Distribution channel deals with the delivery of the product to the customer. How good the distribution channel is, depends how effectively the channel fulfils the customers need of time utility and place utility as well as keeping the channel structure under manageable levels.
A distribution channel involves the distributors, wholesalers, retailers, salesmen and all other intermediaries. Distribution channels on the basis of number of intermediaries is of following types:-
Zero level channel (Direct selling) – Here the company directly sells to its customers. This can include selling door to door, selling via the internet or via company owned stores. Zero level channel can be very efficient in case on highly technical products where customers have to be explained about the product and marketing and sales go hand in hand. Heavy engineering products are a relevant example for this. It is also very efficient in case where service is also provided along with a product and hence direct interaction becomes unavoidable. Industrial goods which include B to B also rely heavily on this.
One level channel – one level channel has only one intermediary between the company and the customer.
Two level channel- two level channel has two intermediaries.
Three level channel- three level channel has more than three intermediaries.
Two and three level channels are generally used for consumer goods.
Dell Distribution channel
Dell Inc had very effectively used the direct marketing channel for the sales of computers to the end consumer. When all the other pc makers were selling through retailers and distributors, Dell had started efficient use of the direct channels.
In the start the ordering was done via mail. However Dell pu…
• The service support employees do not identify themselves as being part of the Dell team and might not be motivated enough.
• It would always be difficult for a company to manage a large number of partners if they are not directly involved with their activities.
• Moreover, over time the company will lose its capability of extending service support to customers. This weakness can be exploited by the competitors who can enter the market with better service support and in turn eat the market share of Dell away.
The outsourcing activities of Dell and HP are considered to be one of the many reasons for their downfall in the recent past as they have not been able to perform well in their response to service requirements. Some competitors such as Apple have therefore outsourced only the manufacturing but have kept the design, branding and after sales service in house.