::: The Role of Marketing Channels

Channel Functions and Flows

a marketing channel performs the work of moving goods from producers to consumers.
Some functions constitute a forward flow of activity from the company to the customer;
other functions constitute a backward flow from customer to the company. A
manufacturer selling a physical product and services might require three channels: a sales
channel, and a service channel.

Channel levels
a zero level channel consist of a manufacturer selling directly to the final customer.
Major examples are door to door sale, mail order.
A one-level channel contains one selling intermediary; a two-level channel contains two
selling intermediaries. These intermediates could be retailers, distributors.
As the no. of levels increase the level of difficulty of information sharing and
coordination also increase. Channels normally describe a forward movement of products
from source to user.

Service Sector Channels

marketing channels are not limited to the distribution of physical goods. Producer of
service and ideas also face problem of making their output available and accessible to
target population.

::: Channel-Design Decisions

analyzing customer’s desired service output levels

1. Lot size
2. Waiting and Delivery time
3. Special convenience
4. Product variety
5. Service backup

Establishing objectives and constraints

Channel objectives should be stated in terms of targeted service output level. Channel
objectives vary with product characteristics. Bulky product such as building materials
requires channels that minimize the shipping distance and the amount of handling.

Identifying major channel alternatives

Companies can choose from a wide variety of channels for reaching customers from sales
forces to agents, distributors, dealers and direct mail. Channel alternative described by 3
elements: the types of available business intermediaries, the no. of intermediaries needed
and the terms and responsibilities of each channel member.

Types of intermediaries: A firm needs to identify the types of intermediaries available

to carry on in channel work.
No. of intermediaries: 3 stages are available: exclusive distribution, selective distribution
and intensive distribution. Exclusive distribution means severally limiting a no. of
intermediaries. Selective distribution involves the use of more than a few but less than all
of the intermediaries who are willing to carry a particular of product. Intensive
distribution consists of the manufacturer placing the goods or services in as many outlets
as possible.

Terms and responsibilities of channel members:

Price policy calls for the producer to establish a price list and schedule of discounts and
allowance that intermediaries see as an equitable and sufficient.
Condition of sale refers to payment terms and producer guarantee.
Mutual service and responsibilities must be carefully spelled out, especially in franchise
and exclusive agency channels.

::: Channel management decisions

1. Selecting channel members

Companies need to select their channel members carefully as they represent the company
to the customer. To facilitate channel members selection, produces should determine
what characteristics distinguish the better intermediaries, for e.g. the no. of years in
business, the growth and profit record and financial strength.

2. Training channel members

Companies need to plan and implement careful training programs for their intermediaries.

3. Motivating channel members

• Coercive power
• Reward power
• Legitimate power
• Expert power
• Referent power

4. Evaluating channel members

5. Modifying channel arrangements

: Channel Integration and Systems

Vertical marketing system

A VMS by contrast, comprises the producer, wholesaler and retailer. Acting as a unified
system.

Corporate vs.
Administered vms: It coordinates successive stages of production and distribution
through the size and power of one of the member.
Contractual vms: 1. Wholesaler-sponsored voluntary chains
2. Retailer cooperatives
3. Franchise organizations

Horizontal marketing systems

In which two or more unrelated companies put together resources on program to exploit
an emerging marketing opportunity.
Multichannel marketing systems
It occurs when single firm uses two or more marketing channels to reach one or more
customer segments.
• Planning channel architecture

::: Conflict, cooperation, and competition

Types of conflict and competition

Vertical channel conflict means a conflict between different levels within the same
channel.
Horizontal channel conflict involves a conflict between members at the same level within
the channel.
Multi-channel conflict exists when the manufacturer has established two or more channel
that sell to the same market.

Causes of channel conflict

• Goal incompatibility
• Difference in perception
• Dependence

Managing channel conflict

Co-optation is an effort by one organization to win the support of leaders of another
organization by including them in advisory council.
Arbitration occurs when the two parties agree to present their arguments to one or more
arbitrators and accept the arbitration decision.

Legal and ethical issues in channel relations

Many producers likes to develop exclusive channels for their products. Exclusive dealing
often include exclusive territory agreement. The producer may agree not to sell to other
dealers in a given area. Producers are free to select their dealers, but their right to
terminate dealers is somewhat restricted.

::: E-commerce marketing practices

E-commerce means that a company or site offers to transact or facilitate the selling of
product and service online.
E-purchasing means companies decide to purchase goods services and information from
various online suppliers.
E-marketing described company efforts to inform buyers communicate, promote and sell
its product and services over the internet.

Pure-click companies
There are several kinds of pure-click companies for e.g. search engines, ISP, commerce
sites.

Business to Business E-commerce

The purpose of B2B sites is to make markets more efficient. In B2B buyers get
information from supplier website, informidiaries, market makers and customer
communities.

Brick and Click companies

Many brick and mortar companies have agonized over whether to add online e-commerce
channel. Many companies moved quickly to open web site describing their business but
resisted adding e-commerce to their sites. They felt that selling their products or services
online would produce channel conflict.