Which of the following problems is most likely when a company chooses to use a sales intermediary instead of company salespeople?

A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers, distributors, and even the internet.

Distribution channels are part of the downstream process, answering the question "How do we get our product to the consumer?" This is in contrast to the upstream process, also known as the supply chain, which answers the question "Who are our suppliers?"

• A distribution channel represents a chain of businesses or intermediaries through which the final buyer purchases a good or service.
• Distribution channels include wholesalers, retailers, distributors, and the Internet.
• In a direct distribution channel, the manufacturer sells directly to the consumer. Indirect channels involve multiple intermediaries before the product ends up in the hands of the consumer.

A distribution channel is a path by which all goods and services must travel to arrive at the intended consumer. Conversely, it also describes the pathway payments make from the end consumer to the original vendor. Distribution channels can be short or long, and depend on the number of intermediaries required to deliver a product or service.

Goods and services sometimes make their way to consumers through multiple channels—a combination of short and long. Increasing the number of ways a consumer is able to find a good can increase sales. But it can also create a complex system that sometimes makes distribution management difficult. Longer distribution channels can also mean less profit each intermediary charges a manufacturer for its service.

Channels are broken into two different forms—direct and indirect. A direct channel allows the consumer to make purchases from the manufacturer while an indirect channel allows the consumer to buy the goods from a wholesaler or retailer. Indirect channels are typical for goods that are sold in traditional brick-and-mortar stores.

Generally, if there are more intermediaries involved in the distribution channel, the price for a good may increase. Conversely, a direct or short channel may mean lower costs for consumers because they are buying directly from the manufacturer.

While a distribution channel may seem endless at times, there are three main types of channels, all of which include the combination of a producer, wholesaler, retailer, and end consumer.

The first channel is the longest because it includes all four: producer, wholesaler, retailer, and consumer. The wine and adult beverage industry is a perfect example of this long distribution channel. In this industry—thanks to laws born out of prohibition—a winery cannot sell directly to a retailer. It operates in the three-tier system, meaning the law requires the winery to first sell its product to a wholesaler who then sells to a retailer. The retailer then sells the product to the end consumer.

The second channel cuts out the wholesaler—where the producer sells directly to a retailer who sells the product to the end consumer. This means the second channel contains only one intermediary. Dell, for example, is large enough to sell its products directly to reputable retailers such as Best Buy.

The third and final channel is a direct-to-consumer model where the producer sells its product directly to the end consumer. Amazon, which uses its own platform to sell Kindles to its customers, is an example of a direct model. This is the shortest distribution channel possible, cutting out both the wholesaler and the retailer.

A distribution channel, also known as placement, is part of a company's marketing strategy, which also includes the product, promotion, and price.

Not all distribution channels work for all products, so it's important for companies to choose the right one. The channel should align with the firm's overall mission and strategic vision including its sales goals.

The method of distribution should add value to the consumer. Do consumers want to speak to a salesperson? Will they want to handle the product before they make a purchase? Or do they want to purchase it online with no hassles? Answering these questions can help companies determine which channel they choose.

Secondly, the company should consider how quickly it wants its product(s) to reach the buyer. Certain products are best served by a direct distribution channel such as meat or produce, while others may benefit from an indirect channel.

If a company chooses multiple distribution channels, such as selling products online and through a retailer, the channels should not conflict with one another. Companies should strategize so one channel doesn't overpower the other.

The term “distribution channel” refers to the methods used by a company to deliver its products or services to the end consumer. It often involves a network of intermediary businesses such as manufacturers, wholesalers, and retailers. Selecting and monitoring distribution channels is a key component of managing supply chains.

Direct distribution channels are those that allow the manufacturer or service provider to deal directly with its end customer. For example, a company that manufactures clothes and sells them directly to its customers using an e-commerce platform would be utilizing a direct distribution channel. By contrast, if that same company were to rely on a network of wholesalers and retailers to sell its products, then it would be using an indirect distribution channel.

The three types of distribution channels are wholesalers, retailers, and direct-to-consumer sales. Wholesalers are intermediary businesses that purchase bulk quantities of product from a manufacturer and then resell them to either retailers or—on some occasions—to the end consumers themselves. Retailers are generally the customers of the wholesalers and offer high-touch customer service to the end customers. Lastly, direct-to-consumer sales occur when the manufacturer sells directly to the end customer, such as when the sale is made directly through an e-commerce platform.

Effective marketing will help to achieve your goals and grow your business. It will build awareness, attract customers and build lasting, profitable relationships.

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Marketing is about planning and executing the development, pricing, distribution and promotion of products and services to satisfy the needs of your customers.

The main role of marketing is to deliver customer value to attracting new customers and keeping existing ones. This is achieved by:

• knowing what customers need
• coming up with solutions to meet these needs.

Marketing is about the principles that guide your customer-focused actions.

It is a comprehensive process that determines how to go to market with your products and services. For your marketing to be successful, you'll need a strong understanding of your brand positioning and the needs of your customers.

'Marketing is the science and art of exploring, creating and delivering value to satisfy the needs of a target market at a profit.'

Dr. Philip Kotler

Both science and art are important elements of marketing practice. The science of insights, analytics and metrics, and the art of creative ideas and clever execution should work together.

Marketing challenges

Many businesses find it challenging to do effective marketing because of:

• lack of time and resources (like staff and money)
• the growing complexity and continuous change in the world their business operates in, including
  • new technology and new channels, which require new skills and specialisation
  • increased competition, which has given customers an abundance of choice.

Technological advances have made customers more connected, informed and empowered than ever before. To meet the changing expectations, preferences and behaviours, your business must be:

• brand driven
• customer focused.

In practice this means that you should start with strategic thinking, marketing strategy and planning before getting into the tactics (the steps and activities).

By understanding your current situation, you'll be better able to recognise gaps and make improvements. To get more out of your marketing efforts, answer the following questions:

• What role does marketing currently play in your business?
• Does your marketing strategy align with your business strategy?
• Does your business have the right marketing skills and resources?

The 7 Ps of marketing

Marketing is delivered through a combination of elements—the 'marketing mix'. These elements are also often referred to as the 7 Ps of marketing.

This popular and practical marketing model can help you to:

• do a marketing audit
• refine your value proposition
• do a competitive analysis.

Assess your 7 Ps regularly to make sure they keep up with:

• your competitors
• changing customer needs
• technological advancements.

Product refers to what you create and deliver to meet the needs of your customers.

It requires you to think about:

• what problems you're solving for your customers
• how to exceed their expectations.

It includes your products and services, as well as the features, benefits, and value your products and services offer customers.

Value also includes:

• availability (e.g. trading hours and access to online ordering)
• options (e.g. a choice of payment methods or added extras)
• packaging (e.g. using sustainable or recycled materials or innovative designs)
• accessories (e.g. offering a customisable range or product bundles)
• warranties (e.g. offering express and extended guarantees)
• repairs (e.g. annual maintenance or on-site callouts)
• support (e.g. account managers or online tutorials).

You can do customer research to find out which of these factors your customers value most.

Price refers to your business pricing strategy and how customers pay for your products and services.

It's the all-important value exchange—that is, the price customers are prepared to pay for the benefits you deliver.

When deciding on prices, you need to know:

To attract and retain customers, your ideal pricing strategy should:

• align with your business type and goals
• reflect your desired brand positioning
• consider your competition.

You can read more about pricing strategies and use our pricing calculators to work out the best approach for your business.

Place refers to where your products and services are made, found, distributed, sold and supported. It can be a physical location, a digital presence, or both.

Whether it's real or virtual, the design must:

You may engage directly with customers, or your distribution model could include third-party intermediaries, such as:

• partners
• resellers
• couriers.

Your distribution model forms part of the customer experience and must be actively managed.

You could also do a review of your marketing channels to see if you're targeting your promotions in the right places.

Promotion is about communicating information about your products and services to your target customer segments. It's usually designed to create a response.

As part of promotion, also consider your other communication, for example, to your partners and employees.

Choose the right promotional activities

Through the marketing strategy and planning process, you'll be able to choose the right mix of promotional activities for your business needs.

Select your promotional activities based on the media use and preferences of your target market.

Your promotional activities should use the right:

• channels (where and when you communicate to customers)
• messaging (what you say to them, and how you say it).

Types of promotional activities

• Advertising—you can promote your brand across many channels, for example, newspapers, magazines, radio, television, outdoor and online. Find out how to make your business advertising successful.
• Personal selling—effective personal selling, such as telemarketing, requires strong interpersonal and communication skills. You need a good understanding of your customers and back this up with expert knowledge.
• Public relations—positive publicity is earned media (media or exposure you haven't paid for). This can be achieved through, for example, press releases and interviews with national, regional or local media. Learn more about public relations for your business.
• Sales promotions—a proven technique to generate interest is to run short-term sales incentives. This includes discounts, competitions, and coupons. Find out more about running sales promotions and using coupon websites.
• Direct marketing—this represents an efficient way to engage with customers. This can range from targeted direct mail through to letterbox drops. It's worthwhile to learn more about direct marketing methods.
• Online marketing—the digital world offers many cost-effective marketing opportunities. Find out how to develop your digital marketing strategy.

This refers to the individuals who work for your business, including yourself. It's the people who deal with your customers, either directly or indirectly.

This is the human side of your business. When you provide outstanding service and support, you add value to the experience and encourage word-of-mouth and referrals.

Think about how often online customer reviews focus on exceptionally good, friendly service or on rude, bad service.

Consider all interactions, including:

• face-to-face
• through your contact centre
• though online (live) chats and email correspondence
• on social media.

You can give your business a competitive edge by:

This is about the activities involved in delivering your products or services. In simple terms, it's about being 'easy to do business with'.

An effective process helps you to:

• achieve repeatable and consistent customer service levels
• save time and money by increasing your operational efficiency.

It's helpful to map out the end-to-end journey from your customer's perspective. Explore all potential brand interactions, for example:

• sales
• service
• ordering
• delivery
• payment.

Also consider the technology you use and the partners you deal with.

Discover more about business processes and procedures together with customer journey mapping.

This refers to all existing and potential features customers see when engaging with your business.

Physical evidence:

• is the tangible proof that establishes credibility
• includes the look and feel of your business branding
• spans the physical and digital environment.

Physical evidence may be:

• a retail store
• interior design
• a business website
• online ratings and reviews
• the uniforms and behaviour of employees.

Consider everything about your business that can be seen or otherwise observed, and how it can help to reinforce your brand and elevate your business.

To maximise your success, you need to make the most of your marketing mix. The power of marketing lies in combining the different marketing elements in an effective way.

To help you do this, use our template to evaluate your 7 Ps.

Marketing is an essential part of your business. Take a practical and phased approach by following the step-by-step guide to develop your marketing strategy and plan.

Before taking the next step, think about these critical success factors:

• resources—do you have the right people, time and budget?
• expertise—do you have the right knowledge and skills?
• communication—do you have a collaborative approach?

These factors will determine if you can reach your marketing goals. Identify where you need to focus your effort on by completing the interactive marketing health check.

Also consider...

• Last reviewed: 29 Aug 2022
• Last updated: 29 Aug 2022