PRINCIPLES OF MARKETING ASSIGNMENT

Marketing is the process of transfering goods from manufacturer to consumer. Do you

agree? Explain it

NO, I completely disagree with the above mentioned statement.Marketing is a much broader
concept it's not about selling ,or transferring good and services from one source to another. The
process of marketing is that of bringing a product to market, which includes these steps: broad
market research; market targeting and market segmentation; determining distribution, pricing
and promotion strategies; developing a communications strategy; budgeting; and visioning long-
term market development goals.

Under Marketing concept, Marketing channel/ Distribution channel is a business structure of

interdependent organizations that reach from the point of production to the consumer or the
process of making a product or service available for use or consumption by end customers or
business users. An intermediary in the channel is called an agent/middleman.Intermediaries
negotiate with one another, buy and sell products, and facilitate the change of ownership
between buyer and seller.

Retailers are those firms in the channel that sell directly to consumers.Channels normally vary
from two-level channels without intermediaries to five-level channels with three intermediaries.

For example, a leather handbag manufacturer who prepares handbags and sells it directly to the
customer is in a two-level channel. A poultry farmer sells chicken and eggs to a restaurant
supplier, who sells to individual restaurants, who then serve the customer, is in a four-level
channel. Agents/intermediaries in the channel of distribution are used to facilitate the delivery
of the merchandise as well as to transfer title, payments, and information about the
merchandise.

Functions of a Distribution Channel:

Distribution channels are well organized arrangements that perform all the necessary tasks to
assist exchange transactions. The basic function of a distribution channel is to provide a link
between production and consumption and to create time, place and possession utilities which
constitute the added value of distribution.

Intermediaries (wholesalers, retailers, agents, brokers) are needed because manufacturers lack
the necessary financial and human resources to carry out direct marketing. Maruti Suzuki
Corporation sells its cars through more than 600 dealer outlets in India and abroad. It will not be
feasible for Maruti Suzuki Corporation to buyout its dealer network and sell car throughout the
country and abroad.
Distribution channels can be exemplified by the number of intermediary levels that separate the
manufacturer from the end consumer. The choice of a particular distribution channel is
determined by factors related to market size, buyer behaviour and organization’s characteristics.
A typical distribution channel has to perform various functions as mentioned below.

All the above mentioned functions should be considered logically in any market. The idea is to
know what functions are to be performed, who will perform them and how many levels it
requires to make the distribution efforts cost effective, is another important decision to take.

Channel Levels:

Each layer of distribution intermediaries that performs some work in bringing the product to its
final consumer is a channel level.

(i) A Zero Level Channel:

A zero level channel, commonly known as direct marketing channel has no intermediary levels.
In this channel framework manufacturer sells merchandise directly to customers. An example of
a zero level channel would be a factory outlet store. Many service providers like holiday
companies, also market direct to consumers, bypassing a traditional retail intermediary – the
travel agent.

Eureka Forbes, leaders in domestic and industrial water purification systems, vacuum cleaners,
air purifiers & security solutions is pioneered in direct selling that makes it an Asia’s largest direct
sales organization.

The remaining channels are known as indirect-marketing channels.

(ii) A One Level Channel:

A one level channel contains one selling intermediary. In consumer markets, this is usually a
retailer. The consumer electrical goods market in the United Kingdom is typical of this
arrangement whereby producers such as Sony, Panasonic, Canon etc. sell their goods directly to
large retailers such as Comet, Dixons and Currys which then sell the goods to the final
consumers.

(iii) A Two Level Channel:

A two level channel encompasses two intermediary levels – a wholesaler and a retailer. A
wholesaler typically buys and stores large quantities of merchandise from various manufacturers
and then breaks into the bulk deliveries to supply retailers with smaller quantities. For small
retailers with limited financial resources and order quantities, the use of wholesalers makes
economic sense.

This agreement tends to work paramount where the retail channel is jumbled – i.e. not
dominated by a small number of large, dominant retailers who have an encouragement to cut
out the wholesaler. Distribution of drugs/ pharmaceuticals in the Europe and United Kingdom is
typical example of such arrangement.

(iv) A Three Level Channel:

A third level channel, as the name implies, encompasses three intermediary levels – a
wholesaler, a retailer and a jobber. In the poultry industry, products like mutton, chicken, eggs
etc. are first sold to wholesalers; he then sells it to jobbers, who sell to small and unorganized
retailers.

One point in this regard, is to be noted that the levels of distribution vary from industry to
industry and country to country. In Japan, food distribution system usually may involve as many
as five or six levels while rest of the world, rely on two to three levels distribution network.

Types of Distribution Channels:

There are two main categories of marketing intermediary’s viz., (A) Functional Middlemen or
Mercantile Agents, and (B) Merchant Middlemen.These are explained below:

(A) Functional Middlemen or Mercantile Agents:

The mercantile agents perform important marketing services and facilitate the process of
distribution of goods. The following are the various types of functional middlemen:

(i) Brokers:

They do not possess the goods themselves, and their main function is to bring buyer and seller
together. They charge brokerage or commission from the buyer as well as the seller.

(ii) Commission Agents:

These agents are also known as consignees. They sell goods on behalf of the actual owners. They
sell goods and perform important functions of marketing viz., warehousing, packing and grading.
They get commission for rendering these services.

Sometimes they get Del credere commission also which is an extra commission over and above
the normal commission. The loss on account of bad debts (in case of credit sales) is to be borne
by the Del credere agents.

(ii) Common Carriers:

These include railways, road transport, airways and shippers who are engaged in carrying goods
from the place of their production to the place of consumption. In this manner these agencies
create ‘place utility’. They charge freight for taking goods from one place to another either form
the buyer or seller.

(iii) Auctioneers:

They are appointed when goods are to be sold by auction. The goods to be sold are displayed
before the intending buyers and bids are invited from them. Whosoever gives the highest bid is
given the goods. The legal provisions relating to auction sales are covered in the Sales of Goods
Act, 1930.

(v) Insurance Companies, Banks, etc.:

These agencies render valuable services in the form of facilitating functions in the process of
purchase and sale of goods. Most of the business transactions are carried through banks.
Receipts and payments take place through banks.

Banks provide credit facilities against hypothecation of goods. The insurance companies perform
the important marketing function of risk bearing while goods are in the warehouse of the seller
or in transit.

(B) Merchant Middlemen:

These include wholesalers, retailers and direct consumer selling etc. Usually one of the under-
mentioned processes is undertaken to distribute goods to the ultimate consumers:
(i) Manufacturer to Consumers:

This is the direct channel of distribution which involves direct sale of goods from the producer to
the consumers. This process can be carried out by appointing certain salesmen or sending goods
to the consumers by mail. This is called as direct consumer selling. A manufacturer can open his
own retail shop within the premises of the factory to sell goods directly to consumers.

(ii) Manufacturer to Retailer and Then to Ultimate Consumer:

This method is undertaken to cover wider markets. Retailers connect the manufacturers and the
consumers. This channel is suitable in case the products which are perishable and quick delivery
is needed. This method is acquiring immense popularity these days. Departmental stores and
super markets are covered under this category.

(iii) Manufacturer to Wholesaler to Retailer and To Consumer:

This is the traditional and widely used channel of distribution. This method is suitable in case of
scattered and wider markets.

The most important advantage of this method is that the manufacturer can concentrate on
production activities and distribution of goods is transferred to wholesalers and retailers.
Wholesalers and retailers provide specialised and valuable services in the process of distribution
of goods.

(iv) Manufacturer to the Agent to Wholesaler to Retailer to Consumer:

This process involves long chain of distribution. Some manufacturers appoint sole selling agents
for the delivery of goods to the wholesalers who in turn sell them to the retailers. Most of the
textile mills and big business houses in India have agents for the distribution of goods. These
selling agents sell goods on commission basis directly to wholesalers or large retailers.

(V) Manufacturer to Wholesaler to Consumer:

This method is usually adopted in case of large and institutional buyers, e.g. government,
consumer co-operatives, hospitals, educational institutions, military supplies and business
houses etc.