The Distribution channel consists of a chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.
Distribution channel may not be restricted to physical products alone. They may be just as important for moving a service from producer to consumer in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their services directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc.
Distribution is one of the 4 aspects of marketing. A distributor is the middleman between the manufacturer and retailer. After a product is manufactured it is typically shipped/sold to a distributor. The distributor then sells the product to retailers or customers.
Traditionally, distribution has been seen as dealing with logistics: how to get the product or service to the customer. It must answer questions such as:
- Should the product be sold through a retailer?
- Should the product be distributed through wholesale?
- Should multi-level marketing channels be used?
- How long should the channel be (how many members)?
- Where should the product or service be available?
- When should the product or service be available?
- Should distribution be exclusive, selective or intensive?
- Who should control the channel (referred to as the channel captain)?
- Should channel relationships be informal or contractual?
- Should channel members share advertising (referred to as co-op ads)?
- Should electronic methods of distribution be used?
- Are there physical distribution and logistical issues to deal with?
- What will it cost to keep an inventory of products on store shelves and in channel warehouses (referred to as filling the pipeline)?
Benefits of Establishing Distribution Partners
- Access to Multiple Markets.
- Greater Speed of Market Penetration.
- Established Sales Teams - Direct Employees, Independent Reps or hybrid of both.
- Diversification into multiple markets and specialized distribution channels.
- New opportunities with minimal investment in sales infrastructure.
- Portfolio synergies and leverage.
- Broad-based solutions.
- Partnering already established relationships with customers.
- Maintain inventory - Stocking Distributors.
- Multifaceted resource.
- Perspective on market conditions and trends. (Ref: MedCepts)