The company has to evaluate adding or dropping individual middlemen or individual

channels and possibly modifying the whole channel system. The steps of Channel
Decision Making are:

Selecting Channel Members

Selecting channel members would involve:
1. Evaluate experience,
2. Number of lines carried,
3. Growth and profit record
4. Solvency, cooperativeness, and reputation

Training Channel Members

Companies need to plan and implement careful training programs for their
intermediaries, because they will be viewed as the company by end users .

Motivating Channel Members

A company needs to view its intermediaries in the same way it views its end users. It
needs-to determine intermediaries’ needs and construct a channel positioning such
that it’s, channel offering is tailored to provide superior value to these intermediaries

Evaluating Channel Members

They are evaluated on the following parameters
1. Sales quota attainment,
2. Average inventory levels,
3. Customer delivery time,
4. Treatment of damaged and lost goods,
5. Cooperation in promotional and training programs

Modifying Channel Arrangements

A producer must periodically review and modify its channel arrangement. Modification
becomes necessary when the
 1. distribution channel is not working as planned,
2. consumer buying patterns change, the market expands
3. new competition arises,
4. innovative distribution channels emerge,
5. The product moves into later stage in the product life cycle.

Growth of vertical, horizontal and multi channel marketing systems.

Conventional Marketing System

A channel consisting of one or more independent producers, wholesalers, and retailers
each a separate business seeking to maximize its own profits even at the expense of
profits for the system as a whole.

A. Vertical Marketing System

A distribution channel structure in which producers, wholesalers, and retailers act as a
unified system. One channel member owns the others, has contracts with them, or has
so much power that they all cooperate.

VMS s arose as a result of strong channel members’ attempts to control channel

behavior and eliminate the conflict that results when independent members pursue
their own objectives. VMS achieve economies through size, bargaining power, and
elimination of duplicated ser-vices.

Vertical marketing system comprises of

i. Corporate VMS
A vertical marketing system that combines successive stages of production and
distribution under single ownership—channel leadership is established through
common ownership. Ex; Bata.

ii. Administered VMS

It is a vertical marketing system that coordinates successive stages of production and
distribution, not through common ownership or contractual ties, but through the size
and power of one of the parties.

iii. Contractual VMS

A vertical marketing system in which independent firms at different levels of production
and distribution join together through contracts to obtain more economies or sales
impact than they could achieve alone.

Contractual VMS could have the following forms:

• Wholesaler-sponsored voluntary chains
• Retailer cooperatives
• Franchise organizations
 • Manufacturer-sponsored retailer franchise or manufacturer-sponsored wholesaler
franchise

B. Horizontal Marketing Systems

It is a channel arrangement in which two or more companies at one level join together
to follow a new marketing opportunity.
• Two or more unrelated firms put together resources or programs.
• Each firm lacks the capital, technology, marketing resources or other variables to
take on the venture alone
• Can be permanent or temporary

C. Multichannel Marketing Systems

A distribution system in which a single firm sets up two or more marketing channels to
reach one or more customer segments.
• Multi channel marketing—single firm uses two or more marketing channels to
reach one or more customer segments—advantages: increased coverage, lower
cost, customized selling.
• Planning channel architecture (companies thinking through their channel
architecture— which are efficient and not, and developing new means)
• Roles of individual firms in a multi channel system: (insiders, strivers,
complementers, transients, outside innovators)

CHANNEL CONFLICT
Disagreement among marketing channel members on goals and roles—
Types of conflict
• Vertical channel conflict - means conflict between different levels within the same
channel
• Horizontal channel conflict- conflict involves conflict between members at the
same level within the channel.
• Multi channel conflict- exists when the manufacturer has established two or more
channels that sell to the same market

Following highlight the common causes of conflict

• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• “Over” dependence

Following can be used as conflict resolving methods:

1. Adoption of superordinate goals
2. Exchange of people between channel levels
3. Co-optation—winning support at different levels
4. Joint membership in and between trade associations
5. Diplomacy, mediation, arbitration
Members of the marketing channel perform a number of key functions:
• They gather information about potential and current customers, competitors, and
other actors and forces in the marketing environment.
• They develop and disseminate persuasive communications to stimulate
purchasing.
• They reach agreements on price and other terms so that transfer of ownership or
possession can be affected.
• They place orders with manufacturers.
• They acquire the funds to finance inventories at different levels in the marketing
channel
• They assume risks connected with carrying out channel work.
• They provide for the successive storage and movement of physical products.
• They provide for buyers’ payment of their bills through banks and other financial
institutions

In brief the following highlights the importance of marketing channels:-

• Channel choices affect other decisions in the marketing mix
• Pricing, Marketing communications etc. A strong distribution system can be a
competitive advantage
• Channel decisions involve long-term commitments to other firms
A zero-level channel (also called a direct-marketing channel) consists of a
manufacturer selling directly to the final customer. The major examples are door-to-
door sales, home par-ties, mail order, telemarketing, TV selling;-Internet selling.

A one-level channel contains one selling intermediary, such as a retailer.

A two level channel contains two intermediaries.

In consumer markets, these are typically a wholesaler and a retailer

A three-level channel_ contains three intermediaries. e.g., food distribution may

involve as many .as six levels, there can be many brokers and agents involved. From
the producer’s point of view, obtaining information about end users and exercising
control becomes more difficult as the number of channel levels increases.

There are six basic ‘channel’ decisions:

1. Do we use direct or indirect channels? (e.g. ‘direct’ to a consumer, ‘indirect’ via a
wholesaler)
 2. Single or multiple channels
3. Cumulative length of the multiple channels
4. Types of intermediary (see later)
5. Number of intermediaries at each levels (e.g. how many retailers in Southern
Spain).
6. Which companies as intermediaries to avoid ‘intrachannel conflict’ (i.e. infighting
between local distributors)

WHAT IS RETAILING?

Retailing includes all the activities involved in selling goods or services directly to final
consumers for personal, non business use. A retailer or retail store is any business
enterprise whose sales volume comes primarily from retailing.

WHAT ARE DIFFERENT TYPES OF RETAILERS?

1. Amount of service
Self-service retailers
Customers are willing to self-serve to save money
Discount stores
Limited-service retailers
Most department stores

Full-service retailers
Salespeople assist customers in every aspect of shopping experience
High-end department stores
Specialty stores

2. Product lines
Specialty stores
Narrow product lines with deep assortments

Department stores
Wide variety of product lines

Supermarkets

Convenience stores
Limited line

Superstores
Food, nonfood, and services

Category killers
Giant specialty stores

3. Relative prices
Discount stores
Low margins are offset by high volume

Off-price retailers

Independent off-price retailers

Factory outlets

Warehouse clubs

4. Organizational approach
Corporate chain stores
Commonly owned / controlled

Voluntary chains
Wholesaler-sponsored groups of independent retailers

Retailer cooperatives
Groups of independent retailers who buy in bulk

Franchise organizations
Based on something unique

Merchandising conglomerates
Diversified retailing lines and forms under central ownership

WHAT ARE VARIOUS RETAIL MARKETING DECISIONS?

Target marketing and positioning

Product assortment,
Service mix, store’s atmosphere
Price
Promotion
Place (location)