Distribution is one among the four important constituents of the marketing mix, the other three being production, pricing and promotion. Distribution refers to the process of moving goods and services from the source right up to the end consumer through the use of different channels. The various distribution channels include wholesalers, retailers, distributors and even the internet. These channels are further sub-divided into two types of channels direct and indirect. Direct channels let consumers purchase goods from manufacturers directly, whereas indirect channels require consumers to purchase goods from wholesalers.
A company can design as many channels of distribution as they want. Designing channels of distribution requires a firm to consider customer needs, ascertain channel objectives and recognize and assess the major channel options. The marketer needs to understand the output levels desired by the target consumers while designing different channel types. Channel objectives can be established by considering factors such as nature of the product, size and financial position of the company, the characteristics of different types of intermediaries, channels being used by rival firms and environmental factors such as economic conditions and legal constraints. Once the objectives are in place, the different channels of distribution can be determined based on types of intermediaries, the number of intermediaries required and the responsibilities of each channel member.
There can be three types of distribution channels namely exclusive distribution, selective distribution and intensive distribution. An exclusive distribution involves a limited number of intermediaries and is used when the manufacturer wishes to have control over the service levels and output offered by the reseller. It is used mainly for distributing luxury goods. A selective distribution means that the manufacturer uses a few selected intermediaries for distribution of the product; it is commonly used for specialized goods. An intensive distribution refers to the use of all possible outlets to distribute a product and is used mainly for more commonly used goods.
Companies generally do not use one channel of distribution but tend to use a mix of different channels. This may include combining agents who deal with smaller customers and the direct sales force that deals with bigger customers. Using the online channel or smart phones for retailing is also increasing.
An important task of a companys marketing department in regards to distribution is to manage the various channels that are being used for the purpose. This includes motivating the intermediaries that are involved in the process of distribution and also dealing with the conflicts that may occur between the different channels being used for distribution of goods and services.
Distribution of products or services is an integral part of the marketing process employed by a firm. Therefore, it is important to use the different channels of distribution appropriately.