Tuesday, 9 July 2013

Factors Affecting the Selection of the Channel of Distribution

The selection of distribution is affected by many of factors, which play significant role while choosing the channel for distribution. It may include the buying pattern of consumer, type of the product is perishable, or auto mobile, weight and bulk and it also depends on the company's resources.

the main affecting factors are following..

Organization objectives - If company objective is to have mass appeal and rapid market penetration.
type of product - Perishable products should have a short distribution channel, FMCG goods should have a wide reaching, intensive distribution channel.
nature and extent of market- Distribution to consumer market or industrial markets would be different channel structures.
existing channel for comparable product- company may chose it's existing channel of distribution for relative product.
buying habit of customers- Understanding consumer needs and criteria for buying
Channel Availability - Channels may not be available.

Factors Affecting the Selection of the Channel of Distribution

Every producer, in order to pass on the product to the consumer, is required to select a channel for distribution. The selection of the suitable channel of distribution is one of the important factors of the distribution decisions. The following factors affect the selection of the channel of distribution:
       I.            Factors Pertaining to the Product
Keeping in view the nature, qualities and peculiarities of the product, could only the channel for distribution be properly made. The following factors concerning the product, affect the selection of the channel of distribution:
(1)   Price of the Product. The products of a lower price have a long chain of distributors. As against it, the products having higher price have a smaller chain. Very often, the producer himself has to sell the products to the consumers directly.
(2)   Perishability. The products which are of a perishable nature need lesser number of the intermediaries or agents for their sale. Under this very rule, most of the eatables (food items), and the bakery items are distributed only by the retail sellers.
(3)   Size and Weight. The size and weight of the products too affect the selection of the middlemen. Generally, heavy industrial goods are distributed by the producers themselves to the industrial consumers.
(4)   Technical Nature. Some products are of the nature that prior to their selling, the consumer is required to be given proper instructions with regard to its consumption. In such a case less of the middlemen arc) required to be used.
(5)   Goods Made to Order. The products that are manufactured as per the orders of the customers could be sold directly and the standardized items could be sold off only by the middlemen.
(6)   After-Sales Service. The products regarding which the after-sales service is to be provided could be sold off either personally or through the authorized agents.
    II.            Factors Pertaining to the Consumer or Market
The following are the main elements concerned with the consumer or the market:
(1)   Number of Customers. If the number of customers is large, definitely the services of the middlemen will have to be sought for. As against it, the products whose customers are less in number are distributed by the manufacturer himself.
(2)   Expansion of the Consumers. The span over which are the customers of any commodity spread over, also affects the selection of the channel of distribution. When the consumers are spread through a small or limited sphere, the product is distributed by the producer himself or his agent. As against it, the goods whose distributors are spread throughout the whole country, for such distributors, services of wholeseller and the retailer are sought.
(3)   Size of the Order. When bulk supply orders are received from the consumers, the producer himself takes up the responsibility for the supply of these goods. If the orders are received piece-meal or in smaller quantities, for it the services of the wholeseller could be sought. In this way, the size of the order also influences the selection of the channel of the distribution.
(4)   Objective of Purchase. If the product is being purchased for the industrial use; its direct sale is proper or justified. As against it, if the products are being purchased for the general consumption, the products reach the consumers after passing innumerable hands.
(5)   Need of the Credit Facilities. If, for the sale of any product, it becomes necessary to grant credit to any customer, it shall he helpful for the producer that for its distribution, the services of the wholeseller and retailer businessmen be sought. In this way, the need of the credit facilities too influences the selection of the channel of distribution.


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