Factors affecting choice of channels: If a firm is customer oriented—and it should be if it hopes to prosper—its channels are determined by consumer buying partners. As stated in a study about the insurance industry. “It’s time to stop battling about distribution channels and listen to what the consumer wants.”
1. Market consideration: A logical starting point is to consider the target market—its needs, structure, and buying behavior;
a. Type of market: Because ultimate consumers behave differently than business users, they are reached through different distribution channels. Retailers, by definition, serve ultimate consumers, so they are not in channels for business goods.
b. Numbers of potential customers: A manufacturer with few potential customers (firms or industries) may use its own sales force to sell directly to ultimate consumers or business users.
c. Geographic concentration of the market: When most of a firm’s prospective customers are concentrated in a few geographic areas, direct sale is practical. T his situation is found in the textile and garment manufacturing industries.
d. Order size: When either order size or total volume is large, direct distribution is economical. Thus a food products manufacturer would sell directly to large supermarket chains.
2. Product considerations: Although there are numerous product related factors to consider, we will highlight three;
a. Unit value: The price attached to each unit of a product affects the amount of funds available for distribution. For example, a company can afford to use its own employee to sell a printing press part that costs more than tk10000.
b. Perishability: Some goods, including many agricultural products, physically deteriorate fairly quickly. Other goods, such as clothing, perish in a fashion sense.
c. Technical nature: A highly technical business product is often distributed directly to business users. The producer’s sale force must provide considerable presale and post sale service; wholesalers normally cannot do this. Consumer products of a technical nature pose a real distribution challenge.
3. Middlemen consideration: Here we begin to see that a company may not be able to arrange exactly the channels it desires;
a. Service provided by middlemen: Each producer should select middlemen offering those marketing service that the producer either is unable to provide or can not economically perform.
b. Availability of desired middlemen: The middlemen preferred by a product may not be available. They may carry competing products and such, as a result, not want to add another line.
c. Producer’s and middlemen’s policies: When middlemen are unwilling to join a channel because they consider a producer’s policies to be unacceptable, the producer has fewer channel options.
4. Company consideration: Before choosing a distribution channel for a product, a company should consider its own situation;
a. Desire for channel control: Some producers establish direct channels because they want to control their product’s distribution, even though a direct arrangement may be more costly than an indirect one.
b. Services provided by seller: Some producers make decisions about their channels based on the distribution functions desired (and occasionally demanded) by middlemen.
c. Ability of management: The marketing experience and managerial capabilities of a producer influence decisions which channel to use. Many companies lacking marketing know how turn the distribution job over to middlemen.
d. Financial resources: A business with adequate finances can establish its own sales force, grant credit to its customers, and/or store its own products. A financially weak firm uses middlemen to provide this service.
