Characteristics and selection of distribution channels
The distribution channel is a complex of interrelated enterprises whose activities are aimed at organizing the process of commodity-money exchange. In other words, the distribution channel includes a certain number of companies, each of which is involved in one way or another in the chain of movement of goods from the place of its production to the end user.
Types of sales channels
Characteristics of sales channels Sales channels are developed to achieve the main goal of product distribution, i.e. they provide in their entirety the structure of the sales network, through which the sales of products take place.
Sales channels are divided into the following types:
Single-level distribution channels – there is only one link in the chain of movement of goods from producer to consumer. Such channels have the following form: producer – intermediary – consumer.
Two and more level channels – several intermediaries take part in the process of product distribution. Such channels can be represented as follows: producer – intermediary number 1 – intermediary number 2 – intermediary number n – consumer.
Distribution channels with a zero level – the sale of goods to the consumer occurs without the participation of intermediaries. Such channels have the form: producer – consumer.
Choosing the most optimal sales channel and the number of its levels, you need to remember that each of these channels has its advantages and disadvantages. Direct distribution channels or sales channels with a zero level do not require the accumulation of a large number of goods in warehouses, but have a limited amount of target markets. Also, these channels are characterized by the organization by manufacturers of their own after-sales support of goods, which requires additional resources and investments. Distribution channels, involving the use of intermediaries, exclude the possibility of the manufacturer to establish direct contact with consumers. But such channels contribute to the expansion of sales markets, attracting new customers, increasing sales, maximizing profits.
Characteristics of distribution channels Having decided whether to include a distribution channel for intermediaries, it is necessary to make a decision on the number and type of intermediaries necessary for the sales process to become most effective.
From the point of view of sales policy, the following intermediaries are distinguished:
Dealers are wholesale intermediaries who carry out operations on their own behalf and at their own expense. They become the owners of the products they purchase for resale.
Distributors – wholesale and retail intermediaries involved in the process of product distribution on behalf of the manufacturer, but at their own expense. They sell products on the basis of the right that the manufacturer provides them, and do not own the products.
The commissioners are wholesale and retail intermediaries acting on their own behalf, but at the expense of the manufacturer. Ownership of the goods goes to the final consumer after payment.
Agents – legal entities acting on behalf and at the expense of the principal and receiving remuneration for their services.
Brokers are intermediaries whose goal is to establish links between legal entities interested in promoting products. Their remuneration is calculated as a percentage of sales.
In order to determine the number and types of intermediaries listed above, in marketing there are three approaches to the formation of distribution channels:
Exclusive distribution – the number of intermediaries is limited in order to control the distribution of products across predetermined sales markets.
Intensive distribution – intermediaries are involved in the maximum amount to ensure that as many territories as possible are equipped with goods.
Selective distribution – combines the signs of an intensive and exclusive approach. This approach is used by manufacturers wishing to control each stage of product distribution with the lowest cost.
Selection of sales channels. Example
A special feature of sales channels is that, having chosen them once, it is extremely difficult for a manufacturer to change his decision. Therefore, before giving preference to one or another distribution channel, it is necessary to analyze a number of factors, namely, assess the profitability of the channels, their level of compliance with the requirements of potential buyers, the ability to control the distribution, the share of competition, the dynamics of development of the channels.
In the framework of marketing research of the above factors, it makes sense to make a comparative table, a sample of which is presented in Table 1.
Evaluation of distribution channels:
1. Channel profitability
2. The share of maximum profit
3. Convenience for consumers
4. The ability to meet demand
5. Low cost
6. The ability to control the distribution of goods
7. The degree of competition
8. Sales volumes
9. Prospects for expanding new markets
10. The ability to attract new customers