Distribution
Distribution is one of the marketing mix elements that consists in the means and operations that provide the users or the consumers with the products of a company. This offers the place, time, size and amount utilities bringing the product closer to the customer and offering the desired quantity, usually smaller than what the manufacturer is selling.Distribution implies two main activities:
- Commercial distribution – transferring the ownership of the product from the producer to the consumer. It usually involves intermediaries.
- Physical distribution – actually transporting the goods from the producer to the customer using transportation and storage.
Distribution functions:
- Minimizing the contacts between producers and consumers
- Bringing the product as close as possible to the customers
- Allows the producers to focus on manufacturing operations.
Distribution channels
A distribution channel includes all the intermediary links between manufacturer and consumer or final user. The producer and the consumer are the extremities of any distribution channel, between these being inserted one, more or no intermediary link. Therefore, the distribution channels can be :
- Direct channels – no intermediary link
- Indirect channels – distribution through intermediaries
Distribution channel functions
Distribution channel functions are specific functions of manufacturer – consumer relation. In this type of relationship there is not the problem of not fulfilling the functions, but of which member of the distribution channel will fulfill them. These can be carried through by the producer or the intermediaries from the distribution network.
The main functions are:
- Information – gathering information from the market carrying out marketing researches
- Promotion – creating and broadcasting persuasive messages to attract customers
- Contact – discovering and contacting potential clients
- Adjusting the offer to the market requirements – assures the conformity of the offer to the customers' requirements regarding size, amount, package.
- Negotiation – creating accords over prices and other trade conditions
- Physical distribution – transporting and storing the products so that they are available as close as possible to the consumption location
- Financing – assuring the funds necessary for purchasing and storage in the situation when the products are not sold immediately to the final consumer
- Risk assumption – physical and technological depreciation, the risk of not cashing the claims.
Distribution channel features
The distribution channel can be defined by its dimensions:
- Length – the number of intermediary links involved in the distribution process
- Width – the total number of units composing a certain intermediary link
- Depth – how close to the final consumption location does an intermediary deliver the products.
Distribution strategies
Depending of the company's objectives, it can adopt different distribution strategies. The strategy objectives can be controlling the distribution and assuring the best delivery of the products, closer to the customers through a higher number of intermediaries.
The main distribution strategies:
- Exclusive distribution – a drastic limitation of
intermediary number when:
- The producer wants to hold the control over its products' distribution
- The producer doesn't want the intermediaries to deliver any other products, for example, competitors' products
- Selective distribution – the company collaborates with a
limited number of intermediaries that leads to:
- Reduction of merchandise efforts
- Efficient control over distribution
- Good market coverage
- Intensive distribution – delivering the products through a high number of intermediaries, distribution channels with great length, width and depth.
Market logistics
Physical distribution or logistics is the movement and handling of the products from the place where they are manufactured to the place of consumption.
From a managerial point of view, the physical distribution is the planning, implementation and control of the products flux from the origin point to the consumption point in order to satisfy customers' needs and gain profit.
Physical distribution is a part of the logistic chain, the market logistics of the producer. Besides market logistics, the producer manages also the procurement logistics that consists in transporting the goods from the supplier to the producer. So, the procurement logistics of the manufacturer is the market logistics of its supplier.
The main activities involved in market logistics are:
- Receiving and processing customer orders – and deciding if the products should be delivered from the supply or should be manufactured
- Storage – preserving the goods for certain periods of time
- Stockage – creating stocks at different distribution levels to assure immediate delivery of the product
- Transportation – the shipment of the goods from manufacturer to consumer
- Reception – the transfer of ownership rights between the distribution channel members.