Distribution Decisions

Distribution Decisions

Selection Criteria of a Distribution Channel

While selecting a distribution channel, the entrepreneur should compare the costs, sales volume and profits expected from alternative channels of distribution. In order to select the right channel for distributing his product, a small-scale manufacturer should keep in mind the following considerations:

Market Considerations: The nature of the market is a key factor influencing the choice of channels of distribution. The following features of the market should be considered to determine the channels:

Consumer or Industrial Market: If the product is meant for industrial users, the channel of distribution will be a short one. This is because industrial users buy in a large quantity and the producer can easily establish a direct contact with them. But in case for goods meant for consumers, retailers may have to be included in the channels of distribution (Kotler, 2008).

Number and location of buyers: When the number of potential customers is small or the market is geographically located in a limited area, direct selling is easy and economical. In case of large number of customers, use of wholesalers and retailers becomes necessary.

Size of order: Direct selling is convenient and economical where customers place order in big lots as in case of industrial goods. But where the product is sold in small quantities, middlemen are used to distribute such products. A manufacturer may use different channels for different types of buyers. He may sell directly to big retail stores and may use wholesalers to sell to small retailers.

Customers buying habits: The customer buying habits like the time he is willing to spend, the desire for credit, the preference of personal attention and one stop shopping significantly affect the choice of distribution channels.

Product Considerations: The type and nature of the product influence the number and type of middlemen to be chosen for ...