Channel Effectiveness

Posted in Operations and Supply Chain Terms, Total Reads: 270

Definition: Channel Effectiveness

Channel effectiveness refers to how well the distribution channel is laid out, how efficient it is, how cost effective it is for the customer and what needs to be done to improve the present distribution channel. Channel effectiveness basically should give the efficiency, profitability, save time etc not only for the customer but also for the company.

Before understanding about how the distribution channel can be improved, let us know about the types of distribution channel. There are broadly 4 kinds of distribution channels:

• Manufacturer -> Consumers

• Manufactures -> Retailers -> Consumers

• Manufactures -> Wholesalers -> Retailers -> Consumers

• Hybrid: Combination of more than one of the above channel

While choosing an effective distribution channel the following things should be kept in mind:

• Type of product, (Industrial or Consumer good): Generally industrial goods have a short channel.

• Size of order

• Customer buying habits

• Customer service

• Cost of product

• Reach

• Kind of product like perishable or non-perishable, heavy or light etc.

If the present distribution channel is not working out efficiently then the following things above should be revisited to know where the fault is and accordingly channel can be chosen.

For example, if reach is an issue. Then the firm can start selling the products online so that customers can get the products and distribution channel has not to be much worried. Similarly, if a company has not proper distribution channel then it can even outsource the distribution to another firm so that costs are reduced and can earn more profits. Many big firms build an effective distribution channel through merger and acquisition. By this strategy not only firm gains a proper channel but also gains many new customers.

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