Factors determining the choice of channels

The selection of channels of distribution depends first and foremost on the requirements of the market: what the consumer wants, and how much is wanted. But the manufacturer entering a market must also determine what he himself wants; what share of the market he wishes to attain, how much he is willing or able to in¬vest in order to attain it, and how best he can reach the market in order to attain it, and how best he can reach the market in order to get his desired share of it. There is no over-all blueprint which can tell any seller what the best channels are for him. In each instance, the seller has to consider his own objectives, resources, and, of course, the channels which are available to him.
The individual manufacturer or seller making a choice of how he will get his goods most economically and efficiently into the hands of potential consumers has to consider several specific factors. The following six factors will always enter into his calculations:
(a)    The type, size and nature of customers demand. The market is naturally going to influence the channels selected.
(b)    The nature of the company's business. A manufacturer of fine writing paper in West Virginia has only certain channels open to him if he wants to sell paper for letterheads to a corporation in New York City. But the manufacturer of locomotives has only a handful of potential customers and he deals directly with them.
(c)    The type of product sold. Is it a consumer product or an industrial one? Is it a capital good (that is, a piece of major equipment capitalized over a period of years), or an industrial material, such as a heavy chemical? Is it bulk, like petroleum products, or individually packaged units, like cigarettes?
(d)    The price of the unit of sale. What does the unit sell for? Three-thousand dollars, like an automobile, or thirty cents like a package of cake mix?
(e)    The price, margins and markups necessary to induce distributors to handle the goods. The performers of the different services have to be compensated for their services. How much does the distributor need to make to induce him to handle the product?
The manufacturer of only one product or a limited line of products has a distribution problem entirely different from that of the multi-product manufacturer with an extensive line. For example, there is little similarity between the problem of a manufacturer of aluminum window sash and that of a manufacturer like General Foods which produces several hundred products.
The ability of the manufacturer to compete successfully will be based on his ability to gain the most economical form of distribution, and to develop continued profit. In general, we recognize two primary choices that a manufacturer has in his attempt to get his goods from factory to consumer: He may turn the selling job over to someone else, such as selling agents. These are independent business men who operate on a commission and whose principal function is to sell the entire output of a manufacturer or of a limited number of manufacturers. Such business men have unlimited territory, and generally unlimited authority to set price and terms. In effect, they operate as sales agents for manufacturers, generally for a commission ranging from 3 to 5 per cent of net sales.
He may choose to use one of the available trade channels, and thus participate to a greater or lesser extent in the distribution process. If he chooses to use a channel, he has a choice of four channels which have general identifiable characteristics setting each apart from the others.