Channel of Distribution Meaning and Functions Class 12
Introduction
Product and pricing are crucial, but ensuring the product reaches the right place at the right time is equally important. Success depends on effective distribution of the product as all marketing activities revolve around the customer.
Place or Channel of Distribution
Place refers to the process of moving products from the producer to the user. It includes channels like intermediaries, distributors, wholesalers, and retailers.
Place is also called channel of distribution, or intermediary.
According to Philip Kotler, “Every producer seeks to link together the set of marketing intermediaries that best fulfil the firm’s objective. This set of marketing intermediaries is called marketing channel.”
'Channel of Distribution' refers to the path taken by goods from the Manufacturer to the consumer. It’s concerned with the transfer of title to a product which may be affected directly or through a chain of intermediaries.
Four participants of distribution system:
(1) Manufacturers: who produces the goods.
(2) Intermediaries: they perform various functions like buying, selling, assembling etc.
(3) Facilitating agencies: independent agencies that facilitate the smooth distribution of goods from producers, through intermediaries, to consumers like banking institutions, insurance companies, and transportation agencies and warehousing companies.
(4) Consumers: the final destination, who uses the goods to satisfy their needs and wants.
For consumer goods, manufacturers often operate from remote locations while consumers are spread out geographically.
Goods reach consumers through intermediaries like retailers, wholesalers, distributors, warehouses, and increasingly, the Internet. These intermediaries form the 'place' aspect of the marketing mix by moving, stocking, and selling goods.
Channel of Distribution Meaning and Functions Class 12
Functions of Channels of Distribution
Channels of distribution help in smooth flow of goods by creating possession, place and time
utilities. The functions performed by them are grouped into three categories:
1) Transactional Functions
2) Logistical Functions
3) Facilitating Functions
1) Transactional Functions:
The main role of a distribution channel is to bridge the gap between production and consumption. This involves transactional functions like buying, selling, and risk-bearing. Producers sell goods to intermediaries who then sell to consumers.
Risk is also part of this process. Thus, all channel participants must accept the risk of potential loss.
2) Logistical Functions:
Logistical functions involve the physical exchange of goods. Producers make and assemble goods from different locations, then store, grade, sort, and transport them.
Assembling: Goods bought from various places are kept together.
Storage: Proper storage prevents loss or damage and ensures a steady supply.
Grading and Packing: These processes help in handling and selling goods quickly.
Transportation: Makes goods available to buyers wherever they are.
All these functions ensure goods reach the market on time and are conveniently sold to consumers.
3) Facilitating Functions:
Facilitating functions enhance both transactions and the physical exchange of goods. These include services like post-purchase maintenance, financing, and market information.
Sellers offer necessary details to buyers, provide after-sales services, and sometimes offer credit sales. Manufacturers often guide traders to help with sales, and traders inform manufacturers about customer opinions on products.
Thus, Channels of distribution handle numerous functions such as buying, selling, risk management, assembling, storage, grading, transportation, post-purchase service, financing, and market information.
Storage is crucial for perishable and bulky items like coal, petroleum, and iron. For products like automobiles, computers, and mobiles, after-sales service is vital.
Product promotion through advertising and sales activities helps increase sales. Middlemen engage in demonstrations, displays, and contests.
Negotiation occurs between manufacturers and customers to finalize deals. It covers product quality, guarantees, after-sales services, and pricing before transferring ownership.
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