Question

What is the most expensive distribution activity? Explain how this activity works.

What are the key support functions for a successful execution of distribution?

Answer 1

A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. Channels are broken into direct and indirect forms.

Distribution channels can include the manufacturer, warehouses, shipping centers, retailers and even the internet. Direct channels allow the customer to buy goods directly from the manufacturer, while an indirect channel moves the product through other distribution channels to get to the consumer.

There are advantages and disadvantages to direct distribution channels. It is the job of the managers and others involved in corporate governance to find the most effective means based on the firm's specific needs.

Direct Distribution

A direct distribution channel is organized and managed by the manufacturer itself. Direct channels tend to be more expensive to set up at the beginning and can sometimes require significant capital investment. Warehouses, logistics systems, trucks and delivery staff will need to be set up. However, once those are in place, the direct channel is likely to be shorter and less costly than an indirect channel.Direct selling can be difficult to manage on a large scale, but it often allows the manufacturer to have a better connection to its consumer base.

By controlling all aspects of the distribution channel, a manufacturer has more control over how goods are delivered. They have more control over cutting out inefficiencies, adding new services and setting prices.

How The Activity Works

Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.

Modern direct selling includes sales made through the party plan, one-on-one demonstrations, personal contact arrangements as well as internet sales.

Functions For A Successful Execution Of Distribution

1. Information – Gathering and distributing Marketing Research and intelligence information about factors and forces in the marketing environments needed for planning and aiding exchange.

2. Promotion – Developing and spreading persuasive communications about an offer.

3. Contact – Finding and communicating with prospective buyers.

4. Matching – Shaping and fitting the offer to the buyers needs including activities such as manufacturing, grading, assembling and packaging.

5. Negotiation – Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.

Other Functions

1. Physical distribution– Transporting and storing goods.

2. Financing – Acquiring and using funds to cover the costs of the channel work.

3. Risk bearing – Assuming the risks of carrying out the channel work.