Distribution Channel Definition

A distribution channel is a set of interdependent organizations that provide product, information, or financial flows from supplier to customers. In business-to-business markets, the channel may be used to refer to the path taken by a final product as it moves from producer to ultimate market/consumer. The term ‘channel’ encompasses all activities associated with moving a product or service from initial conception through final consumption.

In business-to-business markets, there are four common types of distribution channels: direct selling, indirect selling, marketing intermediaries, and support services. Each type has its own advantages and disadvantages that must be considered when choosing a channel for your product or service.

Direct selling is the most efficient way to reach customers, but it can be expensive and time-consuming. Indirect selling uses intermediaries to reach customers and is less expensive than direct selling, but it can be less effective because of the potential for miscommunication between the supplier and intermediary. Marketing intermediaries provide valuable services such as promotion and logistics support, but they can also create conflict if their interests are not aligned with those of the supplier. Support services are essential for all businesses but should be used judiciously to avoid creating unnecessary dependencies.

The most important factor in choosing a distribution channel is aligning it with your overall business strategy. Consider your target market, your budget, and your resources when making your decision. The wrong choice of distribution channel can limit your growth potential and cripple your business.