Explain in detail the various factors influencing the choice of channel of distribution.
Explain in detail the various factors influencing the choice of channel of distribution.
Ог
Explain the various factors influencing the choice of channels to distribution.
Ans.
Factors influencing the choice of channel of distribution can be divided in following heads. These are the elements that influence the decision about choice of channel.
A. Factors relating to manufacturers
B. Factors relating to product
C. Factors relating to market
D. Factors relating to middlemen
E. Factors relating to Government
F. Other Factors
(A) Factors relating to Manufacturers:
Factors relating to manufacturers can be classified as under:
1. Size of Producer: Firms that work on large scale have resources, reputation, and managerial ability etc. of the highest order. They prefer short medium of distribution.
2. Financial Position: Financial position of the firm also influences the choice of channel of distribution. Short channel of distribution suits financially sound firms as they arrange distribution of their product by opening their own shops. On the contrary those firms whose financial status is not sound adopt long medium of distribution for their products because they have to depend on the middlemen.
3. Goodwill of the Producer: The elements of goodwill are important in choice of distribution channel. Short course of distribution suits those firms who have goodwill in the market because they need not to depend on middlemen for sale of their products. A new firm in the business adopts the long medium.
4. Managerial Ability: A manufacturer must always have the quality of managerial ability. In the lack of that ability it is advisible for him to adopt the long way of distribution. If the manufacturer possesses this quality he may adopt the short medium.
5. Desire to Control: If a manufacturer desires to control his business himself he must choose the small medium. He will have to open his own shops for this purpose in order to control price and distribution otherwise he should select the long way.
(B) Factors relating to Product:
Factors relating to product can be studied as under:
1. Weight of Product: The weight of product influences the medium of distribution. If the product is heavy in weight the manufacturer must adopt the small medium of distribution because handling and transportation of the product costs much to the manufacturer and it is profitable to send the goods directly to the buyer. The lighter weighted goods need long medium of distribution.
2. Perishability of Product: The perishable goods need immediate disposal and therefore the shortest medium of distribution suits them. If the goods are not of perishable nature the medium may be a longer one.
3. Technical Nature of Product: The technical nature of product also influences the choice of channel of distribution. It the product is of highly technical nature and it needs after sales service also, then the manufacturer must select the short medium for distribution so that the buyer must have the goods and also the knowledge of the goods quickly otherwise a long way of distribution can be chosen.
4. Selling Price Per Unit : Per unit sale value also has an impact on the choice of medium of channel. If selling price per unit is low the manufacturer must choose the long medium of channel. On the other hand if the selling price per unit is high a short medium will suit the seller. Low price: goods include match boxes, toffees, cigarates, etc. and high priced goods like television etc.
5. Ordered Product: The product made to order requires short medium of distribution because if longer medium is chosen there may be delay in the delivery. Other standard goods may have short or long way as it is suited.
(C) Factors relating to Market:
Factors relating to market can be classified as under:
1. Number of Customers: Number of customers has also its influence on choice of distribution channel. If the number of customers of a product is more, then the long medium of channel can be chosen otherwise a short medium can be selected if the number of buyers is small.
2. Size of Orders: The size of order is another criteria for selection of a channel for distribution. If the quantity of order is small, the short medium will suit. As against it if the ordered quantities are sizeable then the longer medium will be sufficient and suitable.
3. Nature of Market: The nature of market is another consideration while choosing the distribution channels. For consumer products long medium will suit. If the product relates to industrial market, then a short medium will suit.
(D) Factors relating to Middleman:
Under this head following factors can influence the choice of distribution channel:
1. Cost Consideration: Cost of medium of channel has also got its role to play in selecting the right kind of channel for distribution. The distribution channel system, which costs less to the manufacturer is the better choice. In doing this the nature and urgency of requirement should also be considered.
2. Sales Possibilities: Only those medium of channels should be selected which promise maximum sale. Those medium must be ignored which do not reflect good possibilities of sale.
3. Availability of Middlemen: The availability of the middlemen is also a factor in the choice of medium. For example a manufacturer chooses a longer medium of distribution but such arrangement is not available, he will have to be content will the short medium of distribution channel.
4. Services: The services provided by the channels is another consideration. Those medium of channels which promise better services should be selected for the purpose of distribution: Naturally no manufacturer will risk his sale by handling over the responsibility to a medium which provides bad service.
5. Polices: The polices adopted by the marketing have a bearing on choice of distribution channel. If the marketing policy of the firm does not admit some kind of middleman the manufacturer will also not agree to it.
(E) Factors Relating to Government:
Governments rules and regulations have their own influence on medium of distribution channels. If the government makes licensing necessary for the middlemen, then the manufacturers have to search for the licensed distributing mediums failing which the manufacturer may face legal complications. Naturally enough the manufacturers abide by the rules and norms of the government. For example medicines, wines etc. can be handled by distribution channels authorized by the government.
(F) Other Factors:
In selecting distributing channels there are some other factors which influence the choice of distribution channel. Sometimes those channels are used which are demanded by the customers. In such cases the demand and convenience of the customers has to be given importance specially in case of industrial buyers who usually do not prefer to have a long chain of intermediaries between the manufacturer and them. They do so because of urgency of their requirement and also because a long chain of distribution channel naturally involves wastage of time.
