Factors affecting the choice of channel
The manufacturer’s goodwill also affects the selection of the channel of distribution. A manufacturer enjoying a good reputation need not depend on the middlemen as he can open his own branches easily.
A manufacturer’s ambition to control the channel of distribution affects its selection. Consumers should be approached directly by such type of manufacturer. For example, the electronic goods sector with a motive to control the service levels provided to the customers at the point of sale is resorting to company-owned retail counters.
A company which has a strong financial base can evolve its own channels. On the other hand, financially weak companies would have to depend upon middlemen.
Considerations related to the government also affect the selection of the channel of distribution. For example, only a license holder can sell medicines in the market according to the law of the government.
In this situation, the manufacturer of medicines should take care that the distribution of his product takes place only through such middlemen who have the relevant license.
When a manufacturer selects some channel of distribution he/she should take care of such factors which are related to the quality and nature of the product.
When the product is very costly it is best to use a small distribution channel. For example, Industrial Machinery or Gold Ornaments are very costly products that are why for their distribution small distribution channel is used. On the other hand, for less costly products long distribution channel is used.
Standardised products are those which are pre-determined and there has no scope for alteration. For example utensils of MILTON. To sell this long distribution channel is used.
On the other hand, customised products are those which are made according to the discretion of the consumer and also there is a scope for alteration, for example; furniture. For such products face-to-face interaction between the manufacturer and the consumer is essential. So for these Direct Sales is a good option.
A manufacturer should choose a minimum or no middlemen as a channel of distribution for such an item or product which is of a highly perishable nature. On the contrary, a long distribution channel can be selected for durable goods.
If a product is of a technical nature, then it is better to supply it directly to the consumer. This will help the user to know the necessary technicalities of the product.
Market considerations are given below
If the number of buyers is large then it is better to take the services of middlemen for the distribution of the goods. On the contrary, the distribution should be done by the manufacturer directly if the number of buyers is less.
Buyers can be of two types: General Buyers and Industrial Buyers. If more buyers of the product belong to the general category then there can be more middlemen. But in the case of industrial buyers there can be fewer middlemen.
A manufacturer should take the services of middlemen if his financial position does not permit him to sell goods on credit to those consumers who are in the habit of purchasing goods on credit.
It is useful for the manufacturer to rely on the services of middlemen if the goods are bought in smaller quantities.
If the market area of the product is scattered fairly, then the producer must take the help of middlemen.
Others
A manufacturer should select such a channel of distribution which is less costly and also useful from other angles.
Sometimes some other channel of distribution can be selected if the desired one is not available.
Such a channel which has a possibility of large sales should be given weightage.
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