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Functions Of Distrubution Channel

Functions of a Distribution Channel Assignment / Homework Help
Distribution is one of the four elements of the marketing mix, the other three being product, pricing and promotion. This marketing mix is also referred to as the four Ps of marketing; distribution is here called physical distribution or place. Simply put, distribution is the process of delivering the products manufactured or service provided by a firm to the end user. Various intermediaries are involved in this process. This chain of intermediaries which helps in transferring the product from one intermediary to the next before it reaches the end user is called the Distribution Chain or Distribution Channel. Each intermediary has a specific role and need which the marketer caters to.

Distribution channels are not limited to products only even the services provided by a producer may pass through this channel and reach the customer. Both direct and indirect channels come into use in this case. For instance, the hotel industry provides facility for lodging to its customers, which is a non-physical commodity or a service. The hotel may provide rooms on direct booking as well as through indirect channels like tour operators, travel agents, airlines etc. Distribution chain has seen several improvements in the form of franchising. Also there has been link ups between two service sectors like travel and tourism which has made services available more accessible to the customer. For instance hotels also provide cars on rent.

Functions of a Distribution Channel
  • The primary function of a distribution channel is to bridge the gap between production and consumption.

  • A close study of the market is extremely essential. A sound marketing plan depends upon thorough market study.

  • The distribution channel is also responsible for promoting the product. Awareness regarding products and other offers should be created among the consumers.

  • Creating contacts or prospective buyers and maintaining liaison with existing ones.

  • Understanding the customer's needs and adjusting the offer accordingly.

  • Negotiate price and other offers related to the product as per the customer demand.

  • Storage and distribution of goods

  • Catering to the financial requirements for the smooth working of the distribution chain.

  • Risk taking for example by stock holding

Three Levels of the Distribution Channel

Three Levels of the Distribution Channel
In level (1) there are no intermediaries involved, the manufacturer is selling directly to the customer. This is called the'direct-marketing' channel. Examples of direct marketing channel can be seen at factory outlet stores. Various hotels prefer direct-marketing, they market their services directly to their customers without taking the help of any retail intermediary (travel agent).

Levels (2) and (3) are examples of 'indirect-marketing' channels. In level (2) one intermediary or retailer is used. A Retailer sells goods/services directly to the end users. Retailer buys products from manufacturers or wholesalers.

In level (3) along with retailer a second member is added to the distribution chain. He is the wholesaler. A wholesaler buys and stores products in bulk from manufacturers. He sells these products in smaller quantities to retailers.

Why should a producer not indulge in selling his product directly to the consumer? Once the product reaches the hands of the intermediaries he loses control over them, so why does he take this risk? The reason is that the intermediaries manage the distribution costs efficiently. They are experienced and have potential contacts which add to their productiveness. Their scale of operation is large as compared to the manufacturer alone which means the scale of sales reached would be higher. While there are various organizations which operate their own distribution channel or do not take any help from channel members, there are others who are in need of some level of channel partnership. For instance Dell computers do not need retail stores for selling their product as they customers can buy directly through the internet. But still some amount of channel partnership is needed with parcel post shippers like FedEx and UPS for product distribution. If Dell were to accomplish this part of distribution too all by itself then it would have exhausted all its company resources to build a large shipping service to satisfy its huge customer base. Thus Dell and its customers are taking advantage of benefits provided by its shippers..

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