Distribution channel decisions are among the most complex & challenging decisions facing the firm. Each channel system creates a different level of sales and costs. Once a distribution channel has been chosen, the firm usually must stick with it for a long time. The chosen channel strongly affects, and is affected by, the other elements in the marketing mix.
Each firm needs to identify alternative ways to reach its market. Available means vary from direct selling to using one, two, three or more intermediary channel levels. Marketing channels face continuous and sometimes dramatic change. Three of the most important trends are the growth of vertical, horizontal and multicultural marketing systems. These trends affect channel cooperation, conflict and competition. Channel
design begins with assessing customer channel-service needs and company channel
objectives and constraints. The company then identifies the major channel
alternatives in terms of the types of intermediaries, the number of
intermediaries, and the channel responsibilities of each. Each channel
alternatives must be evaluated according to economic, control and adaptive
criteria. Channel management calls for selecting qualified middlemen and
motivating them. Individual channel members must be evaluated regularly.
Just
as the marketing concept is receiving increased recognition, more business
firms are paying attention to the physical distribution concept. Physical
distribution is an area of potentially high cost savings and improved customer
satisfaction. When order processors, warehouse planners, inventory managers and
transportation managers make decisions, they affect each other’s costs and
ability to handle demand. The physical distribution concept calls for treating
all these decisions within a unified framework. The task is to design physical
distribution systems that minimize the total cost of providing a desired level
of customer services.