Distribution channels of goods can be characterized by about the number of their constituent levels.

Channel level is an intermediary who does the work of bringing the product and ownership of it closer to the end consumer. The length of the channel is determined by the number of intermediate levels between the producer and the consumer, which, like the levels of the channel, are members of the distribution channel.

Distribution channels traditionally consist of an independent producer and one or more independent resellers. Each member of the channel is a separate enterprise seeking to secure maximum profit. The maximum possible profit of an individual channel member may be at the expense of the maximum profit extraction of the system as a whole, since none of the channel members has full or sufficient control over the activities of the other members. These distribution channels are called horizontal (Fig. 1).

Vertical distribution channels (Fig. 2) are channels made up of a manufacturer and one or more resellers acting as one one system. One of the members of the channel, as a rule, either owns the other participating companies, or provides them with certain privileges. Such a member may be a manufacturer, wholesaler or retailer. Vertical channels are economical and exclude duplication of functions performed by channel members.

fig.1. Horizontal distribution channel

fig.2. Vertical distribution channel

Table Types of intermediaries in distribution channels

Dealers- These are wholesale (less often retail) intermediaries that conduct operations on their own behalf and at their own expense. The goods are purchased by them under a supply contract. Thus, the dealer becomes the owner of the product after the full payment for the delivery. Relations between the manufacturer and the dealer are terminated after the fulfillment of all conditions under the supply contract. However, the relationship between the manufacturer and dealers in recent times take on a variety of forms due to the desire of producers to form vertical channels distribution. At the same time, dealers become holders of privileges, combining in their hands a number of successive stages of the production and distribution process. In the logistics chain, dealers occupy the position closest to the end consumers.

There are two types of dealers. Exclusive Dealers are the only representatives of the manufacturer in this region and are endowed with exclusive rights to sell its products. Dealers cooperating with the manufacturer on a franchise basis are called authorized.

Distributors- wholesale and retail intermediaries conducting operations on behalf of the manufacturer and at their own expense. As a rule, the manufacturer grants the distributor the right to sell his products in a certain territory and for a certain period of time. Thus, the distributor is not the owner of the product. Under the contract, they acquire the right to sell products. The distributor may act on his own behalf. In this case, a supply contract is concluded within the framework of the contract for granting the right to sell. In the supply chain, distributors usually occupy a position between the manufacturer and dealers (Figure 6.4).

Rice. 6.4. An example of organizing a distribution channel

commission agents- These are wholesale and retail intermediaries conducting operations on their own behalf and at the expense of the manufacturer. The commission agent is not the owner of the products sold. The manufacturer (or the committent in this operation) remains the owner of the product until it is transferred and paid for by the end consumer. The contract for the supply of products is concluded on behalf of the commission agent. Thus, the commission agent is an intermediary only for the committent, and not for the end consumer, whose money is transferred to the commission agent's account. In this case, the risk of accidental damage and loss of products lies with the committent. The commission agent is obliged to ensure the safety of the goods. He is responsible for the loss or damage of products through his fault. The remuneration to the commission agent is usually paid as a percentage of the amount of the transaction or as the difference between the price set by the committent and the sale price.

Agents- intermediaries acting as a representative or assistant of another person (principal) that is the main one in relation to him. As a rule, agents are legal entities. The agent enters into transactions on behalf of and at the expense of the principal. Agents are divided into two categories according to their scope of authority. Universal Agents perform any legal action on behalf of the principal. General Agents conclude only transactions specified in the power of attorney. Agents receive remuneration for their services both at rates and by agreement with the principal. The most common type of agency fee is a percentage of the amount of the deal.

Brokers- intermediaries in the conclusion of transactions, bringing counterparties together. Brokers do not own products like dealers or distributors, and do not own products like distributors, commissioners or agents. Unlike agents, brokers are not in a contractual relationship with any of the parties to the transaction and act only on the basis of individual orders. Brokers are only rewarded for products sold. Their income can be formed as a certain percentage of the cost of goods sold or as a fixed fee for each unit of goods sold.

After choosing the types of intermediaries in the distribution channel, it is necessary to determine the number of these intermediaries. Marketing has developed three approaches to solving this problem: intensive distribution, exclusive distribution, and selective distribution.

intensive distribution involves the provision of stocks of products in the largest possible number trade enterprises. Exclusive distribution involves a deliberately limited number of intermediaries selling these products within the marketing territories. selective distribution is a cross between intensive and exclusive distribution methods. Selective distribution allows the manufacturer to achieve the required market coverage with tighter control and at lower cost than with intensive distribution.

To improve the efficiency of product distribution and in order to save money, organizations often resort to the use of multi-channel product distribution systems.

2.2.1. The concept and functions of logistics channels

Main goal logistics distribution system – deliver the goods to the right place and in right time. Unlike marketing, which is identifying and stimulating demand, logistics is called upon to satisfy demand generated by marketing minimal costs.

The main role in this is played by the solution of the problem of organizing logistics channels (distribution channels, sales channels). The supplier and consumer of MP are two micrologistics systems connected by a logistics channel. Logistics channel - this is a partially ordered set of various intermediaries (organizations or individuals) that carry out bringing the MT from a particular producer to its consumers.

Logistics chain is a linearly ordered set of specific intermediaries from the logistics channel. For example, making a fundamental decision to sell products through an agency firm is the choice of a distribution channel. The choice of a specific agency firm, a specific carrier, etc. is the choice of supply chain.

An important reserve for improving the efficiency of MP distribution processes is the availability on the market big the number of intermediaries, which means choice logistics channel. Thus, the decision on the choice of distribution channels is one of the most important, which must be taken by the management of the organization. The channel of distribution is the path along which goods move from the producer to the consumer. The choice of channel directly affects the speed, time, efficiency of movement and the safety of products when they are delivered from the manufacturer to the final consumer. At the same time, the organizations or individuals that make up the channel perform a number of important functions.

Main functions of logistics channels:

Ø carry out research work to collect information necessary for planning the distribution of products and services;

Ø stimulate sales by creating and distributing information about products;

Ø establish contacts with potential buyers;

Ø adapt the goods to the requirements of buyers;

Ø Negotiate with potential consumers of products;

Ø organize goods circulation (transportation and warehousing);

Ø finance the movement of goods through the distribution channel;

Ø assume the risks associated with the functioning of the channel.

All functions or part of them can be taken over by the manufacturer. Due to the specialization of intermediary organizations, they often act as distribution channels for goods. more efficient charging the manufacturer a certain fee. Therefore, who should perform the various functions of the distribution channel is a matter of relative efficiency. On fig. 2.2 shows options for distribution channels for consumer goods.

Rice. 2.2. Distribution channels for consumer goods

The use of distribution channels is a kind of outsourcing, which determines the following benefits from their use:

Reduced distribution work and savings financial resources for these purposes;

The possibility of investing the saved funds in the main production;

Selling products in more efficient ways;

High efficiency in ensuring the wide availability of goods and bringing it to target markets.

2.2.2. Types of distribution channels

Channel level - it is an intermediary who does the work of bringing the product and ownership of it closer to the end consumer. The length of the channel is determined by the number of intermediate levels between the producer and the consumer. Examples of distribution channels of various lengths are shown in fig. 2.3. The distribution channels shown in the figure are traditional channels that are horizontal. They consist of an independent manufacturer and one or more independent resellers.

Rice. 2.3. Different levels of horizontal distribution channels

Each channel member is a separate enterprise seeking to secure maximum profit. The maximum possible profit of an individual channel member may be at the expense of the maximum profit extraction of the system as a whole, since none of the channel members has full or sufficient control over the activities of the other members.

Vertical distribution channels - they are channels consisting of a manufacturer and one or more intermediaries acting as one single system (Fig. 2.4).

Rice. 2.4. Vertical distribution channel

Such channels are the result of logistical integration in the supply chain (see paragraph 6.2). One of the channel participants, as a rule, either owns the other participating companies, or provides them with certain privileges. Vertical channels originated as channel behavior monitor. They are economical and exclude duplication of functions performed by channel members. Naturally, the fewer links in the supply chain involved in the sale of products, the more effective the control of the promotion channel by the manufacturer.

Creation of large wholesalers on a contractual and corporate basis is carried out in order to increase profits and obtain an additional economic effect from the consolidation of purchased consignments of goods and the simplification of relations between manufacturers and wholesalers.

Each manufacturer, on the basis of marketing research on the sales markets for its products, determines the structure of possible distribution channels, their relationship with specific categories of consumers and with each other (Fig. 2.5).

2.2.3. Intermediaries in distribution channels

In the marketing activities of enterprises, one of the main places is occupied by intermediaries that contribute to the successful implementation of the marketing plan. AT general view intermediary - individual or an organization that facilitates the establishment of contacts and the conclusion of transactions between producers and consumers, sellers and buyers of goods and services.

The main purpose of using the services of intermediary wholesalers is expansion of sales markets goods and cost reduction. In cases of territorial dispersion of the market for goods, it is unprofitable for the supplier firm to supply it through direct relations with consumers due to significant expenses for the sale of its products. The wholesaler, by accumulating incoming goods of various nomenclature, sells them, receiving part of the profit from the joint sale. As a result of such an organization of the sale of goods, suppliers are able to sell their products to a wider range of consumers.

Rice. 2.5. Possible schemes of distribution channels depending on the volume of production and the level of demand

In Western countries, this form of relations between wholesalers and industrial firms is also gaining ground, when the former are assigned operations for maintenance equipment already in the hands of end users. Manufacturers are relieved of the need to have personnel to carry out such operations. In turn, intermediaries, having their own staff of maintenance workers, are no longer dependent on supplier firms.

Distributor Selection Criteria

When choosing wholesale intermediaries, industrial firms take into account the following main considerations:

Confidence of the supplier in the interest of intermediaries to establish relationships with him for the sale of goods;

Good knowledge by the wholesaler of the goods of the supplier;

A sufficient degree of reliability of the position of a wholesale enterprise in a particular industry;

Availability of warehouse capacities at the intermediary and its readiness to store stocks-products of the supplier;

Strength financial position intermediary and the validity of his pricing policy, etc.

Types of intermediaries

The classification of intermediaries is carried out according to two main criteria: on whose behalf the intermediary works and at whose expense the intermediary conducts its operations. Consider the main types of intermediaries (Table 2.2).

Table 2.2

Types of intermediaries in distribution channels

Dealers - These are wholesale (rarely retail) intermediaries that conduct operations on my own behalf and at my own expense. The goods are purchased by them under a supply contract. So the dealer becomes the owner of the product after full payment for the delivery. Relations between the manufacturer and the dealer are terminated after the fulfillment of all conditions under the supply contract. In the logistics chain, dealers occupy the position closest to the end consumers.

Distributors– wholesale and retail intermediaries conducting operations on behalf of the manufacturer and at his own expense. As a rule, the manufacturer grants the distributor the right to sell his products in a certain territory and for a certain period of time. So the distributor does not own the product . Under the contract, they acquire the right to sell products. The distributor may act on his own behalf. In this case, a supply contract is concluded within the framework of the contract for granting the right to sell. In the supply chain, distributors usually occupy a position between the manufacturer and dealers (Fig. 2.6).

Rice. 2.6. Distribution channel example with various types intermediaries

commission agents are wholesale and retail intermediaries operating from own name and at the expense of the manufacturer. commission agent does not own the product being sold. Manufacturer ( committent) remains the owner of the product until it is handed over and paid for by the end user. The contract for the supply of products is concluded on behalf of the commission agent. Thus, the commission agent is an intermediary only for the committent, and not for the end consumer, whose money is transferred to the commission agent's account. In this case, the risk of accidental damage and loss of products lies with the committent. The commission agent is obliged to ensure the safety of the goods. He is responsible for the loss or damage of products through his fault. The remuneration to the commission agent is usually paid as a percentage of the amount of the transaction or as the difference between the price set by the committent and the sale price.

Agents- intermediaries acting as a representative or assistant of another person, the main person in relation to him ( principal). As a rule, agents are legal entities. Agent makes deals on behalf of and at the expense of the principal. Agents are divided into two categories according to their scope of authority. Universal Agents perform any legal action on behalf of the principal. General Agents conclude only transactions specified in the power of attorney. Agents receive remuneration for their services both at rates and by agreement with the principal. The most common type of agency fee is a percentage of the transaction amount.

Brokers- intermediaries in the conclusion of transactions, bringing counterparties together. Brokers do not own the product, as dealers or distributors, and do not dispose of the products as distributors, commissioners or agents. Unlike agents, brokers are not in a contractual relationship with either party of the concluded transaction and act only on the basis of individual orders. Brokers are only rewarded for products sold. Their income can be formed as a certain percentage of the cost of goods sold or as a fixed fee for each unit of goods sold.

Ensuring the personal interest of the intermediary personnel:

Ø the intermediary staff must be considered as a kind of part of its own staff, and therefore it is necessary to achieve loyalty and trust in relations with intermediaries;

Ø remuneration of the intermediary (seller) personnel should stimulate high-quality, active work sales of the company's products;

Ø training of personnel in the correct methods of work and the development of professional skills contribute to the effectiveness of sales;

Ø Service standards developed by the principal firm (manufacturer, exporter) help sales efficiency, as they put intermediaries on an equal footing, and also provide a fairly accurate comparative evaluation their work.

Options for determining the number of intermediaries

After choosing the types of intermediaries in the distribution channel, it is necessary to decide on quantity these intermediaries. Marketing has developed three approaches to solving this problem:

1) intensive distribution- involves the provision of stocks of products in the largest possible number of trading enterprises;

2) exclusive distribution- involves a deliberately limited number of intermediaries selling this product within the marketing territories;

3) selective distribution-is something between the methods of intensive and exclusive distribution. Selective distribution allows the manufacturer to achieve the required market coverage with tighter control and at a lower cost than with intensive distribution.

To improve the efficiency of product distribution and in order to save money, organizations often resort to the use of multi-channel product distribution systems.

2.2.4. Monitoring the functioning of distribution channels

Monitoring the functioning of distribution channels - an important direction in assessing the marketing activities of the enterprise and, in particular, the actual situation in the activities of the intermediary network of the enterprise. The degree of complexity of the organization and the complexity of monitoring distribution channels depends primarily on the number of intermediary links included in each individual channel and involved in the sale of finished products. From fig. 2.7 shows that the distribution channels numbered 1, 2, 3, 4 monitoring is not particularly difficult. For other distribution channels numbered 5, 6, 7, 8 (with an extensive intermediary network), monitoring faces certain difficulties even in the presence of a developed information system.

Rice. 2.7. General scheme distribution channels

Evaluation by monitoring the activities of the intermediary network is carried out according to such indicators as:

fulfillment of the sales norm;

maintaining an average level of inventory;

Efficiency of delivery of products to consumers;

attitude towards damaged and missing products;

· cooperation with the manufacturer in the implementation of sales promotion programs and training programs;

implementation of a set of services that the intermediary must provide to the consumer.

Plan

1. Distribution channels for goods and services

2. Structure and management of distribution channels

1. Distribution channels for goods and services

The choice of ways of distribution of goods and services is the most important task of the enterprise. Distribution paths affect the entire marketing mix.

Most businesses sell their products through intermediaries.

Distribution channel- a set of firms or entrepreneurs who take over or help transfer to someone else the ownership of specific item or service as it moves from producer to consumer.

Functions of intermediaries. The manufacturer transfers part of the sales work to intermediaries. To some extent, he loses control over how and to whom the goods are sold. But manufacturers believe that the use of intermediaries is beneficial.

Many manufacturers lack financial resources to organize trade - both to Russian coal mines and to American automobile companies. General Motors, for example, sells its cars through an army of 20,000 dealers. It is very difficult even for this largest corporation in the world to buy out all the dealerships. Firms find it unprofessional and unprofitable to open stores everywhere for their products.

Intermediaries, through contacts, experience, specialization and scale of activity, offer the manufacturer greater sales opportunities than he can achieve on his own. One of the main sources of savings when using intermediaries is the increase in the number of contacts with consumers. For example, to connect three manufacturers directly to three consumers, nine separate contacts must be established. But if three manufacturers operate through the same authorized distributor, only six contacts need to be established. Intermediaries increase the operational efficiency of the market.

Distribution channel functions. The channel of distribution is the path along which goods move from producers to consumers. Its task is to ensure the movement and change in ownership of goods and services, as well as to smooth out the unevenness of their flows. Distribution channel participants perform the following functions:

organize commodity circulation - transportation and warehousing of goods;

stimulate sales by spreading tempting information about the product;

establish and maintain relationships with potential buyers;

finalize, sort, assemble and pack the goods;

negotiate, agree on prices and other terms of sale;

finance the operation of the channel;

assume the risk of responsibility for the operation of the channel;

collect information for sales planning.

All these functions consume scarce resources, but they must be fulfilled. If part of them is performed by the manufacturer, his costs rise accordingly, which means that prices should be higher. When transferring some functions to intermediaries, the costs and prices of the manufacturer are lower. Intermediaries in this case must charge an additional fee to cover their costs of arranging the work. The question of who should perform the various functions inherent in a channel is essentially a question of relative effectiveness and efficiency. If it becomes possible to perform functions more effectively, the channel should be rebuilt.

Number of channel levels. Distribution channels differ in the number of their constituent levels. The distribution channel level is any intermediary that performs some work to bring the product and ownership of it closer to end customer. Insofar as certain work is performed by both the manufacturer and the end consumer, they are also part of any channel. The length of a channel is usually denoted by the number of intermediate levels present in it.

Zero level channel, also called direct marketing channel consists of a manufacturer selling a product directly to consumers. There are three main methods of direct selling - trade through manufacturer-owned stores, mail order and peddling.

Single layer channel includes one intermediary. In consumer markets, this is usually a retailer, while in industrial markets, this is usually a distributor or broker.

Bilayer channel includes two intermediaries. In consumer markets, these intermediaries are usually wholesalers and retailers; in industrial goods markets, this can be an industrial distributor and dealers.

Three-level channel includes three intermediaries. For example, in industry, there is usually a small wholesaler between the wholesaler and the retailer. Small wholesalers buy goods from large wholesalers and resell them to small businesses retail.

There are channels large quantity levels, but they are less common. The more levels the distribution channel has, the less the ability to control it, but the more stable the rhythm of the manufacturer's work.

Service channels. The concept of channels involves the distribution of more than physical goods. Producers of services and ideas must make their offerings available to the target market. They create "knowledge dissemination systems", "health delivery systems". To reach a disparate audience, you should rationally place your representations.

Hospitals should be located in such a way that all residents of the area have the opportunity to receive complete medical service. Schools must be built close to where children live, otherwise children must be brought to school. Fire brigades should be dispersed in such a way that firefighters can quickly reach the seats of possible fires. Polling stations should be located in such places that they can be reached and voted without wasting time, effort and money. In cities, it is necessary not only to open hairdressers, but also to properly place them.

Distribution channels are widely used in the marketing process educational services. Previously, teachers could teach in classrooms and with the help of books. Then radio and audio recordings were added. Television, videotapes, computers and computer networks. Politicians must also find cost-effective channels to get their messages out to voters - means mass media, rallies, conversations over a cup of coffee in lunch break and web pages.

Distribution channels are characterized by the promotion of goods forward. But the backstop channels are also important. The problem of ecology has become the recycling of solid waste. It arose when organizing the movement of materials through the distribution channel in reverse side, when organizing the purchase of waste through the "reverse" channel. The current channels for “flyback” are primitive, and the financial incentives associated with this activity are insufficient.

vertical marketing systems. AT Recently, vertical marketing systems have emerged that challenge traditional distribution channels.

Typically, a distribution channel consists of an independent manufacturer, one or more wholesalers, and one or more retailers. Each channel participant is a separate enterprise whose goal is to obtain the maximum possible profit, even to the detriment of the maximum profit extraction of the system as a whole. None of the channel members have full or sufficient full control over the activities of other members.

vertical marketing system(Navy), on the contrary, consists of a manufacturer, one or more wholesalers, one or more retailers, acting as a single system. In this case, one of the channel members either owns the others, or grants them trading rights, or has the power to ensure their close cooperation. The dominant force within a CPA can be either a manufacturer, a wholesaler, or a retailer. The Navy arose as a means of controlling the channel and preventing conflicts between its individual members pursuing their own goals. Navies are small in size, have great bargaining power and avoid duplication. In developed countries, IUDs have already become the predominant form of distribution in consumer products.

Corporate Navy Within a corporate BMC, the successive stages of production and distribution are managed by a single company. The largest in the world in number employed workers Since 1996, General Motors has received more than 50% of its income from trade and the sale of services, and not from the production of goods. More than 50% of all merchandise sold by the US's largest retailer, Sire, enters its stores from businesses that are partly owned by the company. This is a global trend.

Contractual Navy. The contractual Navy is made up of independent firms affiliated contractual relations to jointly achieve better results commercial activities than one would have alone. Contractual navy became widespread in the 70s and often impoverishes small and big business. Contractual naval forces are of three types.

1. Voluntary chains of retailers under the auspices of wholesalers. Wholesalers in developed countries are massively organizing voluntary chains of independent retailers to help them compete against the big ones. distribution networks. The wholesaler is developing measures aimed at streamlining trading activities independent retailers and ensure purchasing economy, which allows the entire group to compete effectively with chains. Many Russian retailers willingly agree to such a merger, but wholesalers do not pay due attention to them.

Distribution channels for goods. Levels of distribution channels of goods (vertical and horizontal). Types of intermediaries in distribution channels and their purpose, opportunities, advantages

logistics purchasing supplier goods

According to the number of intermediary links, all distribution channels are divided into channels of various levels. The link of the logistics system, whose activities are aimed at bringing the product and ownership of it closer to the end consumer, is the channel level.

Zero-level channels are characterized by a complete absence of intermediaries, i.e., the manufacturer works directly with the consumer, and first-level channels - by the presence of one intermediary, etc. Another characteristic of the distribution channel is the length, which corresponds to the number of levels between producers and consumers.

Distribution channels are divided into horizontal and vertical.

Horizontal channels are formed independently of each other by the manufacturer and the intermediary. A separate link of the horizontal channel acts as entity operating at its own risk and trying to increase its profits.

Vertical distribution channels consist of links between which relationships are established. A common situation is when a participant in a distribution channel is the owner of the others. At the same time, hierarchical relationships of subordination are introduced among the participants in the distribution process, and the channel works as a whole.

Distribution channel planning. 1. Holding research work to collect information needed to plan the distribution of goods and services. 2. Analysis of the compliance of the goods with the requirements of the supplier. 3. Negotiations with potential consumers of products. 4. Financing the movement of goods through distribution channels. 5. Information support.

Depending on the type of macro-logistics system, distribution channels have a different structure. AT logistics systems with direct connections, distribution channels do not have wholesale intermediary firms. There are such intermediaries in elastic systems.

When choosing a distribution channel, the choice of the method of distribution is made.

The distribution channel is characterized not only by the number of elements included in it and the property of their interrelations, but also by the types of elements included in it, i.e., mediators working throughout its entire length.

Various specialized transport, forwarding, transport and forwarding organizations, physical distribution companies and other enterprises act as intermediaries in physical distribution operations. Resellers may perform logistics related to physical distribution.

The main place among logistics intermediaries in distribution is occupied by resellers, who, along with exchange functions, can perform many other functions of physical distribution.

It is intermediaries, from the point of view of logistics, that provide effective system commodity flows, using market mechanism self-regulation.

Intermediaries in the system of logistics distribution carry out a number of very important functions.

An intermediary is a natural or legal person who facilitates the establishment of business relationships between product manufacturers, on the one hand, and consumers, on the other.

The involvement of intermediaries has the task of improving the efficiency of foreign trade operations. In the event that intermediaries do not provide additional profit in comparison with the profit that producers receive from the independent sale of goods on the market, it is pointless to involve them. But in most cases, the use of an intermediary in the trading process minimizes the costs of the final consumer.

Product distribution channels. Channel functions

Most manufacturers offer their products to the market through intermediaries. Each of them seeks to form its own distribution channel.

The channel of distribution is the path along which goods move from producers to consumers. It bridges the long gaps in time, place, and ownership that separate goods and services from those who would like to use them. Distribution channel members perform a number of very important functions:

1. Research work - collection of information necessary for planning and facilitating the exchange.

2. Sales promotion - the creation and distribution of persuasive communications about the product.

3. Establishing contacts - establishing and maintaining communication with potential buyers.

4. Product customization - product customization to customer requirements. This applies to activities such as production, sorting, assembly and packaging.

5. Conducting negotiations - attempts to agree on prices and other conditions for the subsequent implementation of the act of transfer of ownership or possession.

6. Organization of commodity circulation - transportation and warehousing of goods.

7. Financing - finding and using funds to cover the costs of the channel's operation.

8. Acceptance of risk - acceptance of responsibility for the functioning of the channel.

The implementation of the first five functions contributes to the conclusion of transactions, and the remaining three - the completion of already concluded transactions.

The question is not whether these functions should be performed—should, and must—but rather who should perform them. All these functions have three common properties: they absorb scarce resources, can often be better done through specialization, can be done by different channel members. If part of them is performed by the manufacturer, his costs rise accordingly, which means that prices should be higher. When transferring some of the functions to intermediaries, the costs, and hence the prices of the manufacturer, are lower. Intermediaries in this case must charge an additional fee to cover their costs of arranging the work. The question of who should perform the various functions inherent in a channel is essentially a question of relative effectiveness and efficiency. If it becomes possible to perform functions more effectively, the channel will be reorganized accordingly.

Number of channel levels

Distribution channels can be characterized by the number of their constituent levels.

The distribution channel level is any intermediary that does some work to bring the product and ownership of it closer to the end customer. Since both the manufacturer and the end consumer perform certain work, they are also part of any channel. The length of the channel is indicated by the number of intermediate levels present in it.

The zero-level channel (direct marketing channel) consists of a manufacturer selling a product directly to consumers. The three main methods of direct selling are peddling, mail order and manufacturer-owned stores. Avon salesmen sell cosmetics to housewives by peddling. The Franklin Mint sells collectibles by mail order, and the Singer sells its sewing machines through their own stores.

A peer-to-peer link includes one intermediary. In consumer markets, this intermediary is usually a retailer, while in industrial markets, this intermediary is often a distributor or broker.

A two-layer channel includes two intermediaries. In consumer markets, this intermediary is usually a wholesaler and retailer; in industrial markets, it can be an industrial distributor and dealers.

A three-level channel includes three intermediaries. For example, in the meat processing industry, there is usually a small wholesaler between the wholesaler and the retailer. Small wholesalers buy goods from large wholesalers and resell them to small retailers that large wholesalers typically do not serve.

There are channels with more levels, but they are less common. From the producer's point of view, the more levels a distribution channel has, the less control it has.

Choice of distribution channels.

When forming a distribution channel, the decision on the structure of the channel is put forward in the first place, i.e. about the number of levels and about the specific composition of the members of the channel. The distribution channels are characterized by length and width. Length channel is determined by the number of independent intermediaries (or levels of distribution) that consistently promote goods.

Forms of bringing the goods to the consumer:.

Direct communication through the "door to door" system, (zero-level channel) in which the goods are delivered from the supplier to the consumer, bypassing warehouses and storages. This form is used when a large batch of products is purchased or unique products are purchased. It allows you to minimize transport costs and the cost of intermediate storage of goods. Direct connections bring effect only when serving closely located consumers.

In the case when consumers are located far from suppliers or in several regions, the delivery of goods through warehouses (centers) of supplier enterprises. Sales agents, accepting an order for the supply of products, do not send it to the central sales office, from where it is sent to one of the company's enterprises, but directly to the nearest distribution center.

The next form of bringing goods to consumers is using the services of wholesalers. Suppliers resort to the services of wholesalers when selling products for industrial and technical purposes. This form is mainly used to expand sales markets and reduce costs, if necessary, organize an additional channel for the sale of the same product in different markets when supplied in in large numbers goods of standard quality, etc.

In recent years, this form of relations between wholesale intermediaries and industrial enterprises when the first are assigned to the maintenance operations of the equipment located at the consumer. In this case, manufacturers are relieved of the need to have personnel to perform such operations. Industrial equipment, raw materials and semi-finished products can be sold through commodity exchanges, using brokers and agents.

Width distribution channels is characterized by the number of independent participants at each level. A firm may take a variety of possible approaches to addressing the issue of the number of intermediaries. When identifying possible options for distribution channels, it is necessary to determine the type of intermediaries used. Their classification takes into account two features: on whose behalf the intermediary works and at whose expense it conducts its operations.

There are four types of intermediaries.

1. Dealers- wholesale, less often retail, intermediaries who conduct operations on their own behalf and at their own expense. They purchase the goods under a supply contract, become the owners of the goods after paying for the delivery and sell these goods to consumers.

2. Distributors- wholesale and retail intermediaries conducting operations on behalf of the manufacturer and at their own expense. The manufacturer grants the distributor the right to sell its products in a certain territory and for a certain time. The distributor does not own the product. Under the contract, he acquires the right to sell it.

3. commission agents- wholesale and retail intermediaries conducting operations on their own behalf and at the expense of the manufacturer. The commission agent is not the owner of the product. For the services rendered, he is paid a remuneration in the form of a percentage of the transaction amount.

4. Brokers- intermediaries in the conclusion of transactions, bringing counterparties together. Brokers are not the owners of the products, they do not dispose of the products. They act on the basis of instructions and facilitate the completion of the transaction. Rewarded only for products sold.

After choosing the types of intermediaries in the distribution channel, it is necessary to determine the number of these intermediaries. Marketing has developed three approaches to solving this problem: intensive distribution, exclusive distribution, and selective distribution.

intensive distribution involves the provision of stocks of products in the largest possible number of trading enterprises.

Exclusive distribution involves a deliberately limited number of intermediaries selling these products within the marketing territories.

selective distribution is a cross between intensive and exclusive distribution methods. Selective distribution allows the manufacturer to achieve the required market coverage with tighter control and at lower cost than with intensive distribution.

However, in the general case, the choice of one or another channel depends on the ratio of three factors: the number of points of sale of goods, distribution costs, the degree of control over the goods in the process of its "movement" through the channel to the final consumer . If the distribution chain is short, the manufacturer retains more control over the product, but is usually able to cover a smaller market segment and, in addition, bears all the costs associated with warehousing, transportation and marketing. A longer chain increases market coverage and reduces producer costs, but the distribution process becomes more complex and therefore less controllable.

Length and width of distribution channels.

The channel of distribution is the path along which goods move from producers to consumers. It bridges the long gaps in time, place, and ownership that separate goods and services from those who would like to use them.

Distribution channels are characterized by their long and width. The length of the distribution channel is the main indicator and is determined by the number of links. The channel width is determined by the number of participants in each link of the distribution channel. At the same time, the producer of the goods is the initial, and the consumers are the final links of the channel. The task is to determine the number of intermediate links. To select the length and width of the channel, it is customary to use the following criteria.

• income criterion. Direct channels provide the opportunity for more sales and profits. revenue comes without intermediaries, and the company intensifies efforts on their products.
• Cost criterion. Direct supply to a retailer is justified if the incremental cost to achieve the appropriate level of sales is less than the incremental cost associated with advertising.
• Flexibility criterion. The formation of distribution channels is a dynamic process that requires constant refinement.
• Control criterion. The more intermediaries involved in the distribution of the enterprise, the less control it has.

One of the main stages under consideration is determination of distribution channel parameters . These parameters are length (length) and width. Under channel length imply the number of intermediate links that perform work on the movement of goods from the producer to the consumer.

The length of the distribution channel can be characterized by the number of its constituent levels. The distribution channel level is any intermediary that performs some work to bring the product and ownership of it closer to the final buyer. Since both the manufacturer and the end consumer perform certain work, they are also part of any channel.

A channel with a length equal to zero is called direct marketing channel, since there are no intermediate links in it, it consists only of a seller and a consumer. Direct marketing itself is carried out using several methods (selling at home, by telephone, personal selling, and so on) and deserves separate consideration. The remaining channels are indirect marketing channels and may include from one to three or more levels.

Single layer channel includes one intermediary. In consumer markets, this intermediary is usually a retailer, while in industrial markets, this intermediary is often a distributor or broker.

Bilayer channel includes two intermediaries. In consumer markets, these intermediaries are usually wholesalers and retailers; in industrial markets, this may be an industrial distributor and dealers. A three-level channel includes three intermediaries.

There are channels with more levels, but they are less common. From the producer's point of view, the more layers a distribution channel has, the less control it has.

Another characteristic of a distribution channel is its width , that is, the number of intermediaries at each level involved in the distribution of products. Therefore, any firm will have to decide how many intermediaries will be used at each level of the channel. There are three approaches to solving this problem: intensive, exclusive and selective distribution.

At intensive In distribution, producers tend to seek to ensure the availability of stocks of their goods in the largest possible number of trading enterprises. For such goods, the convenience of the place of purchase is mandatory.

Distribution on an exclusive basis, or exclusive, means that the manufacturer grants a limited number of dealers exclusive rights to distribute the company's products within their sales territories. In this case, the condition of exclusive dealership is often set, when the manufacturer requires that dealers selling his products do not sell competitors' products. By granting exclusive rights to distribute its product, the manufacturer hopes to organize a more aggressive and sophisticated marketing, as well as the possibility of greater control over the actions of the intermediary in the areas of price policy, incentives, credit transactions and the provision of various kinds of services. Exclusivity distribution usually enhances the image of the product and allows for higher markups.

Method selective (selective) distribution is a cross between methods of intensive distribution and distribution on the basis of exclusivity. In this case, the number of intermediaries involved is more than one, but less than the total number of those ready to engage in the sale of goods. The firm does not need to spread its efforts across multiple outlets, among which there are many and clearly secondary. She can set good business relationship with specially selected intermediaries and expect above-average sales efforts from them. Selective distribution enables the producer to achieve the required market coverage with tighter control and at a lower cost on his part than with intensive distribution.

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