What are the three factors affecting channel choice? Briefly discuss how each factor might influence a company to implement a direct channel of distribution.
What will be an ideal response?
MARKET FACTORS. Industrial customers tend to buy in larger quantities and require more customer service. Conversely, consumers usually buy in very small quantities and sometimes do not mind if they get no service at all. Geographic location and size also determine channel choice. A geographically concentrated market is appropriate for direct selling through a direct sales force. Markets that are more widely dispersed may need more intermediaries. Generally, a very large market requires more intermediaries. Also, if there is lots of existing competition, choosing a direct channel may be less difficult and more profitable.
PRODUCT FACTORS. Products that are more complex and customized and have a high unit cost tend to use shorter and more direct marketing channels. Product life cycle also plays a role. In the introductory stage of the product life cycle, a direct sales force may be used. During the maturity stage, alternative channels are sought, and a direct channel may be added for multiple distribution to an already existing channel choice. Finally, fragile and perishable products require a shorter channel that involves less handling.
PRODUCER FACTORS. Producers with large financial, managerial, and marketing resources are better able to use channels that require fewer intermediaries. More direct channels may also be used by producers who wish to control pricing, positioning, brand image, and customer support.
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