Factors Influencing Channel of Distribution
The factors determining the suitability of a channel for a product distribution are as follows:
Seasonal products are distributed through less layer of middlemen. Non standardized products that are made according to customer specifications may be delivered directly. But standardized products may be passed on through middlemen. Trucks which are heavily needed to be distributed with less layers of distribution. The life of perishable products is limited and should reach the consumer at the earliest. e.g. Flowers and milk. Technical products which require pre-sale and post-sale advice from technicians should be directly distributed by producer or with middlemen. e.g: Air- conditioners, Washing machine.
The size of the market for the goods is a major factor while selecting the route for distribution of products. Distribution in large geographical area requires more middlemen. Middlemen are not required to distribute products in a limited area.
Large purchases made by few consumers require centralised distribution. Large number of consumers making purchases in small quantities requires more middlemen.
Middlemen who are experienced and have produced more sales are wanted by all producers. Long channel naturally increases the cost and price of the product. The number of layers of middlemen should be kept to the minimum. The competitor who is efficient in reducing distribution cost will sell more as his price tends to be lower.More the middlemen are lesser will be the level of control and more problems on the part of the producers. Quality of distribution service can be ensured and loyal customer base can be created with less middlemen. In some areas there may be scarcity of right middlemen and in some other cases the policies of producers may be not acceptable to the middlemen.
A financially strong producer may select a high technology oriented channel which will reduce cost in the long run. Manufacturers with large volume of production may open direct branches in cities and towns where there is more sales. They can also provide more services expected by consumers. Small and medium producers require the services of middlemen for selling their products. A producer offering wide range of products can have a long channel as he can defray the cost of distribution over more number of products.
The channel cost should go along with the quality of service provided by middlemen. Ordinary goods are routed through economical channel even though the time taken by the channel for delivery is more.
Machinery or equipment which need to be installed and demonstrated should be sold with shorter channel. Technical services can be provided by manufacturers or by their trained technicians. Therefore a shorter channel is preferred for sales.
An established product can select an ordinary channel. But a new product entering into the market should be carefully promoted by experienced middlemen.