Meaning of Distribution
| Production and sale center do not remain at same place. Distributors are needed to supply production to the consumers/customers. Production of goods or services becomes meaningful only if they are supplied to the consumers/customers. So, the activities performed for supplying the products to the target markets on the whole is called |
distribution. Distribution creates time utility, place utility, ownership utility of products. Management of product storing creates time utility whereas exchange creates ownership utility. Management of good transport system creates place utility. Distribution management satisfies customers’ wants by supplying necessary goods to them and heightens their lifestyle.
Products have no utility at production place. Their utility increases immediately after they have been taken to consumption places. For example, publishers have no use of books, but when they reach among readers and students their utility increases. Similarly, suppliers provide means of productions and work as bride between producers and target markets by supplying products. Distribution includes the tasks of distribution channels and physical distribution. Distribution channels of marketing provide products to customers whereas physical distribution transports products to warehouses and target markets. Both these functions are the important channels of distribution.
The task of carrying finished goods to target markets is called physical distribution. This includes the important functions such as transport management, warehouse management, stock control, product management, order scanning etc. In the lack of distribution, marketing becomes lame/ crippled. To make physical distribution clearer, different definitions given by different experts and writers can be presented as follows:
According to Prof. William J. Stanton, “Physical distribution consists of all activities concerned with moving the right amount at the right product to the right place at the right time.”
According to S.A. Sherlekar, “Physical distribution is an important marketing function describing the marketing activities relating to the flow of raw materials from the suppliers to the factory and the movement of finished goods from the end of production line to final consumers or users.”
From the above mentioned definitions, it becomes clear that physical distribution provides distribution channels and supplies products to the target consumers. Physical distribution is task or the function of supplying products from production place to the final consumers or industrial users at the right time they demand for. Mostly, transport and storage/warehouse related functions are emphasized in physical distribution.
Marketing channel is also called distribution channel. They way which is used to supply products to the consumers is called marketing channel. As the channel carries water to the farm from its origination, the distribution channels carry products to markets or consumers from place of production. So, distribution channel can be taken as the pillar of marketing.
To make the marketing channel much clearer, the following definitions have been presented:
According to Prof. William J. Stanton, “ A channel of distribution (sometime called a trade channel) for a product is the route taken by the title to the product as it moves from the producers to the ultimate consumers or industrial users.”
Accordint to Prof. Philip Kotler, “ Distribution channel as the set of firms and individuals that take title or assists transferring title to the particular goods or services at it moves from the producers to the consumers.”
From the above definitions, it becomes clear that marketing channel is a simple as well as an easy way through which products reach the target markets. Proper channel should be used for distribution according to the nature of products or service. Generally, distribution channel of industrial goods become short. But channel of consumer goods becomes long.
Objectives of Distribution
Distribution, in marketing, has narrowed the world market and makes it very easy. Any product can be easily delivered/ supplied to every geographical place or region at any time if demanded by customers. No any producer has to fret over how to distribute the products. Distribution management takes all the responsibilities to distribute any goods produced by any producer to any place at proper time. The distribution management also decides which goods of what nature should be distributed through what channel to which place and at what time. So, the main objectives of distribution management which discharges such important responsibility are as follows:
1. Minimization of total cost
Producers produce various goods. A lot of expense needs to distribute them. The producers may give responsibility to any channel to distribute. Channel management may deliver products to a certain place at minimum cost for distribution. While distributing products in such way, many channels may involve in it. The function of distribution can be completed at minimum cost calculating the average labor of persons or groups spend on it. So, distribution channel sets the objective to minimize the total cost.
2. Making the goods available
Effective distribution channel makes arrangements for easy availability of any goods. Any goods or services demanded by customers become available at any place and any time. If goods are available when demanded, sale quantity of such goods increases on the one hand and healthy competition with competitors can be easily faced on the other. In this way, distribution channels always have the objective to maintain the availability of the products regularly.
3. Regular supply of goods
Any business firm or producer can give the responsibility of distribution for channels. Then the distribution channel manages regular supply of goods. In other word, distribution channel delivers right product at the right time and right place to buyers. So, all the customers of target market do not feel the lack of goods. Thus, distribution channel sets objective to render crucial services of regular supply of goods.
4. Transfer of product ownership
The distribution function also fulfills the process of ownership transfer. For any product documents/papers should also be given together with product by signing a contract. Ownership of some other goods should be handed over, in presence of government authority, with documents by completing every legal process and requirement. Only after formally transferring ownership, the goods can belong to the buyer or customer. So, distribution channels also take responsibilities to transfer ownership of goods.
5. Promotion of goods and services
Effective distribution channel also promotes goods or services. Distributor reaches target market taking goods from production center. After reaching target market, the distributor gets chances to show the goods to customers. Customers become very happy to see and know about the goods. They also can ask about the product if anything unclear. They become acquainted with the product after the distributor gives true information and answers to them about the products. In this way, distributor has the target to promote the product or service of the producer.
Importance of Distribution
In the lack of distribution, products become meaningless. Distribution has very important role in marketing. The importance has been mentioned in short as follows:
1. Utility of the product
In marketing, distribution creates utility of goods/ products. If the products are not carried to the consumption place, no any benefit or utility can be obtained from them. Mainly transportation, storage and exchange are involved in distribution. Transportation creates place utility of the product by carrying wanted goods to the right places. Storage creates product utility of time by storing and providing goods at the time when wanted. Similarly, exchange creates ownership utility of goods by transferring ownership. By different activities, it becomes clear that distribution motivates customers by creating place utility, time utility and ownership utility.
2. Need satisfaction
In this competitive business age, at first the needs of customers should be studied and understood. Then goods should be produced accordingly. The distribution meets/satisfies the needs of the customers by supplying the right goods to right place at right time. If there is no proper arrangement of distribution, needs/ wants of the customers cannot be satisfied at right time. Distribution plays an important role to heighten the life style of customers. This function should compulsorily be conducted by carrying goods from production place to the selling centers.
3. Employment and occupation
Distribution is one of the important tasks of marketing. This provides job or employment to many persons. Distribution plays an important role in providing employment opportunities to the people. Many persons get employment by involving in wholesale business, retail business, agents, intermediary, etc. A large number of people have adopted it as their occupation. Similarly, transport, banking and insurance have provided job to large number of people. Distribution has been found successful to provide job to a large number of people in the industrial and developed countries. In the developing country like Nepal, distribution has provided job opportunities to a lot of people.
4. Means of production
The producers need means to produce different goods. Raw materials, machines and machinery parts, big machines and equipment, production function, supply etc. help in production. Besides this, it also provides necessary financial resource to conduct production function effectively. Without means of production, production function becomes meaningless, and in the absence of it, marketing itself becomes worthless.
5. Financing
Several intermediaries are involved in distribution function. They manage financial resources themselves for distribution. Besides this, they also manage financial resources for extra warehouse and stock. So, the producers need not make financial arrangement for distribution and creating distribution channel. Hence, the producers do not need to invest stock financial resources. Produced goods change in cash immediately. So, no any difficulty arises in managing financial resources for market research, production of new goods, development of goods and other functions.
6. Communication
Distribution function establishes contact between producer and customers. So, distribution works as link between the two sides. Producer makes flow of message about products, price, promotion, etc. to the customers through the persons or groups of person involved in distribution. Through the persons involved in distribution, they also get feedback about competitors, environment change etc. Hence, it becomes clear that distribution function also works as a means of communication.
