There are four basic elements of the marketing mix- product, pricing, place and promotion. All the four elements must be paid attention to for successful marketing and sale of products or services. Distribution relates to the place element. Let us look at its importance.
Distribution means the process by which we make the goods or the service available to the end consumer. Generally, the place of production is not the same as the place of consumption. So the goods have to be distributed to overcome the barrier of place.
Now the distribution of the products can be done by the organisation itself which is direct distribution. Or it can hire intermediaries and form distributions channel i.e. indirect distributions. The plan will depend on several factors, some of which are
- Product: Whether the product is perishable or durable will be a factor in deciding its distributions model.
- Market: The size of the market will be a factor. In a large market, the direct distribution may not be a perfect choice. Also if the markets are scattered indirect channel will be more suitable
- Company: The size of the company and its product-mix are also deciding factors in the decision about distributions.
- Marketing Environment: In a slow economy or depression a shorter distributions chain is preferable. In a healthy economy, there is a wider choice for alternatives.
- Cost: The cost of the channel like transportation, warehousing and storage, tolls etc are obviously a factor in this decision.
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Types of Intermediaries
These are the middlemen that ensure smooth and effective distribution of goods over your chosen geographical market. Middlemen are a very important factor in the distribution process. let us take a look at the types of middlemen we usually find.
Agents are middlemen who represent the produces to the customer. They are merely an extension of the company but the company is generally bound by the actions of its agents. One thing to keep in mind, the ownership of the goods do not pass to the agent. They only work on fees and commissions.
Wholesalers buy the goods from the producers directly. One important characteristic of wholesalers is that they buy in bulk at a lower rate than retail price. They store and warehouse huge quantities of the products and sell them to other intermediaries in smaller quantities for a profit.
Wholesalers generally do not sell to the end consumer directly. They sell to other middlemen like retailers or distributors.
Distributors are similar to wholesalers in their function. Except they have a contract to carry goods from only one producer or company. They do not stock a variety of products from various brands. They are under contract to deal in particular products of only one parent company
Retailers are basically shop owners. Whether it is your local grocery store or the mall in your area they are all retailers. The only difference is in their sizes. Retailers will procure the goods from wholesaler or distributors and sell it to the final consumers. They will sell these products at a profit margin to their customers.
In the reality of the market, all producers rely on the distribution to channel to some extent. Even those who sell directly may rely on at least one of the above intermediary for any purpose. Hence the distribution channel is of paramount importance in our economy.
Solved Question for You
Q: What are some advantages of indirect distribution?
Ans: A company’s ability to sell its products depends heavily on its method of distribution. Some advantages of indirect distribution i.e. using a distribution channel are as follows:
- It helps the company to reduce its cost of distribution. Direct distribution requires a commitment of a lot of resources and time
- Also at times, the retailers (stores) will do the marketing and promotion activities for you to increase their own traffic and customer base. This will help out your own marketing strategies.
- Using a distribution channel will help you widen your customer reach. You can cover a far greater geographical area with indirect distribution, and hence pull in a lot more customers.
- And if you wish to expand your company globally you need agents and distributors in these countries to help you. They have the expertise in their market that you require to expand and sell your product.