Outline the factors that a manager needs to consider in selecting distribution channels.

Principles and Practice of Management notes and Revision questions and answers

In deciding the combination of channels to use, the following factors should be considered:

I. Company Characteristics-These include such factors as company objectives and constraints, financial status, past channel experience and desired degree of channel control required by the company.

II. Product Characteristics-These include such factors as perishability (require more direct marketing), bulky products (require channels that minimise shipping distance and handling), non-standardised products(sold directly by the company’s sales force
e.g. custom-built machines),products requiring installation are usually sold by the company or by franchised dealers.

III. Middlemen Characteristics- These include such factors as financial capabilities, payment policies, capability in reaching consumers and any strengths and weaknesses.

IV. Competitive Characteristics-The channels used by the competitors may represent the wisdom of the industry. Therefore, the company may tend to use them to make available its product where the company competitors are Alternatively, the company might use a different channel so as to differentiate its products.

V. Environmental Characteristics-Political, legal, economic and technological characteristics influence channel decisions. When economy is depressed, producers may wish to use shorter channels to reach the consumers with less cost. Government legislation against producers doing their own marketing may also influence the channel decisions.

VI. Customer Characteristics-Key questions here include:
– What is the output level desired by the customers?
– What is the lot size purchased by the customer?
– Does the customer expect service back-up?
– Are the target customers centrally located or dispersed?

Principles and Practice of Management notes and Revision

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