Setting trade channel policy

We have seen that the manufacturer must consider the nature of the product, the characteristics of the market, the characteristics of the individual buyer, the buying habits of the buyer, and the competition he faces before he determines what he can or should do. The failure of some distributors to serve the consumer (for example, the appliance distributor who is not in a position to service major appliances in the buyer's home after purchase) has often led the manufacturer to go closer to the consumer in an effort to improve the total selling job.
Most manufacturers do not consider that the sale is made until the ultimate buyer gets full value and use out of the product. Some manufacturers have even established retail stores, feeling that many retailers lack marketing stability. A manufacturer must, therefore, constantly review his channel policies and make sure that they are not only adequate, but the best for his situation.
In setting his channel policy, the manufacturer will consider his total sales volume, the stability of sales in his line, the effect of the different channels on his gross margin and on his operating costs and profits. Much will depend on the degree of aggressiveness exhibited by different types of distributors, as well as the amount of sales effort the manufacturer considers necessary to sell his products effectively.
No marketing policy, and this includes channel selection policy, can be permanent or unchangeable. Many manufacturers have made the mistake of waiting too long before they change, only to find that competitors have outstripped them by taking advantage of the changed policy. On the other hand, of course, it is dangerous to make drastic changes without adequate information and reasonable expectation of improvement. The ultimate test must be the effectiveness and economy of serving the consumer.
Intensive distribution is the policy of a manufacturer who seeks to use as many outlets as possible, in as many places as possible. It is also called maximum expansion. Manufacturers who sell convenience goods usually try to get intensive distribution.
Convenience goods are those which consumers purchase frequently, on the spur of the moment for a small unit price. Cigarettes are a case in point. There are literally hundreds of thousands of outlets for cigarettes. The fantastic growth in the consumption of cigarettes has been due, in part, to their general availability. Tobacco manufacturers increased their advertising from $93 million to $210 million during the last decade in order to provide adequate advertising support to the ad¬ditional tens of thousands of outlets added during that period.