Channels of Distribution

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CHANNELS OF DISTRIBUTION
Even before a product is ready for market, management should determine what methods and routes will be used to get there. This means establishing strategies for the product distribution channels and physical distribution. Managing a distribution channel often begins with a producer; therefore we will discuss channels largely from a producer’s vantage point.

MIDDLEMEN AND DISTRIBUTION CHANNELS
Ownership of a product has to be transferred somehow from the individual or organization that makes it to the consumer who needs and buys it. For goods they have to be physically transported from where they are produced to where they are needed but as for services they can’t be stripped but rather are produced and consumed in the same place. a middleman is a business firm that renders services directly related to the sale and purchase of a product as it flows from the producer to the consumer. The middleman either owns the product at some point or actively aids in the transfer of ownership. Middlemen are commonly classified on the basis of whether or not they take title to the product being distributed. Merchant middlemen take title to the products they help market. The two groups of merchant middlemen are wholesalers and retailers. Agent middlemen, they never own the products but they do arrange the transfer of title e.g. real estate brokers, travel agents.

Note:
Intermediation is the process by which middlemen are eliminated in the distribution channel. This outcome is not predictable because of a basic axiom of marketing: YOU CAN ELIMINATE MIDDLEMEN BUT YOU CANNOT ELIMINATE THE ESSENTIAL DISTRIBUTION ACTIVITIES THEY PERFORM. Huge firms sometimes conclude that using middlemen is better than ‘do it yourself’ approach to distribution. Middlemen act as sales specialists for their suppliers. Conversely they are seen as purchasing agents for there consumers.

Services of middlemen to both the suppliers and customers. | suppliers | customers | |Sales specialists for producers |Purchasing agent for buyers | |Provides market information |Anticipates wants | |Interprets consumer’s wants |Sub-divides large quantities of a product | |Promotes producer’s products |Stores products | |Creates assortments |Transports products | |Negotiates with customers |Creates assortments | |Provides financing |Provides financing | |Owns products |Makes products readily available | |Shares risks |Guarantees products | | | |

A distribution channel consists of the set of people and firms involved in the transfer of title to the product as the product moves from producer to ultimate consumer or business user. A distribution channel always includes both the producer and the final customer for the product in its present form as well as any middlemen. The channel of a product only extends to the final/last person or organization that buys it without making any significant change in its firm e. g when timber is milled and then made into furniture, two separate...
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