Distribution Channels are distribution methods used to bring a product or service to the consumer. Distribution can be in the form of retail sales, consumer purchases and network marketing strategies. In order to get a competitive advantage over their competitors, organizations need to know how to distribute their products or services effectively.
Distribution is among the four pillars of the whole marketing mix. Distribution is simply the procedure of making a product available to the public or business client who needs it directly or indirectly. This could either be done directly by the manufacturer or distributor or through intermediaries or third-party channels. The most common distribution channels include direct marketing, online sales, franchising, private label, mass market and institutional sales. In fact, there exists no distribution channel that is completely free of costs.
Direct distribution channels offer lower price points as compared to indirect ones. However, this is not always the case as certain intermediaries charge additional costs for their services. For instance, retailers pay to acquire the rights to sell an item on the retailer’s behalf. This means that they will have to pay for any advertisements as well as for shipping and handling charges incurred.
One of the most common distribution channels is that of door-to-door selling. This involves running a large advertisement campaign either on television, radio or newspaper. It requires the manufacturer or distributor to visit every household in the targeted area and persuade them to purchase the product or service. This takes a lot of time and costs a great deal of money as well.
Another type of distribution is called the exclusive distribution. Exclusive distribution refers to the manufacturer launching its own product exclusively for sale in the market. There are various forms of exclusive distribution such as the manufacturer launching selective offers within a limited geographical area or a selective launch in the market with the help of various channels. In this case, the manufacturer benefits from the increased sales as retailers prefer to sell their products exclusively rather than sell them in bulk.
Distribution channels can either directly or indirectly affect the price of a good. The direct method has the advantage of directly improving the profit margin as distributors can offer price discounts to consumers. However, this reduces the efficiency of the product and the profits are also reduced as there is no competition and little if any marketing.