Designing and

Managing Marketing
Channels

Functions, Objectives, Conflicts

 Marketing Channels and Value Networks

• Marketing channels— Sets of interdependent

organizations involved in the process of
making a product or service available for use
or consumption.

• Value network— System of partnerships and

alliances that a firm creates to source,
augment, and deliver its offerings.
 Marketing Channels … Functions

# Facilitate exchange process by reducing the number

of marketplace contacts necessary to make a sale.

# Adjust for discrepancies in the market’s assortment

of goods/services via sorting, channeling products to
meet the buyer’s and producer’s needs.

# Suit payment terms, delivery schedules, prices,

purchase lots, and other conditions in accordance to
customers.
Marketing Flows
 Marketing Intermediaries
Middleman Any intermediary between manufacturer and end-user markets

Agent or Any intermediary with legal authority to act on behalf of the

Broker manufacturer
An intermediary who sells to other intermediaries, usually to
Wholesaler retailers; usually applies to consumer markets dealing in
commodities.
Retailer An intermediary who sells mainly to customers

Intermediaries who perform a variety of distribution functions,

Distributor including selling, maintaining inventories, extending credit, and so
on.
Dealer An even more imprecise term that can mean the same as
distributor, retailer, wholesaler, and so forth
Value created by Intermediaries
Consumer and Industrial Marketing Channels
 Channel Design Decisions

•Analyze customers’ desired service output

levels
•Establish objectives and constraints

•Identify major channel alternatives

•Evaluate the major alternatives
 Customers’ Service Output Level

Waiting and Spatial

Lot size
delivery time convenience

Product
Service backup
variety
 Establishing Channel Objectives

• Channel objectives stated in terms of targeted

service output levels.
- Increase availability of goods/services
- Ensure promotional efforts

- Obtaining timely and detailed market info

- Increasing cost effectiveness of distribution
 Identifying Major Channel Alternatives

• Types of • Terms and

intermediaries responsibilities of
• Wholesalers channel members
• Retailers
• Price policy
• Conditions of sale
• Number of
intermediaries • Distributors’
• Exclusive territorial rights
• Selective • Mutual services
• Intensive and responsibilities
 Evaluating the Major
Alternatives
Determine whether
own sales force or a
channels will produce
more sales.
Estimate the costs of
selling different
volumes through each
channel.
 Channel-Management Decisions

•Selecting Channel Members

•Training and Motivating Channel Members

•Evaluating Channel Members

•Modifying Channel Arrangements
 Selecting Channel
Members
Common Criteria used for Selection
 Size of the channel firm

 Financial health of the channel firm

 Sales Strength

 Ability to carry number of product lines

 Management ability & Management Succession

 Attitude towards business

 Multichannel Marketing System

Single firm uses two or more marketing

channels to reach one or more customer
segments

Hybrid system is a variation where members

of a hybrid system perform complementary
functions for the same customer segment.
Multichannel Marketing System
Hybrid Marketing System
 Sources of Channel Power

 Reward power
 Coercive power
 Expert power
 Referent power
 Legitimate power

The power of any firm within a distribution channel

is inversely proportional to how dependent the
other channel members are on that firm.
 Types of Conflict

Vertical

Horizontal