Distribution Channel Functions
Category: Marketing
A distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. Members of the marketing channel perform many key functions:
Information. Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. Promotion. Developing and spreading persuasive communications about an offer. Contact. Finding and communicating with prospective buyers. Matching. Shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging. Negotiation. Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred. Physical distribution. Transporting and storing goods. Financing. Acquiring and using funds to cover the costs of the channel work. Risk taking. Assuming the risks of carrying out the channel work.
The first five functions help to complete transactions; the last three help fulfil the completed transactions.
The question is not whether these functions need to be performed — they must be — but rather who is to perform them. All the functions have three things in common — they use up scarce resources, they can often be performed better through specialisation, and they can be shifted among channel members. To the extent that the manufacturer performs them, the costs go up and the prices have to be higher. At the same time, when some functions are shifted to middlemen, the producer’s costs and prices are lower, but the middlemen must add a charge to cover their work. In dividing the work of the channel, the various functions should be assigned to the channel members who can perform them most efficiently and effectively to provide satisfactory assortments of goods to target consumers.
| Functions (tasks) in the Distribution System | ||||||||
| Information | Promotion | Contact | Matching | Negotiation | Physical Distribution | Storing | Financing | Risk taking |