Answer – Place, distribution, channel, or intermediary

Want to go further? Study a full online course and earn a certificate →

Marketing channel diagram showing direct and indirect distribution routes

Channel Length: Direct or Indirect?

Colorado Ricardo currently runs a zero-level (direct) channel: the bike moves straight from the factory to the customer with no intermediary in between. Kotler and Armstrong (2018) describe how adding intermediaries – a one-level channel through independent retailers, or a two-level channel through a regional distributor as well – extends a manufacturer’s reach at the cost of giving up some control over how the product is sold.

Distribution Intensity: Intensive, Selective or Exclusive

An intensive strategy would put the e-mountain-bike into as many outlets as possible; an exclusive strategy would tie it to a single partner in each territory; a selective strategy sits between the two. For Colorado Ricardo, selective distribution through a small, carefully chosen set of independent bike shops in neighbouring states (Utah, Wyoming, New Mexico) is the better fit: it builds real reach beyond Colorado while keeping enough control over how the bike is presented to protect the hand-built, premium story that low-margin, high-volume sporting goods chains would dilute.

Why Use an Intermediary At All?

Worked example – what a dealer network does that the factory can’t

An independent bike shop in Salt Lake City can hold local stock, let a customer test-ride the same afternoon, fit and service the bike locally, and give trail-specific advice – none of which the Denver factory can do cost-effectively for a customer 500 miles away. Bucklin (1966) makes the underlying point: intermediaries only survive in a channel if they can perform these functions at a lower total cost than the manufacturer reaching every customer alone.

Key point

Kotler and Armstrong (2018) list the functions channel members perform – breaking bulk, holding inventory close to the customer, providing local knowledge and after-sales service – that a producer could never reach cost-effectively on its own. The trade-off for Colorado Ricardo is that a dealer network also creates a second, less controllable version of the brand story, and could compete for the same loyal Colorado customers the direct-sales showroom was built around.

A channel decision cannot be made in isolation from price and target segment – see the Pricing Strategies and Segmentation exercises for how those choices interact.

Written by Marketing Teacher.

Online course · certificate on completion

Study a full online course — and earn a certificate

Three courses that turn the free lessons into ordered modules, written at university Levels 4 to 6, with a short quiz after each.

See the online courses

Teaching this topic?

The slides, worksheet, lesson plan and poster for this lesson are free to download and free to use in your course — no sign-up, no permission needed.

See the teacher resources →