Marketing Channels for consumer goods

 

Introduction

The term channel of distribution is used to refer to the various intermediaries who help in moving products from the producer to consumers. There are a variety of middlemen and merchants who act as intermediaries between the producers and consumers. Stanton (1981:283) defines a channel of distribution for a product as ‘the route taken by the title to the ultimate consumer or industrial users’. A channel always includes both the producer and the final customer for the product, as well as all middlemen involved in the title transfer. Even though agent middlemen do not take actual title to the goods, they are included as part of a distribution channel. This is because they play such an active role in the transfer of ownership.

A channel of distribution is also defined as ‘a system designed to move goods and services from producers to customers, which consists of people and organizations supported by various facilities, equipment, and information resources’.

Marketing Channels for consumer goods

Marketing channels can be described by the number of channel levels involved. Each layer of middlemen that perform some work in bringing the product and its ownership closer to the final buyer is a channel level. Because the producer and the final consumer both perform some work, they are part of every channel. We have two types of marketing channels – channels for consumer goods and channels for industrial goods; in this section we shall only take a look at the consumer goods channel only.

(1) Producer to the Consumers: When there are no intermediaries between the producer and the consumer, the channel is direct. This type of channel is most commonly used with organizational products, especially where the product is new. This is aimed at creating awareness and to gain access to target consumers.

In this channel, a producer makes the goods and sells them to the consumer directly with no intermediary, such as a wholesaler, agent or retailer. Goods come from the manufacturer to the user without an intermediary or middleman. For example, a farmer may sell some produce directly to customers. For example, a bakery may sell cakes and pies directly to customers.

(2)        Producer to Retailer to the Consumer: The channel from producer to retailer to the consumer is common when the retail establishments involved are relatively large.

Purchases are made by the retailer from the manufacturer and then the retailer sells the merchandise to the consumer. This channel is used by manufacturers that specialize in producing shopping goods.

For example, clothes, shoes, furniture and fine china. This merchandise may not be needed immediately and the consumer may take her time and try on the items before making a buying decision. Manufacturers that specialize in producing shopping goods prefer this method of distribution.

(3)        Producer –Wholesaler – Consumer: In this channel, producer dispenses the services of the agent and retailer. Consumers can buy directly from the wholesaler. The wholesaler breaks down bulk packages for resale to the consumer. The wholesaler reduces some of the cost to the consumer such as service cost or sales force cost, which makes the purchase price cheaper for the consumer. For example, shopping at some of the warehouse clubs, the customer may have to buy a membership in order to buy directly from the wholesaler.

According to Odedukun, Udokogu and Oguji (2011) the following are some of the advantages of using the channel:

a.       The retailing profit now largely accrues to either the wholesaler or the consumer in forms of reduced prices or to both of them.

b.      There is reduction in time taken for the goods to reach the consumers. It is specifically desirable when it involves perishable goods, and the fashion goods, which are very much vulnerable to obsolescence within a short time.

(4)        Producer - Agent – Consumer: This is a channel which involves the producer – agent and consumer. It is usually found in industrial goods which are used by companies e.g. Construction Company when buying a caterpillar for their own use.

Distribution that involves more than one intermediary involves an agent called in to be the middleman and assist with the sale of the goods. An agent receives a commission from the producer. Agents are useful when goods need to move quickly into the market soon after the order is placed.

For example, a fishery makes a large catch of seafood; since fish is perishable it must be disposed of quickly. It is time consuming for the fishery to contact many wholesalers/retailers all over the country so he contacts an agent. The agent distributes the fish to the wholesalers.

(5)        Producer to Wholesaler to Retailer to the Consumer: The most common channel for consumer goods. It employs a wholesaler to take care of the shipping and transportation needs. Wholesalers offer the accumulating and allocating functions that allow small producers to interact with large retailers, and vice versa.

(6) Producer to Wholesaler to Jobber to Retailer to the Consumer: the producer chooses to use agents (Jobbers) to assist the wholesalers in marketing goods. The use of Jobbers could be attributed to their specialised experiences.

The Importance of Channels of Distribution

The importance of channels of distribution is summarised below:

(1) Channels of distribution are the most powerful element among marketing mix elements. Many products which were intrinsically sound died in their infancy because they never found the right road to the markets.

(2) Channels take care of the transaction aspects of marketing, including the selling, the financing and the risk taking associated with strong products in anticipation of future sales.

(3) They perform the logical function of moving products from the point of production to the point of purchase.

(4) They help producers promote goods and services.