Factors influencing distribution decisions


The distribution patterns, channel objectives and constraints are influenced by a host of variables. These are explained in the following write up.

Market Characteristics

The market, characteristics play an influencing role on distribution decisions. For example, if the customer wants a high level of service, the manufacturers will have to ensure that its channel members are able to provide it or else the firm will have to provide it. The latter alternative may be costly but may ensure a high level of customer confidence. In an automobile dealership, for example, the automobile manufacturer insists on investment in tools, equipments and manpower training that will ensure high precision and level of servicing. The manufacturer trains dealers’ employees in servicing the automobiles. For a firm like Sumeet, a leader in mixer and grinder market has a mobile service concept to serve its customer. It regularly announces the date, time and place where its service van will be parked for the benefit of the housewives and retail outlets. Many other firms have adopted this pattern to service their target markets.

Customer characteristics also involve attitude towards waiting time, expectations with regard to special convenience and preference for buying in a comfortable and more relaxed environment.

Company Characteristics

The next variable is the company characteristics and objectives. The channel design is influenced by the company’s long term objectives, financial resources manufacturing capacity, marketing mix and even its philosophy. For example, if the firm’s manufacturing capacity can meet only 25% of the total market demand it may be well advised to follow selective distribution, i.e. distribute only through selected outlets in few markets or adopt an intensive distribution, i.e. cater to all outlets in a given geographical market or exclusively distribute it all over the country.

Product Characteristics

The next important variable influencing distribution decision is the product characteristics. Here, the key issues for analysis are product value and perceived risk, and the nature of the product. If the product value and perceived risk is high, as in case of capital equipment, precious stones and gems, shorter channels or rather direct marketing is the most preferred alternative. Here the firm sells the product through its own sales force.. If the product is perishable like example milk, bread, and eggs they require direct distribution. In the case of milk dairy the milk is distributed to the wholesalers and distributors who in short give it to customers through delivery boys (Shorter Channels)

In the case of non-perishable goods like textiles, footwear, toiletries etc., are distributed through the longer channels. The next product related factor to be considered is whether it is standardized or non- standardized. The latter demands direct distribution. For example, a suit tailored to fit a specific customer’s size and fashion preference will demand direct marketing by the tailoring firm. But when the same makes shirts in different collar sizes, colors and fashion so as to appeal to different customer groups it can now adopt a longer channel of distribution because it has now a standardized product.

The product volume will also determine the length of the channel. Bulky products like construction materials, chemicals or soft drinks require shorter channels to economically reach the customer. Lastly the desired brand image sought by the firm will determine the distribution structure.