Factors that Influence the Choice of Distribution Channel

Distribution refers to the process of transferring goods and services from their point of production to their end users. It is the method or process by which goods or services are moved from the point of production to the point of consumption. Distribution is important because it can help to overcome the time- and place-differences that separate people who want goods and services and those who actually need them.

Channel of distribution refers to the channels through which goods or services are made available for consumers. It is a system of institutions and agencies that, together, perform all activities necessary to connect producers and consumers to achieve the desired marketing task.


There are two types of channel systems:

1) Conventional Marketing System: This system includes an independent producer, wholesaler and retailer. Each business is an independent entity that seeks to maximize its profit. It is almost a highly fragmented network where loosely aligned manufacturers and wholesalers have bargained and negotiated terms of sale

2) Vertical Marketing System – This type of distribution channel allows for coordination because the wholesaler, retailer and producer act together as one system. Any member of the system can own the others and any one member cannot dominate it. It’s also effective in controlling channel behavior and eliminating conflicts that can arise when channel members pursue their individual goals.


You can choose any one of the forms mentioned above.

There are three types:

I. Direct Channel – When producers sell directly to consumers. This is most common for the sale of perishable and industrial consumer goods. It is a zero-level approach. This means that it is Manufacturer-Consumer. This form is mainly dependent on services. E.g Haidresser, Doctor etc. This distribution channel does not require middlemen to intervene.

II. Indirect Channel: This involves the intervention by middlemen to ensure that goods reach their final destination. It works at one level. It is a one-level approach.

III. Multi-Channel – This means that you can use multiple channels to reach your market. It’s a two-level method. It is a two-level method.

Factors that Influence the Choice of Distribution Channel

The analysis of the customer, the type and characteristics of the firm, as well as the consideration of the environment, will determine the channel to choose.

1. Market Analysis: The following market analysis should be performed at the market level.

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I. I.
III. 3. Geographic concentration of the market

2. Product Analysis: This is important because it affects the choice for channel. These include:

I. Unit Volume

3. Considerations for the Company: The company’s reputation, financial resources, experience, and desire to control the channel can all impact on which channel is chosen. The use of middlemen will be less common for companies that have sufficient financial and non-financial assets.

4. The Middlemen’s Consideration: This covers the types of services that middlemen provide, the availability of middlemen desired, and the sales volume opportunities.

5. Environment: You should consider the following factors when evaluating environmental factors: Economy, technology, legal and competition. Most often, producers will choose the shortest and most cost-effective route when they feel the economy is in decline.

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