What is Distribution?
Distribution is an activity, process, and means where the products are delivered to the ultimate customers from the production point by different types of delivery channels. It is also said to be the product distribution.
Distribution i.e. place is also one of the crucial parts of the marketing mix, which adds up a great role in successful marketing operations. Just like product, price, promotion, the place should be given careful attention to producing a marketing exercise more than is anticipated.
It generally means moving goods and services from producers to different markets (customers) by using various channels. Once the products are manufactured, they should be placed in the right place where their demand exists or where people feel convenient to buy.
In this competitive environment, due to lots of choices customers have, they will easily shift between competitors, they do not visit the production point to purchase any desired items unless they are brand sackers. Marketers or producers hence need to distribute their offerings i.e. products and services in different locations that make it convenient for customers to buy from where they are.
More specifically, distribution is the process whereby products and services are delivered from producers to the consumers and organizational buyers where and when products are needed. Under this system, along with products and services, money and communication also flow from one channel member to another.
The distribution system combines the channels of distribution with marketing logistics to have a smooth movement of products from point of production to point of consumption.
Its main focus is on delivering the right product in the right place at the right time through the right channel within minimum chances of loss or damage and transferring ownership from seller to buyer or at different distributions chains.
One objective the distribution should have is to safely distribute the products to the place desired. The primary objectives of distribution can be listed as below:
Movement of Goods: One of the primary objectives of distribution is to make the movement of goods. It is a great way to facilitates the flow of goods and services from one place to another or from production point to consumption. A poor distribution channel can not make a proper placement, hence a proper one is important for both producers and consumers.
Availability of Goods: It is obvious that all the potential consumers of the firm do not live in the same area, they are scattered in different geographical areas. Its next important function is to ensure that firm’s offerings are placed into the hands of those scattered consumers who need them. By this, it plays a key role in the fulfillment of consumers need and want.
Brings Cost-Effectiveness: It helps business firms to get lots of good results without wasting more money. It enables the firm to reduce its unit cost in one increasing efficiency in marketing on the other. Both of the measures are major concerns for the consumers.
Protection of Goods: Protection of goods is also one important objective of it. When an individual consumer buys goods from the production point he may or may not safely bring them to the house. It hence ensures that goods are properly stored, handled, and protected so that they can be supplied to final consumers in proper condition.
Makes Transfers of Ownership Effective: Distribution is the only means through which the ownership is transferred from the seller to the buyer. This transfer of ownership makes equally responsible all parties, which is an important tool for promoting marketing activities and developing marketing efficiency.
Strengthens the Promotion of Products: Usually, in the distribution process, most of the products and services being promoted and advertised by marketing intermediaries. Therefore, it has also promotional importance too.
Enhance Sales: It makes sure that products in demand are always available. Moreover, it ensures that the contingency plans for quick order processing of goods. A proper distribution channel with well-established channel relation hence enhances sales.
Promotes Marketing Exercises: Product, price, and promotion are not the only elements of the marketing mix that make marketing exercise successful, rather the placement of the products or services to the place where it is needed, is all that matters at the last. The perfect combination of all marketing mix components hence leads up successful marketing activity.
Mainly there are two methods of distribution, based on directness, are,
- Direct distribution
- Indirect distribution
If the producer or manufacturer itself is involved in the delivery of its products or services to the end customers, it is called direct distribution. It is a method used by business firms to move from production point to buyer on their own.
Doing it may involve following techniques,
- Through the producers own distribution network,
- Through the producer’s own sales agents,
- Through the producer’s own sales depots.
Advantages of direct distribution can be listed as below:
- The producer can exercise greater control over distributors or systems,
- The producer can collect adequate market information and can have better market feedback about foreign markets,
- Development of in-house expertise in the distribution system is possible because the producer himself involves in delivering activities and has better market feedback,
- Must customers have trust in producers rather than the middlemen like wholesalers and agents,
- Standardized services can be offered to all the customers.
- Producers can get a lot of knowledge and experience regarding the distribution of products in the market.
- A better relationship can be established with the public and can gain popularity and goodwill in the market.
Certain limitations or disadvantages of direct distribution are as follows:
- A producer has to spend a lot of time delivering activities,
- A producer has to invest a lot of money in creating and building its own distribution network,
- The producer may have difficulty in developing and establishing public relations with all the customers,
- The producer may not have specialized knowledge and experience in delivering techniques.
If the producer uses different marketing intermediaries while distributing his products and services, it is called indirect distribution. In other words, if the delivery of goods and services goes from the producer to agent to wholesale to retailer to customer, it is called indirect distribution.
A producer can realize the following advantages of adopting this method,
- Relieves producer from the distribution task,
- Products can be distributed in different parts of the country,
- Producer does not have to invest money in creating their distribution network,
- Essential information regarding market behavior can be collected from the distributors from broad areas for making right policy and strategic decisions,
- Distributors themselves provide necessary services to the customers,
- Producer may be able to diversify products as required by the market and will be able to expand production and market in future.
A producer also can realize the following limitations or disadvantages using this method,
- The producer may not have control over marketing intermediaries,
- Reliable distributors may not be available in the market,
- Timely distribution may be affected since the marketing intermediaries handle products of many producers at a time,
- Marketing intermediaries may demand high-level profit margins,
- Conflicts may arise with intermediaries on several subject matters on a regular basis.
A producer can also adopt the mixed distribution method, which is the combination of the direct and indirect distribution methods. As per the circumstances, a producer can adopt this situation.
In a positive way, while adopting this method a producer can enjoy the benefits of both methods, and on the other hand, he might also face the limitations of both methods.