What is a distribution channel?


Distribution channels are the means by which a product is received from the manufacturer. In the business of distribution channels play a very important position. So to understand more about what distribution channels are, follow this article!

What is a distribution channel?

Distribution channel, also known as Marketing channel distribution – is a collection of interdependent organizations and individuals engaged in activities to bring products to users. This is considered an important part for business people, especially those that directly produce goods.

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What is a distribution channel?

Distribution channel is different from the form of distribution, these are two concepts that need to be clearly distinguished when doing Marketing. Distribution is just the way in which customers buy products directly or indirectly.

The distribution channel will include all activities in the circulation stage. It will be an intermediary bridge linking consumers with manufacturers through products. The content in the distribution channels will be a series of services after the production process and before the consumption process.

The meaning of distribution channels for manufacturing enterprises

The choice of distribution channel will have important effects on a business that produces goods. Every decision to choose a distribution channel will have a significant impact on marketing plans. Distribution channels also have an impact on the pricing of the products they decide to market.

Therefore, the decisions in the marketing plan and product advertising depend a lot on the source of the product distribution channel. Besides, it also involves cooperation between businesses.

Types of distribution channels in Marketing

In marketing industry Distribution channels are divided into 3 main groups, as follows:

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Types of distribution channels

Direct distribution channel (no intermediaries)

With a direct distribution channel, there will not be any intermediaries involved, only the participation of producers and consumers. All products after being manufactured will be delivered directly to customers, without using intermediaries to connect.

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Indirect distribution channel

Unlike the direct distribution group, the indirect distribution channel needs an intermediary to link the producer with the consumer. This group of distribution channels will be divided into:

Traditional distribution channel: means that the product after being manufactured will be distributed through intermediaries and then delivered to customers. Modern distribution channel: Producers and intermediaries will combine into a unified whole. When the goods are finished production, they will pass through the intermediary circulation department to directly reach the user. Multi-level distribution channel: The participants in this distribution channel except the manufacturer assume the role of both the intermediary and the consumer of the product.

Distribution channel development strategy

To be able to develop distribution channels most effectively, the following development strategies are needed:

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Distribution channel development strategy

Choosing the right distribution channel

Choosing the right distribution channel will play a very important role in the consumption of goods. To be able to develop the most effective marketing strategies, you should determine for yourself a distribution channel that best suits the conditions of the business.

Remember that the longer the distribution channel, the less profit will be obtained in the end. Therefore, in many cases, manufacturers will choose to directly produce and consume goods to get the best profits. This will cause manufacturers to skip the wholesale process and directly retail products to consumers.

Customer target analysis

The analysis of target customers will help manufacturers know what their customers need, what you need to provide for them. This is considered a process that needs a long time to learn and cannot be rushed.

Know that bringing products directly to consumers is the most profitable form. However, intermediaries often have a better understanding of customers and a larger number of customers. So the customer analysis step is very important and necessary to come up with the best strategies.

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Evaluate and adapt

Evaluating the effectiveness of the distribution channel is very important in improving the development strategy. The evaluation of the distribution channels of many businesses will be done using the strategic profit model, which examines key indicators of the financial performance of the channel.

There will be more effective distribution channels and vice versa, the evaluation will help businesses select effective channels. This is a necessary and very important process that cannot be ignored, so it is very necessary when developing a distribution channel

Category: FAQ

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