On the other, a new small company would use many distribution channels to sell its products because it has to make a name for its brand and it has less experience. The agents normally receive a commission and are allocated the task of product distribution in a particular area. The three-level channel is suitable for goods that are in high demand and with a target market that stretches across a country.

Role of Distribution Channels:

If a company chooses multiple distribution channels, such as selling products online and through a retailer, the channels should not conflict with one another. Companies should strategize so one channel doesn’t overpower the other. If a company continues to use indirect channels of distribution, digital technology also allows it to manage relationships with wholesale and retail partners more efficiently. This level may add the role of the individual, sometimes referred to as a “jobber.” A jobber is a small-scale wholesaler or middleman in the retail goods trade.

For instance, almonds are sold in big gunny bags to middlemen by the producers from states such as Himachal Pradesh and Kashmir. The produce so obtained in bulk is broken down into smaller quantities as it moves down the channel of distribution. For instance, a producer of cement like ACC or shoes like Nike manufactures products in large numbers but individual buyers need them in smaller quantities. This mismatch in functions of channel of distribution quantity is synchronized by middlemen who make products available in numbers that are desired by customers. In an international marketing scenario, a firm can get customer and competitor insights from middlemen who operate in that market. Middlemen can influence consumer decision in favour of certain brands simply by providing relevant product and company information.

Size of the Market – If the market is large in size, more number of middlemen will be required to sell the product. Channels of distribution form an important part of the marketing mix. Decision relating to it involve decisions regarding type of channels, type of inter­mediaries, channel strategies, motivation to channel members, physical distribu­tion etc. There are various factors which influence channel of distribution decision. A right product at right price will not have any value if it is not made available at the right place. Distribution is the process of moving the product from the producer to the ultimate consumer.

A zero level channel, commonly known as direct marketing channel has no intermediary levels. In this channel framework manufacturer sells merchandise directly to customers. An example of a zero level channel would be a factory outlet store. Many service providers like holiday companies, also market direct to consumers, bypassing a traditional retail intermediary – the travel agent. Exhibit 12.3 shows various ways marketing intermediaries can be linked.

What Is the Difference Between Direct and Indirect Distribution Channels?

This involves defining the goals and objectives that the distribution channel should achieve. It includes determining factors such as market coverage, sales targets, customer satisfaction, and brand positioning. Channel strategies outline the approach to be taken in terms of channel structure, partner selection, and resource allocation to meet the objectives. As they help in introducing and establishing new products in the market. Under some cases, buyers go by the recommendations of the dealers.

Channel Levels:

1. Usually the manufacturer uses this channel when he cannot afford to have a sales force of his own.
2. The group is composed of individuals who are both communal producers and consumers of whatever goods and services can be made available.
3. All of these individuals are interdependent, and could not operate successfully without the cooperation and capabilities of all the others.
4. It includes determining factors such as market coverage, sales targets, customer satisfaction, and brand positioning.
5. A computer manufacturer may know everything about designing the finest personal computer, but know absolutely nothing about making sure the customer has access to the product.

There are many other benefits of using a diversified marketing channel. A business can know about target customers’ presence, reach and acquire new customers, and gain customer loyalty. Therefore, manufacturers must be cautious when choosing a marketing channel to increase sales revenue while minimizing market risk. The decision of choosing the placement for products depends on various factors.

What are distribution channels?

It is gaining more attention in recent times after the formation of so many super markets, departmental stores like Big Bazar etc. It makes avail­able the goods to the consumer as per his requirement. It is important to note that channel objectives vary in different environmental conditions and market conditions. Finally, channels should have certain distribution objectives guiding their activities.

Therefore, selecting the right distribution channel for the product is the main element for the success of the company’s marketing strategies. When the product is easily available to the customers, then it increases the profit for the business. The direct distribution channel does not make use of any intermediaries. The direct form of distribution is typically used by producers or manufacturers of niche and expensive goods and items that are perishable. Digital technology has transformed the way businesses, especially small businesses, use direct channels of distribution. With increasing consumer demand for online shopping and easy-to-use e-commerce tools, direct selling usually equals more success for businesses.