Describe the types and organization of distribution channels

Most producers use intermediaries to bring their products to market. They try to develop a distribution channel (marketing channel) to do this. A distribution channel is a set of interdependent organizations that help make a product available for use or consumption by the consumer or business user. Channel intermediaries are firms or individuals such as wholesalers, agents, brokers, or retailers who help move a product from the producer to the consumer or business user.

Types of Distribution Channels:

Channel Length

Distribution channels can be described as being either short or long. A short channel involves few intermediaries. A long channel, on the other hand, involves many intermediaries working in succession to move goods from producers to consumers. In general, business products tend to move through shorter channels than consumer products due to geographical concentrations and comparatively few business purchases. Service firms market primarily through short channels because they sell intangible products and need to maintain personal relationships within their channels. Not-for-profit institutions also tend to work with short, simple, and direct channels. Please note Table 15.1 below that highlights the characteristics of short and long marketing channels.

Consumer Channels

The simplest and shortest distribution channel is a direct channel. A direct channel carries goods directly from a producer to the business purchaser or consumer. One of the newest means of selling in a direct channel is the Internet. A direct channel may allow the producer to serve its customers better and at a lower price than is possible using a retailer. Sometimes a direct channel is the only way to sell the product because using channel intermediaries may increase the price above what consumers are willing to pay. Another reason to use a direct channel is control.

Many producers, however, choose to use indirect channels to reach consumers. Customers are familiar with certain retailers or other intermediaries and habitually turn to them when looking for what they need. Intermediaries also help producers fulfill the channel functions previously cited. By creating utility and transaction efficiencies, channel members make producers’ lives easier and enhance their ability to reach customers.

The producer-retailer-consumer channel is the shortest indirect channel. GE uses this channel when it sells small appliances through large retailers such as Wal-Mart or Sears. The producer-wholesaler-retailer-consumer channel is another common distribution channel in consumer marketing.

Business-to-Business Channels

B2B distribution channels facilitate the flow of goods from a producer to an organizational customer. Generally, B2B channels parallel consumer channels in that they may be direct or indirect. The simplest indirect channel in industrial markets occurs when the single intermediary—a merchant wholesaler referred to as an industrial distributor rather than a retailer—buys products from a manufacturer and sells them to business customers. Direct channels are more common to business-to-business markets because B2B marketing often means selling high-dollar, high-profit items to a market made up of only a few customers. In such markets, it pays for a company to develop its own sales force and sell directly to customers at a lower cost than if it used intermediaries.

Channels for Services

Because services are intangible, there is no need to worry about storage, transportation, and the other functions of physical distribution. In most cases, the service travels directly from the producer to the customer. Some services, however, do need an intermediary, often called an agent, who helps the parties complete the transaction. Examples include insurance agents, stockbrokers, and travel agents.

26 What is the difference between marketing research and market research?

Market research is the process of discovering relevant primary and secondary information about the demand for a product or service in a specific market.

Marketing research is a much broader and wider-ranging process. Marketing research involves discovering consumer reaction to many areas of the marketing process. Marketing research include market research, product development and testing, pricing, promotional aspects, distribution and selling theory and the evaluation of competition.

The terms market research and marketing research are often used to mean the same thing, but this is obviously not the case. In effect, market research is a part of marketing research

The need for market research

• To reduce the risks associated with new product launches.

• To predict future changes.

• To explain patterns in sales of existing products and market trends.

• To assess the most favoured designs, flavours, styles, promotions and packages for a product..

Marketing research can therefore be used to discover information about:

• market size and consumer tastes and trends,

• the product and its perceived strengths and weaknesses,

• the promotion used and its effectiveness,

• competitors and their claimed unique selling propositions,

• distribution methods most preferred by consumers,

• consumers' preferences for packaging the product.

Marketing research

The marketing research activities of the company are usually focused on five main areas. These are: research on markets, on products, on promotion, on distribution and on pricing.

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