DISTRIBUTION DECISIONS

 Meaning of channel of distribution

 Distribution is the physical flow of products through

distribution channels.
 A channel of distribution is defined as a chain of
market Intermediaries or middlemen used by a
producer or marketer to make products and services
available when and where consumers or users want
them.
Types Of Channel Of Distribution
 Producer – Consumer or direct marketing.

 This is the shortest channel and entails selling direct to the final consumer or
user of a product. In this case the producers open up their own retailing outlets
where consumers buy the products.
 This type of channel is commonly used in agricultural sector. Selling direct to
the final buyers normally requires a large capital outlay and, therefore, many
marketing organizations do not find it a feasible alternative except in the case
of large industrial products.
 producer – Retailer – Consumer
 The producer – retailer – consumer channel incorporates one intermediary or
middlemen.

 This type of channel is common in the marketing of agricultural

commodities.
 However large retailers such as the Carefour and Quick Mart Supermarket
Ltd are also able to buy directly from manufacturers because of the volume
of their orders.
Producer – Wholesaler – Retailer – Consumer
 This channel has two middlemen and is, therefore, more complicated.
 Most consumer products in Kenya including beer, cigarettes, edible fats and
toothpaste are distributed in this manner.
 East African breweries ltd, Unilever Industries, Coca Cola Ltd among others
primarily distribute their products using this type of channel.
Producer – Agent – Retailer – Consumer
 In this channel goods moves from the producer – Agent – Retailer
– Consumer.
 It is similar to the producer – Wholesaler – Retailer – Consumer
in terms of number of intermediaries except for the fact that it
uses an agent instead of a wholesaler.
 The difference between a wholesaler and an agent is that while
the former owns the merchandise, which he sells the latter, does
not.
 An agent only transacts on behalf of his producer and is paid a
commission for the services.
 This type of channel tends to be commonest in international trade
but even in the case of domestic marketing such as Kenya, agents
are commonly used particularly in the insurance and travel
industries.
Producer – Agent – Wholesaler – Retailer – Consumer
 This channel comprises three middlemen and although it is
occasionally used in distributing locally produced and
consumed products; it tends to be dominant in international
transactions. It is the most indirect channel of distribution.
 How does the producer decide which channel to use. To help
us answer this
question we will now look at factors to consider by a producer
when in selecting the channel of distribution.
Factors to be considered when selecting channels
The target market characteristics.
 To select an effective channel, producers must look at the size,
density, and purchase frequency and the quantity purchased by
the customers.
 Market size refers to the number of customers in the target
market.
 Generally speaking the more the customers, ,the more likely the
firm is to use a long channel of distribution.
 The general practice when a market is closely concentrated is
that producers should go for a direct channel. On the other hand
when the customers are widely scattered the firm should adopt a
long channel of distribution.
 Nature of the product
 Product characteristics are important to the choice of
channel of distribution include product size and weight,
perishability, level of product control, and input required.
 It is easier to sell and bulky products through short or
direct channels.
 The more perishable a product is the more necessary it is to
use a direct channel.
 When a product requires a lot of producer input and
controls such custom-made, installations, or training a short
channel is in order.
Cost efficiencies
 Cost factor is very important in channel selection just as in every
marketing decision.
 The goal of the producer should be to find the most cost efficient
channel, which balances the cost and accomplishes the necessary
channel objectives.
Company Characteristics
In addition to evaluating customer and product characteristics, the
channel analyst must consider company characteristics.
The relevant characteristics are the company objectives, financial
status, product mix, past channel experiences and the desired
degree of channel control.
 Middlemen Characteristics
Middlemen characteristics should also be considered in
deciding the channel to be used in distributing the producer’s
product(s).
The major factors here are the markets the middlemen serve,
their financial requirements, the services that they provide and
their availability.  
 Middlemen who can provide wanted marketing services will
be given first preference.
 The middlemen who can offer maximum co-operation in
promotional services are also preferred.
 The channel generating the largest sales volume at lower unit
cost is given top priority.
 Competitive Characteristics
 The channels used by competitors tend to be regarded as
representing the collective wisdom of the industry.
 It is also argued that the producer should make his
products meet with those of competitor’s head on.
 The producer should, therefore, make sure that his
products are available where his competitor’s products are
and this can only be accomplished by using the channels,
which the competitors use.
 Environmental Characteristics
Economic, political, legal, social and cultural factors also
influence channel decisions.
It is often argued that where economic conditions are
depressed, marketers should move their products to the market
via the route that is least expensive for the ultimate consumers.
Distribution STRATEGIES

 Intensity of Distribution decision

 Once the producer has decided on the general channels that he will use, he
must then determine the number of intermediaries that he will use at each
level.
 This is referred to as the intensity of distribution and is, therefore, concerned
with answering the question ‘given that wholesalers and retailers will be used
in the distribution of product A, how many wholesalers and how many
retailers will be recruited for the job?’
 As far as this goes, the producer has three major alternatives.
 Intensive Distribution
If the producer opts for intensive distribution then as many
outlets will carry his product as possible.
That is, any middleman who wants to distribute the product
will be allowed to do so.
It appears that the manufacturers of convenience goods
(goods which are purchased frequently and with little, if any
marketing effort) find it more profitable to follow intensive
distribution.
 Selective Distribution
Those who advocate the use of selective distribution argue that
not every retail outlet that wishes to carry a given product should
be allowed to do so.
It is argued that if some outlets are allowed to carry a brand, the
prestige of that brand may be lowered.
Hence, selective distribution entails a policy of using less than
all those willing to distribute the product. Manufacturers of
shopping and special goods favour the policy.
 Exclusive Distribution
As the name suggests, the policy of exclusive distribution entails getting into an
agreement with a particular middleman whereby the manufacturer gives that
middleman exclusive right to market the product in a given market.

The middlemen in turn usually agree not to carry any merchandise of

competitors. For instance, DT Dobie Kenya Ltd has the exclusive right of
distributing Mercedes Benz vehicles and Nissan. Marshals Ltd also has the
monopoly of distributing Peugeot vehicles in Kenya.
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