number of product items, it has
greater ability to deal directly with customers because
the breadth of the product line enhances its ability to
clinch the sale. Hence, direct channel is the best choice,
such as Allen Solly, Peter England, Wills, Woodland, Bata
Shoe Company etc. They have got wide product range
and thus sell their products direct through their own
multiple shops or authorized retail shops.

13. COMMON CHANNELS OF DISTRIBUTION.
Industrial Goods • As the industrial goods have quite different nature
and more or less fixed patterns, the channels used by them are less
complicated. • Major channels of distribution, which are commonly
used in the distribution of industrial goods, are as follows:
1. Producer -> Industrial User
2. Producer -> Wholesaler -> Industrial Users
3. Producer -> Agent -> Industrial Users
4. Producer -> Agent -> Industrial Distributor -» Industrial User

14. Producer -> Retailer ->Ultimate Consumers • This is also a
simple, easy, old and most popular type of channel of
distribution. • Under this method, producers sell their
goods to retailers and retailers sell them in turn to ultimate
consumers. • Here the producer allows the retailer to have
direct access to him. • The wholesalers or agents are totally
eliminated. • This channel option is preferable when buyers
are large retailers, such as departmental stores, chain
stores, super bazaars, discount houses, big mail order
houses or cooperative stores.

15. It is also suitable when the products are of perishable
nature, such as vegetables, fruits, eggs, and thus speed
in distribution is essential. • Home appliances, ready-
made garments, automobiles, shoes etc. are directly
sold by the manufacturers to the retailers. • This type of
channel of distribution maybe suitable in the following
situations : 1.When the product is perishable either
physically or due to changes in fashion and thus
requiring speedy distribution.

16. Determining Distribution Intensity
1.Intensive distribution.
2. Exclusive distribution.
3. Selective distribution.
4. Consignment selling.
5. Franchise selling.

17. Intensive Distribution:- Under this method, the management
seeks to use as many outlets as possible. The method, is
referred to as maximum expansion. The method is adopted in
the case of convenience goods such as cigarettes, sweets, etc.
Exclusive Distribution:- This refers to the practice of selecting
and giving a distributor exclusive area of sale called 'Territory'.
The distributor agrees not to handle or deal in any competing
product. It gives some sort of prestige to the product as having
an exclusive dealer. The exclusive dealer is protected from
competitors in the area allotted.

18. Selective Distribution:- The manufacturer selects the limited
number of wholesale or retail distributors and works closely
with them to further the sale of his products. This requires
considerable planning and thorough knowledge of the market.
Selective distribution can be used on any type of product.
There are certain distinctive advantages of the policy. The
manufacturer can pick the best outlets. Selective distribution
suitable in the case of shopping goods which carry a higher
unit price and which are not purchased as frequently as
convenience goods. Goods which require after-sales service are
often sold through selective distribution outlet. Washing
machines, TV, Computers, Mobile phones, high value Cameras
etc. are generally sold under this method.

19. Consignment Selling:- It is a practice of placing goods in the
hands of middlemen with the title and control remaining in the
hands of the seller. The distributors are neither wholesalers nor
retailers but occupy only the position of agents. They usually
get a commission on the sales effected together with charges
incurred thereon. The manufacturer specifies the manner, time
and price of sale. The advantages of the system is that the
distributor runs no risk of buying and being struck with goods.
Further they need not invest any money. As for the
manufacturer, he could retain all his control over his
merchandise even when they lie in the distributor's hands. This
kind of distribution is not very commonly found now.

20. Franchise Selling:- A manufacturer arranges distribution
with some individual outlets providing the required
machinery for selling. This method is necessary when
the owners of outlets lack capital and knowledge of
marketing the products. The parent company provides
loans, designs for building, trainings for both the owner
and his staff and, helps in advertising and promoting the
business.

21. Evaluating the Effectiveness of Channels Distribution.
Economic.
Control.
Criteria.

22. Economic Criteria • For evaluating the effectiveness of
the channels of distribution, the economic criteria are
the most important since the firm pursues the profits. •
From the economic point of view, three factors are to
be considered : 1.What would be the sale volume
under each of the channel alternatives? And would a
channel be able to push up the sale of the company?
This can be judged by having a market survey of the
sale volume of different channels of distribution and
the sale can be estimated under each alternative.

23. The second consideration is to estimate the selling and
distribution costs of each alternative. For this purpose it
would be considered whether the costs of a particular
alternative are reasonable and within the capacity of the
company considering its sale volume and the financial
resources. 3.Then the sales and the costs of different
alternatives should be compared having a comparative
view of cost-effect on the net profit of the firm. Company's
own sale force should also be taken in view and should
decide whether it should hire its own sales force or use
the sales agency.

24. 2) Control Criteria: In evaluating the channels the second
main consideration is that of the control, i.e., how would the
marketer be in a position to have a control over a particular
channel? • The more would be the control, the better would
be the channel of distribution. • For this purpose, he is to
consider the relationship between various channels of
distribution, their interests and attitude about company's
product and conflicts among them legal aspect in appointing
a particular channel should also be considered.

25. 3) Adaptive Criteria • The next consideration in channel
decision is to see whether the channel would be
suitable to adapt to the changing conditions in future.
• Each channel alternative involves some duration of
commitment and loss of flexibility. • For example, a
channel alternative involving a long commitment must
appear to be greatly superior on economic or control
grounds in order to be considered but it is not valid on
the ground of adaptability.

26. Problems Involved in the Determination of
Marketing Channels.
The main problems are :
1. Adjustment to Buyers Needs and Expectations.
2. Determining the Best Channel Alternatives
3. Determining Distribution Intensity.

27. 1.1) Adjustment to Buyer's Needs and
Expectations • Producers determining the
market channels adjust to buyer's wants and
expectations. • As regards the consumer goods
marketing, the final buyers are ultimate
consumers and they buy from those retailers
who best serve their needs.

28. 2) Determining the Best Channel Alternatives • From the
producer's point of view determining the best channel
alternatives involves : 1. Recognizing what best means. 2.
Comparing various alternatives in terms of this meaning. •
Best means most profitable sales volume and cost. The
producer must have long run estimates of market
potential. He is free to choose single channel or a number
of channels. The ultimate test of a policy must be the
effectiveness and economy of serving the customer.