Channel of Distribution in Marketing and Sales Essay

Channel of distribution is one of the crucial areas in marketing and sales today. It refers to the general activities business to business firms use to channel their products to market through channel partners as in an efficient and effective way. These are a number of factors which includes sales forecasting, inventory management, incentive program management, revenue recognition, data integrity and channel marketing management. Most companies struggle to address all their complexity with small approaches and an overworked staff. B2B and B2C companies can sell by use of a single marketing channel which may or by using a combination of many channels of distribution. This paper's main objective is to focus on the challenges of channel distribution management. The paper will specifically look at a single challenge then it will discuss some of the impacts of this challenge to business performance. This paper's citations and references are carefully selected in order to write a paper with a strong foundation.

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Synopsis Background

In the current business environment, most manufacturers do not sell directly to their end-consumers but they make use of marketing intermediaries to deliver and supply the goods to market. The intermediaries are responsible for organizing marketing channels. As a matter of fact, the channel of distribution also known as a marketing channel is the major link between producers and end-consumers and it consists of a set of intermediaries who play a single and a specific role (Armstrong and Kotler, 2010). Intermediary channels boost the forecasting power of the flow of cash, sales and profitability, reduction of company's costs, and provide purchasing possibility for customers. They are also considered as the permanent promoters of products and representative of business organizations to the outside world and external environment. Distribution channel and marketing has a great role and application for any kind of business organization that satisfies the needs and desires. In the age of globalization and intense competition, and cultural management and development will face deficiency if it does not involve interest of efficient marketing within the business values (Rasouli, 2011).

Introduction

An appropriate distribution channel can help the sustainable development of the economy and reduce additional costs. However, most of the organizations pay minimum attention to their distribution channels of goods and services (Buhalis, laws 2001). Sometimes, this may lead them to very serious series of impacts. Therefore, the needs for close supervision and correct distribution of a number of companies in distribution channels and maintenance of long-term cooperation have redoubled importance. Due to the previously mentioned facts, the need to study and identify the current challenges in goods distribution channels and is necessary. This paper focuses on the challenge of understanding the operational costs of a distribution channel.

Challenges

Marketing has a cultural sense and is majorly concerned with an in-depth understanding of potential customers, knowing the requirements and desires of consumers, and totally accomplishing their needs and passion. Marketing, therefore, plays a major role in the cultural expertise domain. It is a phenomenon in which economy is dominated by culture (Tonkiss and Slutter, 2001). As a matter of fact, marketing is a cultural, social, and management chain which groups and people use to produce and then exchange goods with another party. Marketing is the process of noting, building, and meeting customers' desire and demands (Kiaei, 2009). On the contrary, marketing mix identifies business performance using a set of controllable variables in the environment where numerous uncontrollable factors exist. Similarly, different marketing decision variables provide a framework using marketing mix models through which the industries and firms plan their own marketing activities (Ostrow, 2009). In marketing literature, Neil Borden was the first person who raised the idea of the marketing mix. He included elements of the marketing mix such as product, price, place, promotion, sales, and marketing research. Then, E. Jerome McCarthy split marketing mix into four elements including product, promotion, place, and price.

Marketing and channels of distribution are however accompanied by challenges. This excerpt discusses the challenge of understanding the operational cost of the channel of distribution. Understanding the operational cost of the distribution channel is responsible for the determination of the best way to issue out products to the final consumer. A channel of distribution must be well understood before making a decision on the best channel to adopt. Understanding the operational cost of the channel of distribution helps the business in avoiding risks accompanied by the channel of distribution chosen. Evaluating of channel selection is an important component of any business's marketing strategy. Before choosing any channel of distribution, it is important for a business to identify the accounting data that will enable it to select the preferred channel. In any channel model, a profit maximization model is preferred in order to obtain optimal marketing strategy (Zoltners, 2009). There is an effect of diminishing returns as more intermediaries are added into the channel of distribution.

The challenge of understanding the operational cost of a channel of distribution can cause impacts to any business. If say there are so many channels of distributions in the market, the price of the final product is likely to shoot. The shooting of the price destroys the products market and there is a high chance probability of a decrease in the demand for that particular product. Since operational cost in the channel of distribution is a part of the price of the product, there is a high chance of the increase in the cost of production (Landley, 2003). It could be costing to outlay these paths and including the cost of supply. It is thus important to conduct a cost comparison by channel before choosing a channel of distribution. The challenge of the understanding operational cost of marketing channel, therefore, may lead to a number of impacts. If say the cost of a marketing channel is expensive, the price of the final product goes up.

Recommendations

The current trend in solving the challenges in channel distribution is the use of the internet. It has turned to be an extension of the global distribution system (Mols, 1998). The internet has wider area coverage and can be easily accessed all over the world. The internet reduces the cost of channel distribution hence leading to a cheaper cost of production. The internet enhances customer service by providing better and adequate information. In the current world, the internet has got billions of users all around the world. It is thus more efficient and less costly to use the internet as an alternative channel of distribution.

References

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Handfield, R.B., Nichols, E. L.Jr., (2002): Supply Chain Redesign: Transforming Supply Chains into Integrated Value Systems, Financial Times Prentice Hall

Kotler, Ph. (1997): Marketing Management: Analysis, Planning, Implementation, and Control, Ninth Edition, Prentice-hall, Inc. 1997, Prijevod, MATE, Zagreb

Kotler, Ph.; Wong, Veronica; Saunders, J.; Armstrong, G. (2006): Principles of Marketing, Prentice-Hall, 2003., Prijevod, MATE, Zagreb

Lambert, D. M., Garcia-Dastugue, S. J., Croxton, K. L., Knemeyer, M. A., Rogers, D. S., Goldsby, T. J., et al.: Supply Chain Management in D. M. Lambert (Ed.) (2008): Supply Chain Management: Processes, Partnerships, Performance, Supply Chain Management Institute, Saraso

Levy, M.; Weitz, B.(2007): Retailing Management, Sixth Edition, McGrawHill, Company Incta, Florida

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Muller-Hagedorn, L.(2005): Handelsmarketing, Vierte Auflage, Verlag W. Kohlhammer, Stuttgart

Ostrow, R. (2009): The Fairchild Dictionary of Retailing, Second Edition, New York, Fairchild Books, Inc.

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