Lecture notes
Distribution
- Institution
- CCEA
A look at the methods of distribution e.g. air, rail, with analysis of each method via advantages and disadvantages.
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Place: Channel of DistributionThe choice of method used to get goods and services to a location where consumers can purchase them is known as the
channel of distribution.
Choosing an efficient and effective channel of distribution is vitally important if a firm is to meet its marketing objectives.
On average, distribution costs account for approximately 1/5 of a product's overall costs.
1. Manufacturer/producer to wholesaler to retailer to consumer: Two level channels such as these are still common in
consumer markets, where small retailers do not have the buying power to purchase directly from the manufacturer
and therefore must buy their stock from a wholesaler. Small retailers can group together to buy collectively in an
attempt to reduce costs.
2. Manufacturer/producer to retailer to consumer: Known as one level channel, this is becoming the most common
channel of distribution in consumer markets. This is a result of the growth of large retail chains such as Tesco and
M&S who prefer to buy directly from the manufacturer rather than from a middleman as they can often secure better
prices if they deal directly with the manufacturer.
3. Manufacturer/producer to consumer: This channel distributes goods from the producer to the end user. Sometimes
this is known as a zero level channel, it is growing in popularity as a result of the increase in direct selling. Examples
include farm shops, where the farmers sell directly to the consumer or a jeweller making a specific item of jewellery to
meet the exact specifications of the consumer.
Choosing a distribution method:
The method chosen will depend on a wide range of factors, which include:
o The cost.
o Level of control that can be exercised over the channel.
o The geographical coverage of the channel.
o The reliability of the channel relative to the product presentation.
o Continuity of supply and the level of customer care or after sales service.
In most cases manufacturers will not stick rigidly to one distribution channel but will instead use a range of
distribution channels as appropriate to the good/service they are providing.
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