Page 584 - Business Principles and Management

Chapter 21 • Product Development and Distribution

21.3 Channel Design

Goals Terms
• Discuss the factors that affect a • piggyback service • warehouses
producer’s choice of distribution • containerization • distribution center
channel. • bar codes
• Describe the characteristics of
major forms of transportation
used to distribute products.
• Give examples of product-
handling procedures that improve
product distribution.

Selecting a Channel of Distribution

From the available channels of distribution, ranging from direct and simple to
indirect and complex, producers must decide which channel or channels will best
fit their needs. Producers generally prefer to use as few channels and channel mem-
bers as possible. Sometimes producers need to use more than one channel to get
the widest distribution for their product. Products such as books, candy, pens, and
soap are purchased by many people in a variety of locations. Such items require
several channels to reach all of the possible consumers. The manufacturers may sell
directly to national discount stores that can sell large quantities of the product. To
reach other markets, the manufacturers may sell to large wholesalers that, in turn,
sell to supermarkets, convenience stores, vendors, or other types of businesses.
Selling to different types of customers requires different channels of distribu-
tion. For example, a magazine publisher may sell magazines through retail
stores, news agencies, newsstands, and magazine subscription agencies, as well
as directly through the mail or Internet to subscribers. Figure 21-4 summarizes
these different channels (see p. 572).
Producers must consider many factors when deciding which channel or
channels to select for distributing their products. Some of the main factors are:
• Perishability of the product. Highly perishable articles, such as bread,
fresh flowers, and ice cream, require rapid and careful handling. Those
products are usually marketed directly to the consumer or through very
few channel members.
• Geographic distance between producer and consumer. Many products are
now sold internationally as well as throughout the country in which they
are produced. If the market is very close to the point of production, there
is less need for channel members. Generally, more businesses participate in
handling a product as the distance from producer to consumer increases.
• Need for special handling of the product. If the product requires costly
procedures or equipment for handling, it is likely to pass through as few
channel members as possible. Gasoline, which requires pipelines, special
tanks, and trucks for handling, is moved from the refiner to the retailer

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