Question No. 3 - Principles of Marketing BCOE - 141

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BCOE - 141 - Principles of Marketing

Question No. 3

What do you understand by channel of distribution? Discuss the functions of channel of distribution.

Channels of Distribution or Distribution Channel can be defined as the path taken by the good or service when they move from manufacturer to the end consumers. The movement of the goods implies the physical distribution of the goods or the transfer of ownership.

It is the network of intermediaries such as wholesalers, retailers, distributors, agents, etc., who carry out a number of interrelated and coordinated functions in the flow of goods from its source to its destination. Additionally, it creates utility of time, place, form, and possession to the product by the quick and efficient performance of the function of physical distribution.

Have you ever wondered that product manufacturing units of various companies are set up at a particular location only, but the consumers of that product are everywhere across the globe, so how these goods are available to the people residing in a place distant from the place where the manufacturing unit is located? Well, it is the channels of distribution that act as an intermediary to make the goods available to the intended consumer.

Channels of Distribution implies the means through which the good or service need to pass to reach the intended consumer. Based on the number of intermediaries involved, the channel of distribution can be short or long. Further, it has a great impact on the company’s sales, as the higher the availability of the goods, the more will be its sales.

Depending on the type of the product, i.e. good or service, different marketing channels are employed by the companies.

• Functions of Channel of Distribution

The functions performed by the channels of distribution are divided into three main categories:

1. Transactional Functions: Functions like buying, selling, and risk-bearing which are relevant to a transaction are called transactional functions. Producers sell goods to intermediaries, who further sell them to the customers. In this way, the title of goods changes hands, and goods flow from producer to consumer. In the absence of any buying and selling, there won’t be any transaction.

2. Logistical Functions: It involves the physical exchange of the goods such as assembling, storage, sorting, grading, packing, and transportation. This is to make certain that goods must reach the marketplace at right time and sell to the consumers conveniently.

3. Facilitating Functions: Functions like post-purchase service, maintenance, financing, information dissemination, channel coordination, etc form part of facilitating functions.