Place and Distribution is one of the most important and decisive factors in the entire Marketing mix. For the manufacturer or marketer , the most important issue is , How can the firm deliver the product to customer ? what are the channel should be used ? etc.
For the customer , the issue really is from where does the firm get the product or the service that the customers want . Does the customer have to travel distances or can he have all that he needs under one roof ( shoppers stops or crosswords , pantaloons or Big bazaar , etc.)
The aspects need to be considered while deciding a channel
- What are the cost and what are the benefits | advantages of using such a channel ?
- What channels are the competitors using ?
- How does the channel fulfill the customer’s benefits ?
- what does the customer think is important ? and Finally ?
- What does the marketer’s own intuition or guts or experience say ?
The choice of a channel mist in the ultimate analysis male economic sense to both the organization as well as to the channel , However , it must also take into account certain important issue like global happenings, Best practices and also what are the benchmarks set by the competitors , etc.
The number of channels is dependent not only on the market potential but also on several other factors like size of the area , price of the product , etc.
The choice of the channel is also a functional of the “Potential of the customer and the extraction of the customer.” the potential of the customer can be defined as the quantum ( either in terms of value or in terms of numbers ) that the customer buys ( respective who it buys) and form this potential the quantity that the marketing organization can get is called as the extraction .
Large volume products with a low transactional price per unit, e.g. product consequently was a large number of layers in the distribution channel , thus between the manufacture and the customers there are
- Sub Retailers
- Sub. sub, Retailers, etc.
While small volumes products, e.g., industrial product / niche product there was a small number of layers in the distributor channels.
Thus , between the manufacture’s and the customer there are hardly one , two layers . some of the characteristic of the channel was in the volume- based product , core product ot niche- based product , industrial product
Additional consideration in determining channel structure
A variety of environmental factors influences channel – structure strategy formulation, these influences may be technological , social , ethical , governmental , geographical or cultural .
Many aspects of channel structure are affected by technological advances , for example, mass retailing in food has become feasible because of the development of automobiles , highway, refrigerators cars , cash registers , packaging improvements and mass communications
In the coming years television shopping with household computers terminals should have a far reaching impact on distribution structures.
The channel- structure strategy can also be influenced by local , state and federal laws in a variety of ways.
Geographic size , population pattern, and typology also influence the channel – structure strategy , in urban areas, direct distribution to large retailers may make sense , rural areas , however , may be covered only by wholesalers
Finally , cultural trail may require the adoption of a certain channel structure in a setting that otherwise seem an odd place for it .
5 Steps involved in selecting a channel strategy are :
- List the factors that have a bearing in the market product and these have to be evaluated with respect to the industry position as the proper strategy .
- Pick out the factors that will have the most impact on the channel design decision . no factors with a dominant impact should be left out . for example, assume that the following four factors have been identified as having particular significance :
- Market concentration,
- customer service level .
- Asset specificity .
- Availability of working capital.
- Create a matrix based on the key factors to consider the interactions among key factors . if only two factors are being considered , a two – by – two matrix of four cells would result. foe three factors , a three – by three matrix of nine cells would result .
- Decide whether a direct channel , and indirect channel or a combination of both a direct and an indirect channel is most appropriate , considering the factors involved . Combination channels are becoming more common in business practice , especially in industrial markets .
- For Each product or services in question , locate the corresponding cell in the box mode the prediction in the one that should be followed or at least the one that should be most seriously considered by the firm .
- Exclusive Distribution
- Intensive Distribution
- Selective Distribution