Channel objectives determine channel strategy. Making a major change in an established channel structure is difficult and often risky. Therefore it is desirable to set up the objectives properly in the first place. They should be dictated by the service level output which is desired by the ultimate consumer and the global vision and mission of the company in terms of long term return on investment, market share, absolute level of profits to be achieved and sales growth.
The specific objectives of any channel, apart from the global aspirations of the company, should be firmly based on the service outputs demanded by its customers. Different levels of these outputs may be required in different segments of the market and this need to be determined. The use of multiple channels catering for different segments of the market is common in marketing today.
Once the service levels are decided upon, then the market coverage has to be determined. This in turn determines the support which can be expected from the channel in the event of different coverage strategies. Here the company should also decide whether it needs to own the entire channel or parts of it and what the costs of full and part ownership are going to be in terms of possible consequences.
Three choices are possible: intensive, selective or exclusive distribution. It is worth mentioning in this context that they are all possible in case of vertical or non-vertical integration although the costs may be prohibitive in case of full ownership of a channel specializing in intensive distribution.
Intensive distribution is generally used for products which are frequently bought and which need to be easily available, like newspapers and sweets. Selective distribution is usual for products which buyers like to choose with some effort, e.g. clothing. This type of distribution can. range from expensive items which are almost exclusive, to items like cosmetics which are almost intensively distributed. Exclusive distribution implies a mutually dependent relationship between seller and re-seller and is used for large or expensive items such as farm machinery or very expensive clothes or jewellery.
It is appropriate to check and verify that the strategy adopted is in line with current circumstances when considering how to motivate a channel member. The channel structure and the type of distribution are also interdependent to some degree. A ‘long’ channel structure which possesses many intermediate wholesalers allows for greater spread and therefore more intensive distribution. Conversely, a ‘short’ structure has more direct channels and tends towards exclusive distribution.
It is obvious that the more intensive the distribution, the greater the sales in the short term. However, over a long term, adverse effects such as lower margins appear, followed by unwillingness on the part of the distributors to sell the product, consequent necessity of an increase in promotional efforts by the manufacturer and deterioration of the service levels. As a business executive once remarked ‘you can take fifty years to build a brand and you can ruin it in three years through careless distribution’.
However, intensive distribution is successfully followed in the case of innumerable products through a well-formulated marketing programme which fulfils the requirements of distributors and consumers alike. The various factors should be carefully considered before deciding on a distribution strategy, in particular the relation between the products marketed and the last selling point for them.
