When referring to the distribution channels, we have in mind a tactical program corresponding to one of elements of the marketing mix. Distribution channels are an essential link in the process of marketing activity, because thanks to them a product or a service can be provided to the customer. They play the role of an intermediary between the manufacturer and the customer.
Since the 90s, new technologies have been playing an increasingly important role. New distribution channels which have emerged thanks to the Internet, have given the possibility to apply new strategies and eliminate intermediaries. Customers are more willing to buy products remotely- from home, but this does not mean that you should give up traditional channels because they complement each other.
Distribution channels have the following functions (Nowotny 1993: 70):
- the collection and transmission of market information to marketing;
- promoting the product in the eyes of the customer;
- negotiating a contract with the client, taking into account the conditions of the change in ownership;
- order, storage and delivery to the customer;
- financial transactions related to storage costs and payment;
- risks associated with the distribution of the product.
Distribution channels can be broadly divided to: (1) direct that belong to the producer – he maintains direct control over them, and he is in contact with the client, and (2) independent distribution channels (indirect), which in turn relies on the distribution of goods through intermediaries. The second method has also advantages in the sense that the company can concentrate on its core business, the customer has a wide range of products to choose from, the distribution of the product is often a costly undertaking, and thus costs can be reduced.
After selection of distribution channels between direct and indirect, you should choose specific channels of product distribution. The indirect distribution is the selection of commercial agents. You can put them in a statement using the following table:
| No. | Market Segments | Commercial Agents | Terms & Conditions |
|---|---|---|---|
| 1. | |||
| 2. | |||
| 3. | |||
| … |
In order to improve distribution channels and choose the most effective ones, commercial are to be evaluated . The criteria are described, then they are evaluated according to a predetermined scale and multiplied by the weight that is assigned to each criterion.
| No. | Evaluation criteria | Evaluation | Weight | The weighted evaluation of scores (the product of the evaluation and weight) | ||||
|---|---|---|---|---|---|---|---|---|
| 1. | Malleability to the producer’s impact | |||||||
| 2. | Knowledge of the market | |||||||
| 3. | Activity | |||||||
| 4. | Expertise | |||||||
| … | … | |||||||
| Overall evaluation | 1,00 | |||||||
When choosing marketing channels there are numerous traps waiting for you. McDonald and Wilson (2012: 502-503) discuss three of them. These are:
- serving all customers using all channels – the company often wants to be at customers’ disposal by using all channels, i.e. personal meetings, telephone contact, Internet community. This is one of many ways to do in order to go bankrupt;
- serving the most valuable customers with the most expensive channels – too many companies give their customers an impression that they are less valuable and that they are useless by forcing them to use the cheapest channels, which in turn causes that they walk away. On the other hand, the most valuable customers are provided with a number of options and conveniences. The most valuable customer, however, might not want to use all the channels that he is provided with, besides he is also a client the competition is fighting for;
- serving clients with individual channels – customers use different channels for different stages of the purchase and they should not be attached to one channel only, which they are to follow, for example, customer can use the social network for the initial diagnosis, a website to obtain more information, he will hold a telephone conversation with an expert to make sure that it is what he is looking for, or he will meet personally with a company representative to negotiate.
The marketing plan should define the scope of activity of distribution channels through making a number of programs to refine marketing strategy. These programs include (Nowotny 1993: 126):
- objectives to be achieved through distribution channels;
- strategies for marketing products;
- strategies for customer service;
- strategy for new business;
- education of vendors of selling channels;
- special information material supporting vendors;
- processes of communication between the enterprise and sales channels;
- programs motivating sellers.
Choosing the right distribution channels is a very important issue because it affects the sales organization in the company, its pricing policy, promotion, and it also provides long-term commitment to the chosen method and distributors.
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