Directorate of distance education

Designing a Channel of Distribution
Channel objectives 
will be determined by the organisation’s 
positioning strategy. The “place” element of the marketing mix must be 
consistent with the remaining marketing tools used by the marketing 
manager to gain a sustainable competitive advantage.
Three options can be identified
➢
Intensive distribution
. Generally used for FMCGs and other 
relatively low-priced or impulse purchases.
➢
Exclusive distribution
. Here, distribution may be limited to a small 
number of intermediaries who gain better margins and exclusivity.
➢
Selective distribution
. This represents a compromise between 
intensive and selective distribution. The manufacturer is looking 
for adequate market coverage, but still hopes to select supportive 
dealers.
There are a number of key influences on channel selection strategies:
➢ Buyer behaviour (what do customers expect inn terms of location 
and assortment etc.?),
➢ Producer’s needs, (an important constraint is the resources that are 
available to the manufacturer to bring the product to market. Some 
companies will lack the finances to recruit and reward a salesforce 
and so will use a wholesaler instead.
➢ Product type (e.g. fresh produce that is highly perishable requires 
fairly short channels)
➢ Competition (e.g. if competitors have exclusive deals with certain 
intermediaries, then the support of other channel members with 
similar marketplace penetration may be sought)

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Notes
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A systematic process for 
design of a channel 
is important. An 
“end-user” analysis will result in the creation of an “ideal” channel 
system which offers a multi-channel format catering for the service level 
demands of each customer segment. This should be evaluated in terms of 
the company’s objectives and its positioning relative to the competition. A 
constraints analysis is needed to identify limits which have to be built into 
any proposed channel structure.
Managers can choose from among three generic marketing channels:
➢
Direct marketing.
This involves reaching customers via 
communications media such as telesales, mailshots, catalogues or 
advertisements with tear-off reply slips 
➢
Salesforce.
Here a company might build its own team of salespeople, 
or perhaps hire an
➢ Independent contract sales force. 
➢
Channel intermediary.
This alternative is the chief concerned of 
this chapter.
In general, these channels are shorter than those for consumer goods.
In the case of services, it is not possible to “own” a service and 
their delivery cannot be easily separated from the service provider. These 
factors, and the inability to hold an “inventory” of unsold services, means 
that the role of channel intermediary can be very different for services 
compared to goods. Companies in both consumer and business-to-
business markets use a variety of channels to distribute their products.