What are the factors that affect the selection of a marketing channel?

A careful and systematic study needs to be done for selecting a marketing/ distribution channel. It not only affects the marketing strategy and organisational goals but also the strategies of the intermediaries in the channel. Place factor of the marketing mix that involves the distribution system requires effort and time of the management and involves costs for making changes to it. Therefore it becomes essential that a right channel if chosen to avoid any later changes. Below are the factors that influence the choice of the channel –

Product – The first factor to be considered is the product category. A FMCG product will require different distribution than an automobile. Similarly the channel of distribution for making an industrial product like a “Rotary Encoder” will be shorter as compared to a consumer product like Shampoo. Some consumer goods need immediate availability for the risk of shorter life like perishable goods from a bakery, etc. Similarly a fragile product will need careful handling by the intermediaries and hence, a shorter channel is selected. A technical product will need selling from knowledgeable sellers providing demos, etc. Complexity of product and level of sales service also decide the selection of the intermediary.

Customer – There is a difference in buying behaviour of consumers and a business buyers. They have to be sold through different channels. A consumer may want to personally inspect vegetables and fruits bought for home consumption. A business buyer (hotel owner) will not be that inclined to do personal inspection. He/ she my expect a dealer, company supplier, agent, or a reseller contacting him/ her. This was a business owner would sign a contract for a regular supply for a certain period. Similarly the buying style for consumer and a business buyer will vary like buying on credit, demo by sales team, etc.

Type of market – A large market will require increase in channel members. If the number of buyers is large, it is better to have local presence to understand the pulse of the market. If the market is small, direct selling can be utilised. Number of buyers in the market and their frequency of buying the product affects the choice of channel member.

Organisations objectives and resources – To ensure complete control on the quality, price and after sales service, the organisation may sell directly to consumers. A large organisation with huge resources can avoid intermediaries and deal directly with consumers. It can have its own exclusive outlets to sell its products. An organisation will less financial resources are dependent on the intermediaries to sell their products. They rely on the experience and expertise of the channel members.

Marketing environment – Economic environment affects the choice of marketing channels. For example, a fall in the dollar or pound value will result in increase of product imported from other countries like India and China. Similarly, at the time of high inflation, cheaper intermediaries are chosen. The organisations try to shorten the channel to reduce costs.

Technological advancements have given consumers options to buy products through mobile phones. The organisations also have control over the prices of products when sold over the internet. They can also track the number of potential buyers who visited their sites and which products they have shown interest in. The consumer can buy a custom made product.

Availability of intermediary – The availability of the intermediary also influences the selection of the channel member. The intermediary that the organisation wishes to sell through should be available in the target market. In their absence, the organisation will have to opt for an intermediary that is available to them. Or the organisation will have to invest to open their own stores, opt for direct selling, etc. Sometimes the intermediary is unwilling to distribute the organisations products. In such cases the firm should be ready to involve channel alternatives.

Channel partner capabilities – A new gadget from a manufacturer can be sold through internet. But if a consumer wants to physically inspect the gadget, the producer will need to make it available at stores to increase its sales. The store salesman will be able to educate and influence the sale of the product. Sometimes, the customer is more inclined to buy from a store to ensure easy return and after sales service. Depending on the characteristics and capabilities of the intermediary, the manufacturer chooses an intermediary to meet its objectives.

Cost –There is cost involved in distributing products in the market. The intermediaries are given a share of the profit for their services. Organisations strive to make the channel network as efficient and effective as possible to reduce the costs. The organisations select a channel network that generates high sales with minimum costs.

Competitors control and choice of intermediaries – Sometimes the market leaders control the intermediaries, and threaten to withdraw their products for selling competitor products. An organization has to closely study the intermediaries of the competitors. To avoid conflicts, a firm can sell products through direct selling if the competitor has its products sold through retailers. If both the rival firms sell through the same retailer, intermediaries often influence sale of a product that gives them higher profit margin.

Selecting the best channel is critical for the success of the product in the target market. Not every organisation can have the same channel. The above factors play a big role in selection of intermediaries. Organisations need to balance the above factors carefully to design an effective and efficient marketing channel.