ZIMSEC O Level Business Studies Notes: Marketing: Factors to consider when choosing a distribution channel

  • As pointed out elsewhere business have to choose from a number of distribution channels
  • In instance the business has to consider several factors when deciding on the most appropriate channel to use
  • These factors include:

The nature of the product

  • for example industrial products are sold directly to other business from their producer
  • Bulk products are likely to have a short distribution channel
  • The selling price of the product- very expensive products such as ships and airplanes are likely to have a short production channel
  • Highly technical products that require training for example fighter jets require a lot of support thus have a short channel from the producer to the consumer
  • Perishable products such as bananas and newspapers have a short channel for them to reach the market quickly as they can go bad

Market

  • In a business market for example a market where the buyers are predominantly businesses a direct channel can be used
  • For a large market that is spread geographically indirect channels are more appropriate while for a small market where buyers are concentrated in a local area direct channels can be used
  • Where products are bought in large quantities and/or infrequently indirect channels would be more appropriate

The business itself

  • A large business with resources at its disposal and branches in other areas can choose to distribute directly
  • A large retailer might prefer to skip the wholesaler as they can provide the services for themselves in house e.g OK and Pick n’Pay
  • A smaller business may choose instead to employ the services of agents and middlemen instead

Competitors:

  • Businesses often imitate each other for example if a rival is offering direct sales via the internet a competitor will have to consider doing the same
  • Where price is important a business may have to choose the least expensive channel so as to gain an advantage over its competitors

Channel compensation:

  • This refers to the Cost Benefit Analysis of using each given channel
  • The business will choose the most beneficial channel in terms of cost

Business Environment:

  • In times of recession or depression it becomes beneficial to use shorter channels
  • For example direct marketing results in financial savings for the consumer which can increase sales since demand tends to be elastic in times of recession

Middlemen:

  • The availability of the middlemen is also an important factor
  • If no middlemen exist in a given industry/country then the business has no choice but to sell directly
  • Tradition is also important as traditionally some business sectors have always employed a given channel

To access more topics go to the O Level Business Notes

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