Agree, there is hardly a manufacturer who would not dream of a reliable system would help him or her become a market leader in the regions and provide an advantage among competitors. Probably, for many centuries, sellers were engaged in the delivery of manufactured goods, not assuming that these processes are described by a single financial concept. After economics has undergone a scientific rethinking, distribution phenomenon has been realized, described and classified.
Types of Distribution
An essential problem faced by the maker is to deliver commodities because clients are geographically uneven. Being not wanting to limit sales territorially, he or she should create own distribution model. Participants in this procedure provide logistic facilities and assume the risks associated with trade or resale to other members.
Most fabricators do not have direct contacts with customers, preferring aid of numerous intermediaries. The latter constitute so-called marketing network. It is a collection of companies that supervise an access of goods to the final user. There are still different models of supply organization on the market. They are chosen to take into account a lot of factors, for instance, products’ features, geography of their distribution, the need for servicing, level of competition, etc. Experienced marketers distinguish the following types of circulation:
Through a system of direct extension, experts deliver items exactly in the client’s hands. In this regard, there are no third parties and superfluous contractors. A user thoroughly studies the proposed specimen, analyzes its positive and negative sides, weighs own impressions and makes a decision. A similar method is quite efficient as a way of close communication during trading.
The mentioned spread achieves analogical purpose through the network of other traders. It often happens that the latter buy goods, focusing on consignment. That’s why intermediaries can count on rendering feasible and comprehensive assistance for quick sale.
Multi-Channel (Hybrid) Distribution
If the marketer intends to use more than one channel, we are dealing with a hybrid view. Numerous firms turn to it when they are going to cover a large number of consumers. We are talking about direct sell through a network of shops, electronic mailing, and other paths. Despite the scale of such projects, it is necessary to be careful to avoid potential conflicts.
Types of Intermediaries
Middlemen may act as legal entities or individuals. They are resorted to by a lot of firms for the operation of their channel, although such step, undoubtedly, promises a loss of control over the sale process.
They are called intermediaries, who work on behalf of the manufacturer, but at their own expense. As a rule, a maker gives such a participant the right to trade own products for a certain time period in a concrete place. I.e. a trader does not become the owner of commodities, but only acquires the will to sell it. It is advantageous to choose such an intermediary when:
- A direct proliferation channel will require significant costs;
- Purchase of small quantities of goods is inconvenient;
- Number of warehouses in the region is less than the middlemen;
- Wares are destined for some fields of industries.
By them usually mean intermediaries, conducting transactions on their own behalf and expense. They receive goods under the contract, becoming owners of the product when they fully pay for supply. Once all the conditions are met, a producer and a dealer can terminate their relationship. In the event of an extension of business links, an intermediary unites some stages of the process of production and spread of wares, becoming the holder of privileges.
Brokers and Agents
The agent carries out actions in commodity market related to the sale or purchase of stock at the expense of and on behalf of the guarantor in a certain territory. There are the next types:
- Representatives of makers usually work for several enterprises, generating marketable products;
- Marketing agents have commercial economic relations with medium and small companies engaged in the sale of all wares.
A broker serves as a market middleman, a significant duty of which is information about counterparties on the commodity exchange. He or she does not have any serious authority to independently conduct trading operations without assigning clients. A broker cannot act as a representative of the parties, but on the basis of separate orders, receiving a fee in the form of commissions.
Functions of Distribution Channel
When designing distribution channels, the fabricator selects the most optimal option. A novice company with limited monetary resources will use already formed vectors. As the criteria for selecting the courses, the next are called.
- A size of target market, determined by the number of possible buyers. With a significant amount of appeal to distributors are required.
- Characteristics of the product. Short ways require perishable, heavy and bulky goods due to high transportation costs, as well as wares of high technological complexity need after-sales service. Long channels could be used when inexpensive standard things are sold (stationery, shoes, chewing gum, or clothes).
- Features of the firm. Large companies have greater financial resources and can manage fewer intermediaries.
In the set of actions related to the movement of goods, a principal role belongs to spread channels that perform a number of functions:
- Creating Sales. It is middlemen that are priority link in creating excitement for certain products. They have an opportunity to offer similar wares from various manufacturers. This requires extensive knowledge of human psychology, as well as sales techniques. Such practices can be carried out both independently and through the use of assistants.
- Marketing Research. Distributors are an excellent source of data necessary for any company. Thanks to close contacts with consumers, they are able to study in detail the needs and desires of customers, offering their products advantageously.
- Promotion. As a rule, an initiator of activities aimed at increasing sales is the maker. However, a wholesaler can focus on the implementation of a specific product group while a retailer may place promotional materials in the store.
- Customer Service. The specified assignment consists in the delivery of the goods, registration of the credit, consultation of the user by phone, training, and also offering of guarantees and bonuses. Full “hospitality” can be carried out either by one firm or by a network of companies.
- Product Planning. Intermediaries, as a rule, participate in such procedures in several ways. First, they propose new kinds of items or a radical update of the existing ones. Secondly, they can get acquainted with the products of competitors, evaluate their pros and cons and draw up detailed reports for employers.
- Financial Support. Traders frequently turn to internal corporate financial programs to facilitate and accelerate the buying process. So, the cost of goods may be divided into several feasible payments or extend the term of the loan.
- Pricing. Wholesalers and retailers have a flexible pricing system. They can reduce or raise their level depending on the market situation. This adaptation is due to proximity to the environment.
No one will argue that the company's effective sales system determines the promptness of bringing the new commodity to retail outlets and their stable presence in key segments. Even a choice of priorities for distribution may play a decisive role in the firm’s success in the market: for instance, to accelerate or slow down an analysis of the consumers' demands. The right sort of spread facilitates the fulfillment of numerous marketing tasks.
Thanks to the experience of trading companies in creating effective and trustworthy relations with the end user, distribution network has a really huge potential. After all, if the manufacturer decides to build own sales network, he or she will certainly face tough competition among other market participants. And it will not lead to anything other than enormous material losses.