What are the factors influencing choice of distribution channel?

FACTORS INFLUENCING CHOICE OF DISTRIBUTION CHANNEL:
It is very important to select a channel for the distribution of goods and services to the ultimate consumers in an effective way. The marketer has to select the most suitable channel. While selecting the channel of distribution, the marketer has to consider the following factors:
 

1. Nature of Product: The selected channel must cope up perishability of the product. If a commodity is perishable, the producer prefers to employ a few middlemen. For durable and standardized goods, longer and diversified channel may be necessary. If the unit value is low, intensive distribution is suggested. If the product is highly technical, the manufacturer is forced to sell directly, if it is not highly technical, intensive distribution can be selected. Seasonal products are marketed through wholesalers.
 

2. Nature of market: If the market is a consumer market, the retailer is essential. If it is an industrial market, we can avoid the retailer. If consumers are widely scattered large number of middlemen are
required. When consumers purchase frequently, more buyer-seller contacts are needed and middlemen are suggested.
 

3. Competitors’ Channel: The distribution channel used by the competitors will influence the channel selection. There is nothing wrong in copying the channel strategy of the competitor if it is the right one.
 

4. The financial ability of channel members: Before selecting the channel, the manufacturer has to think about the financial soundness of the channel members. In most of the case financial assistance
are required to the channel members in the form of liberal credit facilities and direct financing.
 

5. The Company’s financial position: A company with a strong financial background can develop its own channel structure. Then there is no need to depend on other channel intermediaries to market their product.
 

6. Cost of Channel: The cost of each channel may be estimated on the basis of unit sale. The best type of channel which gives a low unit cost of marketing may be selected.
 

7. Economic factors: The economic conditions prevailing in the country have to bear on channel selection decision. During the period of boom, it is better to depend channels directly. During the periods of deflation direct relation with the consumers are desirable.
 

8. The legal restrictions: Before giving the final shape to channels of distribution, we have to consider the existing legal provisions of the various Acts. For eg. MRTP Act prevent channel arrangements that tend to lessen competition, create a monopoly and those are objectionable to the very public interest.
 

9. Marketing policy of the company: The marketing policy of the company has a greater and deeper bearing on the channel choice. The marketing policies relating to channels of distribution are advertising, sales promotion, delivery, after-sale service, and pricing. A company has a heavy budget on advertising and sales promotion, the channel selected is bound to be direct as it requires a few layers of people to push the product.