Factors that are taken into account when choosing a distribution...

Factors Considered When Choosing a Distribution Channel

When choosing a distribution channel, it is necessary to consider the influence of the following factors:

- distribution channel costs;

- the ability to control the distribution channel;

- market coverage;

- constancy of intermediaries;

- the width of the assortment group;

- costs and trade margins;

- the length of the sales channel;

- channel blocking;

- volume of stocks;

- the ability to use new marketing ideas.

Distribution channel costs

There are two types of costs distribution channels: investment in their development and constant costs of their support.

Investments in the development of distribution channels, which are often overlooked, are represented by two main elements - the capital requirement and the money flow standards associated with the choice of types of intermediaries. Maximum investment, as a rule, requires the situation when the company on its own creates its own internal distribution channels. The use of dealers and distributors can reduce the size of the investment, but manufacturers often provide initial stocks for consignment, loans, retail space, etc. Intermediary agents may not need to invest, but sometimes the start of their activities is subsidized. Of course, the manufacturer does not have cash receipts from agents before concluding transactions with end customers or consumers. Distributors and dealers provide cash receipts when buying a product.

Constant costs of supporting distribution channels can exist as direct costs for marketing the company's products in the form of discounts and commissions paid to intermediaries selling goods. Marketing costs (most of which are accounted for distribution channel costs) are treated as the difference between the price of production and the price at which the buyer ultimately acquires the goods. Intermediary costs include the costs of transporting and storing goods, unloading them, processing documents and loans, advertising, presentations and negotiations.

Many companies, believing that they can create a "miracle of selling" with minimal costs, assumed the functions of intermediaries, however, when they could not realize dreams of reducing costs, it was necessary to review and rearrange the structure of distribution channels.

Studies have shown that of the five different distribution channels, including sales to subsidiaries, the most beneficial are consumer goods producers that sell them to the distributor of the consuming country.

It is well known that you can reduce the number of intermediaries, but you can not reduce the number of their functions and the cost of services, but creative marketing can reduce distribution costs in some circumstances, for example using shorter distribution channels. Many companies that sell their goods on their own, have concluded that they should extend distribution channels to keep costs at the same level as in foreign markets.

Possibility of monitoring the distribution channel

Often, companies themselves are actively involved in the distribution of their own products to improve control over them in the market. It is generally accepted that, despite the additional costs, the sale of goods by the manufacturer allows him to exercise maximum control over this process. Each type of distribution channel, each intermediary has its own level of sensitivity to control. As the length of distribution channels increases, the ability to control prices, sales volumes, methods of promoting the product on the market and the types of outlets decreases. Some companies prefer not to control the movement of their goods and pass this function to the intermediary. Such companies do not know where their goods go, what sales volume can be expected and what share in the future this product will take in the international activity of the company.

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