Factors Affecting the Structure of Industrial Channels

Industrial marketing channels are set of independent, external organisations involved in the process of marketing an industrial product available to industrial buyer. Marketing channels satisfy the demand of industrial buyers by supplying products  at the right place, in the exact quantity requirements and at correct price.

The factors influencing industrial channel structure are:

  • Type of market: If a manufacturer product can be sold only to the members of one or few industries, and the number of firms in each industry is small, direct distribution is profitable. On the other hand, if the market is horizontal, the product must be sold to buyers in many industries.
  • Market financial: If the probable volume of sales in a market area is quite large, direct marketing may prove profitable. On the other hand , if the sales volume of a specific product is low, the direct method may be too expensive.
  • To what extent are the possible purchasers concentrated geographically: If 70-80% of the total possible sales volume of a product is concentrated to one or two limited market areas, the marketers of such a product will find it profitable direct marketing of such products.
  • Purchase Policies of the buyer: If the typical user of the industrial goods, purchases in small orders and for quick delivery and its marketers find it least costly and most satisfactory to sell through distribution.
  • Gross Profit and price volatility: When the sales are combining of the manufacturer goods, the gross profit is small, makes the item that enjoy higher margins when sold to the users. The maker of items whose price is highly volatile find it difficult to market through distributors, as there is problem of adjusting the margins to compensate for shifts in price.
  • Product installation: Products such as heavy complicate machinery, which need to be installed by the maker itself, profit by using direct channel of marketing. In case like selling of communication equipment specialized contractors are given the task of installation. And same is the case with highly technical product, which require trained experts to guide the users.
  • Quality: Different users of a material or component want a variety of quality graduations. In such cases, lot for each customers order must be produced to specifications and the right lot should be distributed. In such situation, the direct channel is more effective.
  • Weight of the product: If a product is bulky so that its user orders it in truck loads, then direct delivery is recommended. Speed of delivery is most important to the buyer. Manufacturer can sell direct through his own salesman for factory shipment.
  • Repair and maintenance requirements: If the product is so complex that it must be serviced by highly skilled specialists, the manufacturer must maintain some sort of service station from which they can operate and in which extra stock can be kept. This can be accomplished through distributors.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]
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