Explain why companies use distribution channels and discuss the functions these channel perform.
Definition of Distribution Channel
One of the company goals is to deliver their value within the network through supplier, distributor, and also customer. In delivering the value, organization must have and build a distribution channel because most producers do not sell their product or service directly to the consumers. Distribution channel (also called marketing channel or trade channel) is sets of intermediaries that participating in the process of making a product or service available for use or consumption. In other words, distribution channel performs the work of moving goods from producers to final consumers. The activities can be illustrated in the form of a flow. Channel members are connected via a variety of flows. Five flows are illustrated in Figure 1 for the distribution or marketing of forklift truck. The more member that and organization has in their flow, the higher complexity of their distribution channel.
Figure 1 Five Marketing Flows in the Distribution Channel for Forklift Trucks
Importance of Distribution Channel
Distribution channel take part as an important function in an organization. It will affect all marketing decision and can be the key of the success of an organization. Example of marketing decision that comes from distribution channel is to decide the selling price of goods. If the distribution channel is long enough, then the price of goods will be higher compare to the one direct channel from producer to consumer. Distribution channel also represents an opportunity cost. It answers how to convert potential buyers into profitable consumers.
In addition, distribution channel contribute to a decision of long-term commitments with other firm as a set of policies and procedures. For example, if a fast food company has pointed one food supplier and made an agreement for a long-term, then this intermediary will be one of channel member of that particular company.
Another importance of organization defining distribution channel is to identify each channel member functions need to be performed and who is to perform them. For example, a manufacturer in selling its product or service might need sales channel (sales manager and team), delivery channel (distributor agent or courier), and service channel (customer service). In order to make product or service is well delivered to consumer, the flow of distribution channel must be clear and performer in each channel member must be well coordinated each other.
Distribution channel also represent how company do the marketing communications. If the company has a strong distribution channel, it can be a very good competitive advantage that the company has. All elements in marketing mix will be well determined through this strong distribution channel.
Therefore, most of organizations or companies use distribution channel in their business process. Marketers also should manage the whole context in distribution channel in order to get successful in business.
How Distribution Channel Functions Perform in Organization
As mentioned earlier, distribution channel covers all the work of moving goods from producers to customer. Each member of distribution channel performs a number key of functions. Note that these functions can be transferred between channel member depend on the needs and strategies of company at that time.
In general, distribution channel member functions in an organization are described as follows: a) Gather information about potential and current customers, competitors, and other actors and forces in the marketing environment The international clothing line, H&M is now open in Bukit Bintang. The market potential is very high because of many tourist visit Bukit Bintang, even though there are many competitors such as Uniqlo, Padini, Cotton On, etc.
b) Develop and disseminate persuasive communications to...
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