Distribution Meaning and Channels Management YouTube Lecture Handouts

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Distribution Meaning and Channels Management

Meaning

  • Distribution is the process of making a good or service available to the consumer or business user who needs it. This can be done directly by the manufacturer or service provider or using indirect channels with distributors or intermediaries in between.
  • It is one of the most important P՚s of Marketing as using this as only through using this element effectively, the goods reach to the other parties or to the eventual customers within stipulated time.

Importance of Distribution

  • Communication: Distribution acts as a link between both the producers and consumers. Producers can make flow of information to consumers about their products, prices, offers etc. through intermediatories. Similarly, they receive information about customers, competitors and environmental changes from channel members.
  • Employment Opportunities: The function of distribution channels creates employment opportunities in the country. Channel members act as direct and indirect sources of employment. Different producers need to supply their various products to consumers.
  • Betterment in Standard of living: Distribution also helps in improving the living standard of the consumers in the society. It helps in improving living standard of consumers through generation of employment, increase in income etc. Hence, it brings an overall positive effect in the status of the society.
  • Does Value addition: The various functions of distribution such as transportation, warehousing, inventory management etc. increase the importance of products by creating place utility, time utility and quantity utility too. Distribution plays an important role to augment the value of the products through delivery of products in right quantity, at right place and also at the right time.

Objectives of Distribution

  • Movement of goods: The main objective of distribution is to make flow of goods from production place to the place of consumption.
  • Availability of goods on time: The objective of distribution function is to make or supply necessary goods to the large masses of customers living indifferent geographical areas.
  • Customer satisfaction: The other objective of distribution function is to help consumers feel satisfied through effective distribution.
  • Protection of goods: The objective of distribution is also to properly storing, handling and protecting the goods and supplying them to the consumers in good condition.
  • Cost reduction: The objective of distribution is also to reduce cost of product by bringing effectiveness in distribution process.
Objectives of Distribution

Types of Distribution Channels

  • Broadly there are two types of Distribution channels namely:
  • Conventional and
  • Non-Conventional
  • Under Conventional there are two more:
  • Direct and Indirect
  • Whereas under Non-Conventional
  • Horizontal and Vertical

Conventional

  • Direct Channel: As the name says, the channel does not have any intermediately in between i.e.. , the goods reach directly from the producer to the customer without any middlemen in between.
  • Direct channels tend to be more expensive to set up at the beginning and can require significant capital investment like Warehouses, logistics systems, and delivery staff will need to be set up.
  • Indirect Channel: There are intermediatories involved in indirect channel. It can be a one level, two level or multiple level channel depending on the type of products.
  • These are comparatively inexpensive as the support functions of distribution are performed by the marketing channel members

Non-Conventional

  • Vertical channel: A vertical marketing system the is one in which the main members of a distribution channel i.e.. , producer, wholesaler, and retailer work together as a unified group in order to meet consumer needs.
  • Vertical marketing systems can take several forms.
  • In a corporate VMS, one member of the distribution channel owns the other channel members.
  • In an administered VMS, one member of the channel is large and powerful enough to coordinate the activities of the other members without having an ownership stake.
  • A contractual VMS consists of independent firms joined together by contract for their mutual benefit
  • Horizontal channel: Here two or more firms combine or come together to exploit a new marketing opportunity. For example, insurance companies tieing up with banks in order to sell their products through the respective banks

MCQs

In which channel of distribution producer, wholesaler and retailer act as unified person?

1. Direct

2. Indirect

3. Vertical

4. Horizontal

Which channel is suitable for perishable products?

1. Direct

2. Indirect

3. Vertical

4. Non-conventional

✍ Manishika