Distribution Channels: Impact on Marketing and Sales

Role of Distribution Channels

• Centralize basic marketing decisions: The type of wholesale has an important influence.
• Helps reduce costs: Distribution channels can reduce storage and transportation costs. Outsourcing these functions allows companies to focus on their core competencies.
• An asset to the company: A well-chosen distribution channel can be a very important asset.
• Intervenes in pricing: Distribution channels advise on the most suitable pricing strategy. The more intermediaries a product passes through, the longer and more expensive the channel becomes. However, a short channel provides the advantage of first-hand information.
• Provides market information: Distribution channels possess valuable information about the market, competition, and the product. A good channel provides access to this information.
• Involved in advertising: The longer the distribution channel, the more advertising is done at each stage. This level of advertising would be difficult for the manufacturer to achieve independently.
• Positions the product: A good distribution channel ensures that the product is positioned correctly in the market.
• Involved in after-sales service: A good distribution channel facilitates effective after-sales service because the product is well-placed in the market.
• Collaborates with the company image: The final intermediary in the channel may not sell your specific product, but they will want the product category to succeed.
• Acts as a sales force: Distribution channels act as an extension of the manufacturer's sales force, reducing the cost of monitoring.
• Contributes to good management: Distribution channels contribute to professional management practices.
• Expands market reach: Distribution channels enable manufacturers to sell products in locations that would otherwise be inaccessible and unprofitable.

Distribution Channels Defined

Distribution channels represent the path a product takes from the manufacturer to the point of ownership change during a sale. It is more than just the physical movement of goods.

Types of Distribution Channels

• Direct Channel: When a product moves directly from the manufacturer to the final consumer.
• Short Channel: For example, involving a single retailer, such as a car dealership.
• Long Channel: Involves two or more intermediaries. For example, a neighborhood store that sources products from a wholesaler like Mercamadrid and then sells them in their shop. They do not buy directly from the manufacturer.
• Dual Channel: Involves exclusive agents. The manufacturer contracts with an agent to distribute products in another country. This agent acts as a representative of the manufacturer, often through exclusive import agreements or franchises.