Distribution Channels Overview
Distribution channels, also called marketing channels, is a route decided by the company to deliver its good and services. Distribution channels or marketing channels in channel definition are a chain of intermediaries through which goods and services pass and finally reach to the final buyers or the end customers. Therefore channels of distribution or marketing channels are the key elements of the marketing strategies. It revolves around the product distribution channels assists in making the products access to the consumers or the prospective customers that help and maximizing the revenue and enhancing brand awareness.
Most of the producers do not sell the goods directly to the consumers or the customers. Between them are set of intermediaries who perform a variety of functions and constitute marketing channels, also called the distribution channels. In the context of marketing channels definition, it is a set of independent organizations that are in the process of producing products or services and making it available for use to the end customers. Distribution channels follow a path from production, culminating into the purchase and use by the final users.
The distribution channels or marketing channels is a set of channels that a firm employs. The significant role of marketing channels or distribution channels is to convert potential buyers into profitable customers. The aim of channels of distribution marketing channels should not just be serving markets but also to make markets. While managing intermediaries distribution channels or marketing channels, the firm should decide how much effort to devote to the marketing strategies, namely push strategy and pull strategy.
Push strategy: These distribution channels or marketing channels use the manufacturer’s sales force, promotions, and other means to entice intermediaries to promote and sell the product to the end-users. This strategy in distribution channels or marketing channels is ideal where there is no brand loyalty, and the product is of impulsive nature. Also, the product benefits are well understood.
Push strategy: This distribution channels or marketing channels use advertising promotion and other forms to persuade consumers in demanding the product from the intermediaries. This induces the intermediaries to order the products from the manufacturer. Push strategy in distribution channels or marketing channels is appropriate where brand loyalty is high, and there is high involvement in the category.
Companies like Coca-Cola, Nike, and Intel employ both the pull and the push strategy in the context of distribution channels or marketing channels.
Functions of Distribution Channels
To understand the importance of distribution channels or marketing channels, one should keep in mind that it does not just bridge the gap between the producer of the product and its user. Some other functions include:
Creates utility: Distribution channels or marketing channels create space, time, and ownership utility. Distribution channels or marketing channels makes the products available when, where, and in which quantities the customer demands.
Logistics and physical distribution: Distribution channels or marketing channels are responsible for the assembly, storage, sorting, and transporting of goods from the manufacturers to the end-users.
Facilitation: Distribution channels or marketing channels also provide pre-sales and post-sales services like financing maintenance dissemination and channel coordination.
Creating efficiencies: In the context of channel definition and channels of distribution, bulk breaking and creating assortment helps in creating efficiencies. Wholesalers and retailers purchase a large number of goods from the manufacturers and break it by selling a few at a time to the channels for the customers. Also, they offer different types of products at a single place, which is a massive benefit to the customers as well.
Sharing risk: An ideal feature related to channel definition in the context of channels of distribution is the sharing of the risk as most of the channels buy the products beforehand. It helps in dividing the risk with the manufacturers and do everything possible to sell the products.
Marketing: According to channel definition, distribution channels are also called marketing channels as they are among the core touchpoints where the marketing strategies are executed. Marketing channels are in direct contact with the end-users, which helps the manufacturers in propagating the brand message and the product benefits to the customers.
Types of Distribution Channels or Marketing Channels
In the context of channel definition of distribution channels can be divided into direct and indirect channels. The producers and the final customers are part of every channel. Therefore indirect channels in channels of distribution are further divided into one level, two-level and three-level channels. Channels of distribution are based on the number of intermediaries between manufacturers and customers.
Direct Level Zero Level Channel (manufacturer to the customer)
In channel definition of channels of distribution of direct level channels is the oldest form of selling the products. It does not include any intermediary, and the manufacturer directly gets in contact with the customers at the point of sale. Distribution channels of this type consist of a manufacturer and the final customer. Some of the significant examples are door to door sales, telemarketing, mail order, internet selling and, manufacturer-owned stores. Eureka Forbes promotes door to door channels of distribution, whereas ICICI Bank uses a telephone to prospect for new customers or sell augmented services. Asian sky shop promotes telemarketing channels of distribution, and Bata promotes manufacturer-owned store kind of channels of distribution.
Direct channels of distribution are usually used by manufacturers selling perishable goods and whose target audience is geographically concentrated.
Channel definition in context to the indirect channel is those distribution channels that require intermediaries to sell the products to the final customers. There are three distribution channels in the indirect channel.
One Level Channel (manufacturer to retailer to the customer)
In context to channel definition of channels of distribution in one level channel, the retailer buys the product from the manufacturer and directly sells it to the customer. One level channels of distribution according to channel definition works best for the manufacturers who are dealing in shopping goods like clothes, furniture, shoes, etc.
Two-Level Channel (Manufacturer to the wholesaler to the retailer to the customer)
Channel definition related to two-level channel talks about the wholesaler buying the bulk from the manufacturers and breaks it into small packages and sells them to the retailer who eventually sells it to the end customers. Such channels of distribution are used for goods that are durable, standardized, and somewhat inexpensive.
Three-Level Channel (manufacturer to wholesaler to jobber to retailer to consumer)
Channel definition of three-level channels of distribution involves an agent besides the wholesaler and the retailer who helps in selling the manufacturer’s goods. The jobbers come handy when goods need to move quickly as soon as the order is placed. These agents are given a duty to handle the product distribution of a specified area or a district with a certain percentage of commission. The agents can be categorized into super stockists and forwarding agents. Super stockists buy stocks from the manufacturers and sell them to the wholesalers and retailers of the area. Forwarding agents work on a commission basis and provides their houses for order processing and deliveries.
Dual Distribution Channels
The Channel definition of dual distribution channels is those distribution channels when the manufacturer employs more than one marketing channel or distribution channels to reach the end-users. A manufacturer may open their showrooms to sell the products and, at the same time, may use the Internet and other retailers to attract more customers.
Distribution channels for services are always delivered using direct channels. As services are intangible and cannot be stored; thus, the services are always delivered using direct distribution channels. With the introduction of the Internet, online marketplaces even services now use intermediaries to reach to the final customers.
Emerging Distribution Channels that One should Prioritize in 2020
Choosing the right distribution channels helps in getting the best return on investment. As there are so many changes in the market, it becomes necessary to know which will work best for the product. Looking at the emerging trends some practices on how to get the most out of them are
Pay Per Click Marketing: Pay per click marketing aims at encouraging marketing channels, especially with the diverse options now available to brands. The dominating forces in the world of pay per click marketing are Google ads, Facebook, and Instagram.
Social Media: In the framework of channel definition and distribution channels, social media has emerged as a significant player in the marketing world right now. Customers actively seek brands they like or are interested in, which helps in the buying decision process.
Email Marketing: Email marketing is one of the emerging and best methods of direct response marketing. Email marketing best practices include making emails more personalized as possible. Keeping the emails short and using a combination of segmentation practices to make the emails relevant to the receivers. Also, the email should not neglect the subject line and give the user a reason to click on the email.
Own Website: Creating and launching its own website as a marketing channel has become one of the most important marketing channels. This is where users come to know more about the business. Thus the site should have a good impression and should clearly represent the business brand product and services the way a manufacturer wants.
Content Marketing and SEO: It is just like a savings account in which compound interest makes it even more valuable. The evergreen post can offer SEO benefits for a long time as people continue to search for them and also can help in providing valuable relationship building and lead generation capabilities.