Distribution: Meaning, Functions, Factors and Types

Distribution: Meaning, Functions, Factors and Types -Jaiib/DBF Paper 1 (Module D) Unit 5

Dear bankers,

As we all know that  is Distribution: Meaning, Functions, Factors and Types  for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Distribution: Meaning, Functions, Factors and Types (Unit-5), SUPPORT SERVICES – MARKETING OF BANKING SERVICES/ PRODUCTS (Module D), Principle & Practice of Banking JAIIB Paper-1.

♦Distribution Channel

  • A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer. Distribution channels can include wholesalers, retailers, distributors, and even the Internet.

♦Function of Distribution Channel

  • Product Promotion: Sales promotional activities are mostly performed by the producer but sometimes middlemen also participate in these activities like special displays, discounts etc.
  • Matching: The Distribution channel partners, shape and fit the offer to the buyer’s needs, including alterations, grading, assembling and packaging, They also help in providing variety of offerings from different sources to the consume.
  • Negotiation: Middlemen negotiate the price, quality, guarantee and other related matters about a product with the producer as well as customer.
  • Physical Distribution: Marketing channels are responsible for assembly, storage, sorting, and transportation of goods from manufacturers to customers.
  • Marketing: Distribution channels are also called marketing channels because they are among the core touch points where many marketing strategies are executed. They are in direct contact with the end customers and help the manufacturers in propagating the brand message and product benefits and other benefits to the customers.
  • Risk Taking: Middlemen have to bear the risk of distribution like risk from damage or spoilage of goods etc. when the goods are transported from one place to another or when they are stored in the god-owns.

♦Types of Distribution Channels

  • Channels of distribution can be divided into the direct channel and the indirect channels. Indirect channels can further be divided into one-level, two-level, and three-level channels based on the number of intermediaries between manufacturers and customers.

Direct Channel or Zero-level Channel (Manufacturer to Customer)

  • Direct selling is one of the oldest forms of selling products. It doesn’t involve the inclusion of an intermediary and the manufacturer gets in direct contact with the customer at the point of sale. Some examples of direct channels are peddling, brand retail stores, taking orders on the company’s website, etc.

Indirect Channels (Selling Through Intermediaries)

When a manufacturer involves a middleman/intermediary to sell its product to the end customer, it is said to be using an indirect channel. Indirect channels can be classified into three types:

  • One-level Channel (Manufacturer to Retailer to Customer): Retailers buy the product from the manufacturer and then sell it to the customers. One level channel of distribution works best for manufacturers dealing in shopping goods like clothes, shoes, furniture, toys, etc.
  • Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer): Wholesalers buy the bulk from the manufacturers, breaks it down into small packages and sells them to retailers who eventually sell it to the end customers. Goods which are durable, standardised and somewhat inexpensive and whose target audience isn’t limited to a confined area use two-level channel of distribution.
  • Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to Customer): Three level channel of distribution involves an agent besides the wholesaler and retailer who assists in selling goods. These agents come handy when goods need to move quickly into the market soon after the order is placed. They are given the duty to handle the product distribution of a specified area or district in return of a certain percentage commission. The agents can be categorised into super stockists and carrying and forwarding agents. Both these agents keep the stock on behalf of the company. Super stockists buy the stock from manufacturers and sell them to wholesalers and retailers of their area.

♦Factors Influencing Channel selection

Producers have to decide the types of channels for distribution of their products. The major factors influencing this decision are discussed below:

  • Market Characteristics
  • Product Characteristics
  • Competition Characteristics
  • Company Characteristics

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♦Channels for Banking Services

  • Branches
  • Telephones Banking and call centres
  • ATM
  • Personal Computer
  • Plastic Cards
  • Virtual Branches and Automated video Banking

♦Mobile Banking

Advantage

  • With Mobile Banking, users of mobile phones can perform several financial conveniently and securely from their mobile.
  • A person can check his/her account balance, review recent transaction, transfer fund, pay bills, locate ATMs, mange investments etc.
  • Mobile banking is available round the clock 24/7/365
  • Mobile banking is said to be even secure than online/internet banking. ETC ETC.

Disadvantages

  • Mobiles banking users are at risk of receiving fake SMS messages and scams.
  • The loss of a person’s mobile device often means that criminals can gain access to your mobile banking PIN and other sensitive information.

♦Internet Banking

  • Most online payments are done via internet banking option. It has become one of the most convenient payment methods for transferring money. Most banks have created their own apps that can be downloaded on the phone and used any time. Through mobile devices, users can make transactions through mobile apps, net banking facilities, or internet fund transfer services such as IMPS (Immediate Payment Services), NEFT (National Electronic Fund Transfer), and RTGS (Real-time Gross Settlement).

Advantages

  • Easy To Operate
  • Convenience Of Making Payments
  • Round The Clock Availability
  • Time Saving and Efficient
  • Account Activity Tracking

Disadvantages

  • No Online Banking Without Internet Access
  • Threat Transaction Security
  • Securing Your Password

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