Importance of Channel Distribution

Importance of channel distribution in a channel arrangement is described as under

• Cost Savings in Specialization: Members of the distribution channel are specialists in what they do and can often perform tasks better and at lower cost than companies who do not have distribution experience
• Reduce Exchange Time: Not only are channel members able to reduce distribution costs by being experienced at what they do, they often perform their job more rapidly resulting in faster product delivery
• Customers Want to Conveniently Shop for Variety: Marketers have to understand what customers want in their shopping experience .Resellers within the channel of distribution serve two very important needs: 1) they give customers the products they want by purchasing from many suppliers (termed accumulating and assortment services), and 2) they make it convenient to purchase by making products available in single location
• Resellers Sell Smaller Quantities: They allow customers to purchase in quantities that work for them. Suppliers though like to ship products they produce in large quantities since this is more cost effective than shipping smaller amounts
• Create Sales: Resellers are at the front line when it comes to creating demand for the marketer’s product. In some cases resellers perform an active selling role using persuasive techniques to encourage customers to purchase a marketer’s product
• Offer Financial Support: Resellers often provide programs that enable customers to more easily purchase products by offering financial programs that ease payment requirements. These programs include allowing customers to purchase on credit, purchase using a payment plan, delay the start of payments and allowing trade-in or exchange options
• Provide Information: Companies utilizing resellers for selling their products depend on distributors to provide information that can help improve the product. High-level intermediaries may offer their suppliers real-time access to sales data including information showing how products are selling by such characteristics as geographic location, type of customer, and product location

In order to channel the goods to end users, a manufacturer must either assume all these functions or shift some or all of them to channel intermediaries. One can eliminate or substitute institutions in the channel arrangement. However, the functions these institutions perform cannot be eliminated. When institutions are eliminated, their functions are shifted either forward or backward in the channel and therefore, are assumed by other members.