Factors governing the selection of an appropriate distribution channel.

Factors Influencing the Choice of Channels: There are various factors that are to be kept in mind while choosing the channel of distribution as these factors have great influence on it. They are categorized into following groups.

1. Product Consideration

2. Market Consideration

3. Middlemen Consideration

4. Company Consideration.

(1) Product Consideration

● Perishability: If the product is perishable in nature, distribution channel should be short or else goods may decay due to the time consumption in the process of moving to final consumers.

● Bulkiness: For bulky and heavy products also distribution channel should be short, as the distribution, handling and transportation of these products is difficult.

● Technical Nature of the Product: Product that are technical in nature are sophisticated and it’s difficult for layman to understand themselves so they should be sold directly using short channels.

● Product Value: Product with low unit value can move through long distribution channels.

(2) Market Consideration

● Size of the Customers: It’s difficult to handle large number of layers directly so if the market is large, long channel of distribution is required.

● Potential Volume of Sales: To reach the target market and maximize sales volume firm may choose long channel of distribution.

● Concentration of Buyers: If the buyers are concentrated at specific location, producer can reach them directly.

● Size of the Purchase Order: When purchase quantity is small, long distribution channel is preferred.

(3) Middlemen Consideration

● Types of Middlemen: Depending upon the function of the middlemen, producer decides the distribution channel.

● Channel Competition: Competition in the market also affects the selection of Distribution channel.

● Availability of Middlemen: Availability of middlemen performing various functions in the market.

(4) Company Consideration

● Cost of Distribution: Distribution channel affects the distribution cost and hence the price of the product. So least expensive channel must be selected.

● Long Run Effect on Profit: Should keep in mind the level of profit in long run.

● If the producer can perform the function effectively, he should use short channels. 

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