Producers are the starting point of the logistic flow and purchases. Their importance in the distribution channel can vary in a very wide from one extreme characterized by the integration of producer all the functions of distribution, up to the opposite extreme which involved in a measure the largest part of these functions by different intermediaries. The manufacturer is facing three fundamental alternatives when they have to decide on distribution of goods:
- a direct sale;
- a sale through intermediaries;
- dual distribution
Direct Sale
The main advantage of direct sales is that it enables the seller to keep control over the whole process of marketing. Its use is favoured by the existence of limited number of prospective buyers, high level of potential buyers and high level of technological innovation. Any of these factors, separately is sufficient to support policy of direct selling.
Sale Through Intermediaries
Manufacturers frequently use an intermediary, acting in the name of a number of buyers and sellers, is able to perform in a way more economical many functions; for example the cost required for an intermediate is less than the indirect costs that would be involved the same services by the producer himself. Advantages and disadvantages of using an intermediary can be:
Advantages: Drive to minimize costs related to organizing sales, storage, finance stocks. Facilitates contact with all potential customers to the producer, without involve fixed costs that would be needed for direct selling. Ensure in a more efficient manner.
Disadvantages: The main disadvantage of using an intermediary is losing it control over the product.
Dual Distribution
The desire to reconcile the conflict between the benefit of direct contact and an intermediary, many manufacturers have adopted a compromise solution referred to a “dual” distribution. In This alternative, the manufacturer sells a portion of the products directly, but relying on the other side of an intermediary sales. This policy is favoured by the existence of the phenomenon of “heavy half”, in which a limited number of users constitutes the most important part of the application.
The main disadvantage associated dual distribution lies in the difficulty the determination of fair market a division between the manufacturer and the intermediate.
The necessity and opportunity of the presence of intermediaries in distribution are justified by the functions they fulfil, you need to be careful what intermediaries you choose.
