What is distribution?

Distribution is the process of making a product or service available to consumers. It is a component of the marketing mix which facilitates the movement of goods and services from the seller and buyer to the end consumer. This includes direct selling, where a company sells its products directly or by the means of intermediaries such as wholesalers, retailers, distributors, and other third parties to facilitate distribution.

Importance of distribution

Distribution is an integral part of the marketing mix because it provides a continuous feedback loop between the customer and the company. The company gets intel on the market trends and changes that are occurring in the market, the demand for its product, and the perceived value of the product. The distribution also helps companies identify new opportunities and threats to their business. When a company has enough information about the market, it can make better decisions about how to respond. This information is then used to create strategies that will help the company achieve a competitive advantage.

The distribution process is very important in any organization because it allows them to determine the de facto director of the company's growth. If there is no distribution system in place, the company would be limited by its confined reach and visibility.

The company can set up the distribution channel from scratch or indulge in direct selling. At times the company still needs assistance from the widely scattered businesses that are already established within the industry.

Channels of distribution

The distribution channel is defined as the set of intermediaries a product gets passed through to reach the end consumer. The channel can be of varying lengths ranging from direct to consumers to having numerous suppliers. These intermediaries can be divided into three major categories, distributors, retailers, and wholesalers.

Distributors are the agents that carry out the task of managing and distributing the products to the retailers.
Retailers are people who carry out the job of selling goods to customers. They are the last point of contact in the whole distribution process and are responsible for the flow of information about the product to the consumer. The consumers learn about the quality and demand of the product and share it with the manufacturer. When a product sells quickly off the shelves, the retailer's strategy is to stock it in fewer amounts and reorder it from the distributor.

Wholesalers purchase goods in large quantities from the brand to distribute them further to the retailer. They get larger discounts from the brand marketer due to the large volumes they buy.

Marketing channels in distribution

Marketing channels are the medium of communication for the brand to deliver its value propositions to the customer. These channels are used for advertising the product, making new announcements or launches, sharing product information by the manufacturers to the customer, availability of the product, and so on. The marketing channel can be divided into two parts, direct marketing, and indirect marketing.

Direct marketing uses marketing channels such as email marketing, social media marketing, content marketing, search engine optimized ads, and digital marketing, and runs different marketing campaigns on social media as part of the marketing strategy to promote and appeal to the target audience. E-commerce channels are used largely in modern times to directly reach out to customers.

Indirect marketing takes the help of multiple intermediaries such as wholesalers, retailers, and distributors to widen the area, and scope of the distribution.

Factors affecting the choice of distribution channel

The selection of a channel for distribution is affected by multiple factors, as what may be suitable for a large industry may not be as suited for a small business. Similarly, Business to business (B2B) marketer's requirements could differ from business to customer (B2C). Since there is no ultimate guide that applies across the industry, marketing research needs to be done while choosing the different channels, and below are the factors that need to be taken into consideration:

1. The unit cost of the product- Higher cost products generally require a smaller distribution channel while products of smaller value need to reach the mass market and in higher quantity for which distribution channels with a large number of intermediaries are well suited.
2. Type of product- If the product is standardized that is one product suits all, the distribution channel can be large, whereas if the product is heavily customizable, the manufacturer needs to know the requirements of the individual customers better for which short channels are preferred to avoid any misinterpretations.
3. Market location- If the potential customers are scattered, taking the help of intermediaries is generally a better option.
4. The unit cost of distribution- The cost of distribution plays a major role, as the supply chain needs to be cost-effective.
5. Nature of the product- If the product is suited for Business-to-Business (B2Bs), such as technical products, which can be the distribution of software to third-party, the chain should be kept short, while Business to customers (B2Cs) may require the help of a middleman.
6. Financial prowess of the company- If the company can afford and wants to provide a seamless experience to its customers, it can opt-in for omnichannel marketing.
7. Product lifecycle- The marketing plan for a product that is long-term and would be selling over the years of its course could vary from the product, which is intended for a short-term product lifecycle.

Common Mistakes

The common mistake made by students is considering advertising as a function of the distribution. The packaging of a product performs the function of advertising, which is a part of the product but is excluded from the scope of distribution.

Context and Application

Distribution is a fundamental topic in marketing and is important for other courses of study like Business Management, Sales and Marketing, Organization Management, and Supply-chain Management.

Practice Problems

1. Which of the following is not an intermediary of distribution?

1. Retailer
2. Wholesaler
3. Distributor
4. Digital marketer

Answer: Option d

Explanation: The intermediaries are essentially the middle man required to aid in the whole process of distribution. The digital marketer can assist in online marketing and distribution but can not be categorized as an intermediary.

2. Which of the following factors does not affect the choice of distribution channel?

1. Nature of the product
2. Product lifespan
3. The unit cost of distribution
4. The unique selling proposition of the product

Answer: Option d

Explanation: The unique selling proposition of the product creates a unique differentiation in favor of a product that is not available across the industry. Though such differentiation provides a competitive advantage, it does not affect the choice of Distribution channel.

3. Which of the following is not a function of distribution?

1. Provide feedback loop
2. Inform about changes in market trends
3. Expands Reach and availability
4. Assist in viral Marketing

Answer: Option d

Explanation: Assist in viral Marketing is not a function of the distribution. It comes under the scope of marketing where pertinent channel strategy is used to make for a viral marketing campaign.

4. Which of the following options is not a part of the channel that takes advantage of direct marketing?

1. Retail marketing
2. Video marketing
3. Affiliate marketing
4. Direct mail

Answer: Option a

Explanation: Retail Marketing is a part of intermediaries who reach customers and act as a middleman to facilitate the distribution.

5. Which among the following is not a part of the functions of a retailer?

1. Delivery of two-way flow of communication
2. Word-of-mouth promotion
3. Product development
4. Gauge demand for the product

Answer: Option c

Explanation: The retailer can only assist in providing feedback on the product back to the manufacturer. Any manufacturing fault or features that are needed to be included can be communicated. However, he can not on his own alter the product or engage in stages of product development.

Related Concepts

• Packaging
• Production
• B2B marketing