SCHOOL OF BUSINESS AND MANAGEMENT SCIENCE

DEPERTMENT OF BUSINESS MANAGEMENT

BCOM 212 PRINCIPLES OF MARKETING
GROUP 4
ADM NO NAME SIGN
1 BBU/064/22 DAVID TIISA TAWAI
2 BBU/013/22 MESHAK NZIOKI
3 BBU/083/22 MARY KAMAU
4 BBU/084/22 DANCAN OBURE
5 ENR/007/22 MACKLYN OWALA
6 BBU/015/21 JOHN KARINA
7 BBU/039/22 JEPKEMBOI CALVIN
8 BBU/007/22 JANET MWANGI
9 BBU/028/22 FESTUS LAMAI
10 BBU/052/22 VANESSA AKINYI
Question:
Place/ distribution, importance of distribution, types of channels and factors affecting channel
choice.

Introduction
Distribution is the process of making a product or service available for the consumer or business user who
needs it.
Distribution can be done directly by the producer or service provider or by using indirect channels with
distributors or intermediaries.
A channel of distribution is a chain of market intermediaries or middle men used by a producer or
marketer to make products and services available when and where consumers or users want them.
It is also a route followed by a product as it moves from the producer to the consumer.
Middlemen refers to, such institutions or business concerns situated in the marketing channels at points
between the producer and the final buyers.
Importance of distribution
1. . Standard of living
Distribution function helps to improve living standard of the consumers in the society. Proper
distribution of necessary goods and services to the consumers easily at right time does not
only satisfy them but also brings change in their living standard. Distribution brings
improvement in living standard of consumers through generation of employment, increase in
income and transfer of ownership. Hence, it brings positive effect in the society.
2. Delivery of satisfaction
Marketing concept emphasizes on earning profit through satisfaction of the customers.
Besides market research for the development and sales of goods according to need and wants
of consumers, the participants of distribution channel also help producers in production of
new goods.
3. Value addition
The functions of distribution such as transportation, warehousing, inventory management etc.
increase the importance of products by creating place utility, time utility and quantity utility.
Distribution mix plays an important role to increase the value of the products through
delivery of goods in right quantity, at right place and right time.
4. Communication
Distribution serves as link between producers and consumers. Producers can make flow of
information and messages to consumers about their products, price, promotion etc. through
channel members. Similarly, they receive information about customers, competitors and
environmental changes from channel members.
5. Employment
The function of distribution creates employment opportunities in society. Market
intermediaries work as direct and indirect sources of employment. Different producers need
 to supply their innumerable products to consumers. Thousands of distributors, agents,
wholesalers, retailers, brokers etc. involve in supplying the products to the consumers.
Similarly, many persons of the society can get job in the transport and warehouses sectors,
etc.
6. Efficiency
Producers produce limited types of goods in mass quantity. But the consumers demand
different types of goods in small quantity. When goods are produced in a mass quantity, they
can be obtained at lower price. Distribution helps to satisfy the needs of consumers by
supplying assortment of different products of different producers. From this, efficiency can
be achieved in both production and distribution.

7. Financing
Intermediaries themselves make arrangement to keep reserve and stock of goods. The
producers need not make arrangement and management of distribution centers and
warehouse. The producers need not do anything except remaining busy in production, the
timely payment by intermediaries and financial helps become more important for smooth
operation of production. Similarly, the role of finance is also decisive in mobilizing other
means of production.

TYPES OF CHANNELS OF DISTRIBUTION

1. MANUFACTURER – CONSUMER
This is the direct channel. Products are transferred directly to consumers. It is the shortest and simplest
channel. This channel is adopted by the producers of perishable goods, producers of fashion goods who
wants to sell the products before the fashion disappears, when the plan t is located near the customers,
when the new products are introduced into the market for aggressive sales etc.
The main drawback of this direct channel are:

 It is uneconomical to have a direct contact with the customers, who are countless and scattered all
over.

 It is not possible for a direct contact with the multi millions of potential customers for the
products.
For direct selling the methods adopted by the producers are opening sales counter at manufacturer plant,
door to door sales, sales by mail order method, sales by opening own shops, sales through mechanical
devices.
2. MANUFACTURER – RETAILER --- CONSUMER
In the channel there is an intermediary retailer. A manufacturer sells goods to consumers through these
retailers. There is a gap between the manufacturers and the consumer. This method is adopted when the
buyers are large, for perishable goods that need speed in distribution. In this channel wholesalers are
ignored and the manufacturers renders the functions of a wholesaler.
Generally, automobile appliances, clothing, shoes are sold directly to retailers. Bata limited uses this
channel.
 3. MANUFACTURER – WHOLESALER --- RETAILER --- CONSUMER
Wholesaler and retailers are the two types of intermediary in this channel. A manufacturer channels his
products to consumers through these intermediaries. The gap between the manufacturers and the
consumers is widened due to these intermediaries.
4. MANUFACTURER --- AGENT MIDDLEMEN --- WHOLESALER --- RETAILER
– CONSUMER
Agent middlemen, wholesalers, retailers are the three types of intermediaries in this channel.
The gap between the manufacturer and the consumer is very great. In this channel the
manufacturer uses the services of the agent middlemen for the dispersal of goods. The agent
distributes the goods to the wholesalers who sells the goods to retailer and who in turn sells
the goods to the consumers.

FACTORS INFLUENCING THE SELECTION OF A CHANNEL

1. MARKET CONSIDERATION
(a) Nature of the market: This is one of the important factors in market consideration.
Consideration takes place about the product which is meant for customer or the industrial buyer. Long
channel will have to be employed if the product is meant for consumer market and industrial market.
(b) The number of potential customers: There is the need for a number of middlemen service if the
number of potential customers is large. If the number of potential customers is small direct selling
is suggestible.
(c) Geographic Concentration of the Market: Direct selling is effective if the customers are
concentrated in a few places. If they are situated over the whole country, then a large number of
middlemen will have to be employed.
(d) Order Size: If the sales volume is large, direct selling is suitable. Industrial distributors sell
industrial operating supplies.
(e) Customer buying habit: This affects the channel policies very much. When the buyer’s habit and
purchase pattern of consumers are frequent and small in size, then indirect selling is suitable.

2. PRODUCT CONSIERATION
a. Unit sale value of the product: When the unit value of a product is high, direct channel is
effective. On the other hand, when the unit value is low, the direct channel is ineffective. If the product is
of low value, larger and cheaper channels will be better. Short and costly channels may be used of the
products is of high value.
b. Bulk and Weight: To minimize the freight, heavy or bulky goods may be sent by train or truck.

c. Perishable Nature: Perishable products such as milk, dairy products, bread, meat etc. are sent by
shorter channel or direct channel, while long channel is used for nonperishable products.
d. Technicality: The technical nature of the product requires services. Hence, sales and servicemen
are needed to explain the use of the product to the customers. For products like computers, business
machines etc., direct channel is more advantageous.
e. Seasonal: Sales of the product are subject to seasonal variation, for example, woolen clothes etc.
Hence to sell these seasonal products intermediaries are needed. Direct selling is ineffective.
3. COMPANY CONSIDERATION
a. Financial Strength: Financially sound companies are in a better position to select and design their
distribution channel. As such, direct channel is adopted. On the other hand, financially weak companies
have to select indirect channel, as they depend on the intermediaries.
b. Reputation: It has been said that reputation travels faster than man. There are many companies,
which have good reputation because of the product preference by the customers. Many intermediaries are
eager to have connection with such companies.
c. Market Control: When a firm wants to exercise control over the price, the way in which
customers are served etc., direct channel is suggested.
4. MIDDLEMEN CONSIDERATION
The middlemen, who is able to offer a good facility of storage may be considered. The channel which
facilitates maximum sales must be preferred. The cost of each attractive channel may be estimated on the
basis of unit sale. The best type of channel which gives a low unit cost of marketing may be considered.
5. CONSUMER CONSIDERATION
The characteristics of buyers as to their number, location, frequency of the purchase, quantities bought by
them, etc. Influence the channel selection. If the customers are scattered geographically, a long channel
can be adopted. Consumers may wish to have the product at a convenient place; for example daily
consumption items like milk, paper, bread, etc., consumers may like to have them at the door. The
channel adopted must facilitate the commodities produced to be available to the consumers in time.

CLASSIFICATION OF MIDDLEMEN
There are two types of middlemen in distribution. They are Functional middlemen (Mercantile
Middlemen) and Merchant middlemen.
1. AGENT MIDDLEMEN
They are mostly engaged in wholesale dealing. They assist in negotiating sales or purchase or both on
behalf of the seller or buyer. They do not take title of the goods which they handle.
IMPORTANCE OF MIDDLEMEN
Middlemen are very important in the modern ever widening market, by making the distribution easy and
smooth. Organized markets for many commodities are created by them. They create time, place and
possession utility. Middlemen concentrate their effort on marketing and distribution of goods.
FUNCTION SOF MIDDLEMEN
Middlemen’s functions are known as marketing functions. The marketing functions are the functions of
exchange, functions of physical supply and facilitating functions. The functions of middlemen are:
1. The middlemen are the connecting link between the sellers and buyers. They help the sellers and
buyers to enter into a contract of sale or purchase.
2. They direct the flow of goods from the producer to the ultimate consumer.

3. Merchant middlemen perform the function of merchandising by making the goods fit for the
market segmentation.
4. Middlemen is responsible for the flow of goods.

5. Large scale production is possible with the help of middlemen. They collect huge orders and
large purchases of products lead to large scale production.

KINDS OF AGENT MIDDLEMEN

1. Broker: A broker is an agent. He represents the buyer or the seller in negotiating purchases or
sales without having physical control over the goods involved. His main service is to bring the buyer and
the seller together. He is the agent of the owner of goods, seeking a buyer other than the agent of a buyer
who is seeking for supply.
2. Commission Agent: Commission agent is an agent – individual, firms or even companies. It
negotiates the sales of goods belonging to the principal. It customarily exercises physical control over the
sale of goods. It has the power on price, and terms of sale under the condition that it must obey the
instructions of the principals.
3. Manufacturer’s Agent: Manufacturer’s agents are employed by the manufacturers to sell their
products. The agent receives a percentage of commission based on his sales. He uses his techniques. He
employs his sales representatives, who work for him. Selling is his main function. This type of
middlemen are important in the marketing of industrial goods.
4. Selling Agents: Selling agent is an independent middlemen. He operates on a contractual basis.
He negotiates all sales of a specified line of merchandise or the entire output of its principal. He has
authority over the price, terms and other conditions of sale. He is the sole selling agent for the line.
5. Resident buyers: Resident buyer is an independent agent, and he specializes in buying for
retailers. He receives compensation or a fee on commission basis. He operates in lines of trade, such as
furniture, garments etc. He has his office in the market place. The resident buyers are purely and simply
an independent agent specialized in buying for principals who are retailers.
6. Auctioneers: They are generally appointed by business firms. The auctioneer receives the goods
and invites bids for the goods. The highest bidder gets the goods and the auctioneer collects the amount
from him.
2. MERCHANT MIDDLEMEN
Merchant middlemen buy and sell goods on their own account and risk. They take the title to goods. They
resell the goods at profit. They are of wholesalers and retailers.
FUNCTIONS OF MERCHANT MIDDLEMEN
1. They are the connecting link between the producers and consumers and goods are supplied where
they are in demand.
2. They match the demand with production.

3. They perform the important functions of advertisement, display etc.

4. They know the purchasing powers of customers and by informing the producers, fix reasonable
price.
5. They offer too many communications between producers and customers.
1. WHOLESALER
MEANING
A wholesaler is a businessman who specializes in performing wholesale activities. The word wholesaler
means to market goods in relatively large quantities.
DEFINITION
According to American Marketing Association,” Wholesalers buy and resell merchandise to retailers and
other merchants and to industrial institutions, and commercial users, but do not sell in significant amounts
to ultimate consumers.”
FUNCTIONS OF THE WHOLESALERS
1. Buying and Assembling: The wholesalers procures varieties of goods from various producers
regularly and preserves them in his shop for resale.
2. Warehousing: The wholesaler stores goods in large quantities in his own or hired warehouses.
This ensures uninterrupted supply of goods to the retailers.
3. Transporting: Transportation involves the bringing of goods from the plant door to his go down
and also from his go down to the retailer’s shop.
4. Financing: He offers financial assistance to the retailers through extension of credit facilities. On
the other hands, he buys from the manufacturers for cash or for relatively shorter period of credit.
5. Risk bearing: Since he acquires the title over the goods in which he deals, he assumes the risk
arising out of changes in demand, spoilage and deterioration in quality of the goods kept in his go down.
SERVICES RENDERED BY WHOLESALERS
1. TO MANUFACTURERS
a. Wholesalers act as an intermediary between the manufacturer and the retailer.

b. He is the selling assistant of the manufacturer.

c. Manufacturer’s cost of delivery and storage is reduced by wholesalers. They store goods
in their go down and they deliver the goods from the place of production to place of demand.
d. Wholesalers hold stocks when the price is very low at the time overproduction and sell
the stocks when the price is high.
e. Wholesalers offer financial help to manufacturers. Producers do not give credit facilities
to retailers. But wholesalers give credit facility which will enable more sales of products.
2. TO RETAILERS
a. Wholesalers have a large stock of varieties of goods. Hence retailers are free from holding big
stock of goods. The wholesaler’s warehouses serve as a reservoir for retailers. They can buy things as and
when they need.
b. Retailers have only limited capital resources. Hence they cannot buy large quantities from the
manufacturer. Wholesalers buy large quantities and resell them to retailers in small quantity.
c. If the retailers purchase goods from the manufacturer, then there will be delay in delivery. On the
other hand, if the wholesaler has the stock of goods, he can deliver the goods to the retailers promptly.
d. Wholesalers grant credit to their permanent retailers. After selling the product, retailer settles the
accounts with the wholesaler. He will repay the money once a month or as agreed upon.
e. Wholesaler informs the arrival of new goods to the retailers. The manufacturer advertises the new
product. The wholesaler helps the retailers in efficient window display of the new products in his job.
3. SERVICES TO THE CONSUMERS
a. It is the wholesaler who introduces fashion and new changes in the market. It increases the
standard of living of the people.
b. Selection of goods is possible as he has a number of varieties of goods. Retailers and consumers
can select the required goods from there.
c. Specialization leads to decrease in cost and so the retailers and consumers can buy the goods at
the low cost.
DISSERVICES OF THE WHOLESALERS
1. The wholesalers make the distribution channel unduly long and prevent the producers and
ultimate consumers from coming into close contact.
2. The wholesalers maintain their existence at the cost of others. Their existence in the marketing
channel has considerably increased the distribution costs which ultimately fall on the final consumer.
3. The worst type of disservice which the wholesalers can render to the society is by the clever
method of cornering. By hoarding the goods in large quantities, they can create artificial demand for such
product and indulge in black marketing.

2. RETAILERS MEANING
The word retailer is derived from a French word retailer which mean “to cut again.” DEFINITION
According to Cundiff and still, “a retailer is a merchant or occasionally an agent whose main business is
selling directly to the ultimate consumer.”
IMPORTANCE OF RETAILERS
It is one of the important functions of marketing process. The retailer is an intermediary in the marketing
channel of distribution. He is both a marketer and consumer. He is a specialist is selling the goods to the
ultimate consumer. Retailers create place, time and possession utilities. He supplies the needed goods
from the place of production to the place where it is demanded. He sells the goods at a reasonable price at
the time when the customers want the goods.
FUNCTIONS OF RETAILERS
1. Provide personal services to all.

2. Provide two way information.

3. Facilitate standardization and grading.

4. Undertake physical movement and storage of goods.

5. Assemble goods from various sources. Etc.

SERVICES OF THE RETAILER

1. The primary job of a retailer is to assemble different varieties of goods from various wholesalers.

2. A retailer helps in the physical flow of the goods from the producer to the consumer. The retailer
satisfies the daily wants of the people by creating place utility.
3. He provides the availability of many varieties of goods from many manufacturers. He provide
varieties of choice enabling the consumers to select the commodities easily.
4. A retailer attracts consumer’s attention to new goods and their arrival by personal salesmanship.
He brings new products and new varieties to the knowledge of consumers.
5. The retailer gives advice and guidance to the consumers regarding the purchase of goods. It is
essential for him to establish permanent and continuous relationship with consumers.
ELIMINATION OF MIDDLEMEN
Wholesalers and retailers act as middlemen between producers and consumers. Apart from the services
offered, the cost of their function is an addition to the final price which is recovered from the ultimate
consumers. Some people are of the opinion that wholesalers may be eliminated, leaving the retailers, as
they cannot be eliminated from the distribution system. It is generally felt that a good amount of the final
price is eaten away by the middlemen.
ARGUMENTS IN FAVOUR OF MIDDLEMEN
1. There are many functions like assembling, warehousing, transporting etc. are performed by the
middlemen. They also take active part in the distribution of finished goods.
2. The important functions of distribution and its risk burden are assumed by middlemen, and the
producers have been freed.
3. Because of the services of the middlemen, goods are brought to the places where they are needed.

4. Specialization, which is the result of division of labor, is important in modern marketing, when
there are specialized dealers.
5. We can eliminate the middlemen, but we cannot eliminate their functions. It means someone has
to perform the functions. The marketing functions cannot be eliminated.
ARGUMENTS AGAINST MIDDLEMEN
1. The appearance of middlemen in marketing functions costs about 35% to 50% of the price paid
by the consumer.
2. There are large numbers of middlemen between the consumers and producers. Some of these
middlemen do not perform any function but these people create hindrance in the free flow of goods
towards the market.
3. All types of risks arising out of depression and recession, strikes, scarcity are not shouldered by
the middlemen.
4. They enter into black marketing in time of scarcity and emergencies with a view to earn huge
profits, by boosting the price.
5. Communications have been developed extensively, and different modes of transporting systems
are available regularly. Hence, middlemen can be eliminated.
ARGUMENTS AGAINST WHOLESALERS
1. Most of them are only order takers for profit at the cost of the consumers.

2. Relation between producer and consumers is hindered.

3. Encourage black marketing for higher profit.

4. They aim only at higher commission.

5. They do not offer any valuable services to anyone. CONCLUSION

1. Elimination of middlemen does not mean elimination of the marketing functions.

2. There is no sense in eliminating the functions of specialists.

3. Middlemen are essential to deal with the distribution of perishable goods and some of the
convenience goods.
4. It is not possible for the producer to distribute the goods to the ocean of customers.
To be more effective, the chain of middlemen should be shortened. Longer the chain, greater the cost.