MKTG203 Lecture Notes #2 Factors Influencing Distribution PDF

MKTG203 Lecture Notes #2 Factors influencing distribution decisions An efficient channel of distribution will enable a firm to make its output available to customers when required at the lowest cost to the firm. The channel used maybe long or short. There are several factors to consider including:...

MKTG203 Lecture Notes #2 Factors influencing distribution decisions An efficient channel of distribution will enable a firm to make its output available to customers when required at the lowest cost to the firm. The channel used maybe long or short. There are several factors to consider including: (1) Type or nature of the product (2) The market for that product; is the demand for the good urgent? (3) Control – does the produce want to have control over the quality of the product (4) Size of the company – a smaller company may find it difficult to contract out the distribution segment and may be forced to distribute the product themselves while a large company may outsource thus saving costs associated with storage, warehousing and transportation (5) Government policy (pharmaceutical products and chemicals) – you may need a licence to sell (6) Costs – the firm has to consider the cost incurred in using each channel. Any channel that may incur huge storage and transportation costs may not be considered The channel of distribution refers to the chain of intermediaries a product passes through from producer to the final consumer. Distribution channels can be either direct or indirect. A direct channel is where the product is distributed or sold by the firm to the consumer without the use of an intermediary whereas an indirect channel is where the product passes through an intermediary before reaching the final consumer. What determines the channel of distribution? 1) Is the product being sold directly to consumers? 2) Should the product be sold through a retailer? 3) How long should the channel be? 4) Where should the product be available? 5) Should electronic methods of distribution be used? 6) How much would it cost to keep the stock of products on store shelves and in warehouses? 7) How much control does the business want to have over the marketing mix? 8) How will the distribution channel support the other components of the marketing mix?