Marketing Channels

Session 3
Channel Characteristics

Faculty :Sunder Hemrajani

Faculty of Management Studies

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Difference Between Wholesalers and C&FAs:

• Wholesaler: Can keep goods of different brands, C&FA’s are loyal

• Ownership of goods changes from company to wholesaler
• Wholesaler: No price control (can sell at any price)
• Compensation to the wholesalers (Only commission) is different
from that of C&FA (Administrative costs, Employees, Transportation
costs and the commission)
• C&FA’s perform a number of functions: Extension of the company
• Wholesalers are not appointed by the company – unless the
company does not have any C&FA or distributor
• Atta in Delhi is distributed through Wholesalers

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Comparison Between Distributor and
Wholesaler
• Prices are fixed for the distributor

• Distributors appointed by the company

• Distributors stock only company products

• Distributors provide Direct & Indirect coverage into nearby markets

• Distributors operate within well-defined territories

• The wholesalers provide the gap coverage

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Parameters for Evaluating a Marketing
Channel

• Customer Service
• Cost Effectiveness
• Quality of Goods & Services to the Consumer
• Effective Reach of Goods & Services to the Consumer
• Support to Marketing & Sales
• Administrative Control & Operational Efficiencies

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Classification of Retail Institutions

Ownership Store Based Non Store Based

• Independent • Convenience • Direct Marketing
• Chain • Super Market • Direct Selling
• Franchise • Hypermarket • Vending Machine
• Leased • Discount store • Web Store
Department • Membership club
• Vertical • Specialty store
Marketing System • Factory Outlet
• Consumer
cooperative

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Ownership - Independent

Positive Negative
• Ease of Entry • Low bargaining power
• Flexibility – retail format & • No economies of Scale
location , strategy • Operations labour intensive
• Lower costs, Clear • Limited access to advertising
responsibility • Overdependence on owner
• Personalized service, • Limited resources
Comfortable Environment
• Centralized but quick
decision making
• Independence, Efficient
• Entrepreneurial

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Ownership - Chain

Positive Negative

• High bargaining power • Limited flexibility

• Cost efficiencies thru • High investments
bypassing of distributors/ • Limited independence for
wholesalers personnel
• Shared warehousing facilities • Management control for
geographical dispersed
• IT supported
chains, time delays
• Access to media
• Defined philosophy
• Resources for long term
planning

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Ownership-Franchising

Involves contractual arrangement between a franchisor (Manf,

Wholesaler, Service Sponsor) and a retail franchisee

• Product/Trademark Franchising- Acquires identities of franchisors

by agreeing to sell the latter’s products and/or operate under latter’s
names

• Business format franchising-More interactive relationship. Receives

assistance on site selection, quality control, accounting systems,
startup practices, mgt training besides rights to sell goods/services

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Ownership – Franchise (Franchisor)

Positive Negative

• Quick rollout, national • Franchisee could harm

presence franchisor’s reputation
• Enforce qualification for • Could impact customer
franchise ownership loyalty
• • Could harm profitability
Cash against goods delivered
• Franchisee owner-incentive
to work hard

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Ownership – Franchise (Franchisee)

Positive Negative

• Access to well known brands • Oversaturation

• Own retail enterprise with • Cancellation of contract
small cap investment • Royalty % of sales (not profit)
• Std operating procedures & • Stringent clauses
management skills
• Cooperative marketing
(National advtg)
• Exclusive selling rights
• Purchase efficiencies

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Ownership – Leased Department ( Store)

Positive Negative

• New skills for select product • Conflict in operating

category procedures
• Inventory and store costs • Store image
• New categories • Blame problems on store
• Operations by the lessee
• % revenue received regularly

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Ownership – Leased Department ( Lessee)

Positive Negative

• Customer traffic • Inflexibilities- hours,

• Low costs through shared operating style
facilities • Non renewal of lease
• Pooled ads- economies of • Poor in-store location
scale • Restricted lines on offer

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Ownership – Vertical Marketing System

• Consists of all the levels of independently owned business along

channel of distribution

Manufacturing Wholesaling Retailing

– Independent systems ( Manufacturer retailers small, intensive

distribution …)

– Partially integrated system: Two business perform all functions

– Fully integrated system: Single company performs all functions

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Ownership – Vertical Marketing System

Independent Partial Fully Integrated

• No. of manufacturers/ • Large manufacturers/ • Total control

retailers small
• Intensive distribution
• Customers widely
dispersed
• High unit sales
• •
Company resources low
• Members share costs
• Drug stores
• Hardware stores
retailers • Direct contact customers
• Selective/ Exclusive • High retail markups
distribution
• Exclusivity over goods
• Unit sales moderate and services offered
High company resources
• Greater channel conflict
• Existing wholesalers
expensive
• Furniture, Appliances,
Restaurants, Computers

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Ownership – Consumer Cooperative

• A retail firm owned by its customer members

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Nonstore Retailing – Direct Marketing

• It’s a form of retailing in which a customer is first exposed to goods

or services through a non personal medium ( Direct Mail, Cable TV,
Radio, Newspapers or PC) and then orders by mail/ phone or fax/
computer
Positive Negative
• Low setup costs/ Inventories • Limited range
• No display/ features • Products cannot be examined
• No store location • Entry costs- expensive catalogs,
computer system, 24 hrs phone staff
• No sales force
• Clutter, 17 billion catalogs in US 1998
• Lower price/ large geographical area • Change in style
• Convenient – no crowd, queue • Delivery delays/ damages
• Store based + extra income
• 30 days rule for shipping

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Direct Marketing Process
• Mailing List
• Direct Marketing • Catalogues
• Blind Mailing • Consumer interest
• Dual Distribution • Brochures
• Reasons for purchase
• Customer Data Base
• Product Assortment • Inserts
• Advertising in newspaper/ web • Size/ color/ Price
• Banner ads

Business Generating Media Presenting

Definition Customers Selection the message

Feedback

Measuring Order Customer Customer

results and Fulfillment Response Contact
maintaining • All Customers
•Order processing system • Mail/ Phone/ Fax
data base • Computer • Specific segments
• Ask for further • Regular
• Overall response rate information
• Non regular
• Average purchase • Ignore
• New contacts
mount
• Non respondents
• Sales volume by
category
• Value of mailing lists

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Nonstore Retailing – Direct selling

• It includes both personal contact with consumers in their houses

and non store locations (offices) and phone solicitation by the
retailer.eg Cosmetics, Jewellery, Household goods and services,
Vacuum Cleaners, Newspapers (US: Sales US $ 23 Bn, 10 mn
employed in 1998)
Positive Negative
• Convenience and personal touch • Coverage and size of sales force
• Detailed demos • Low sales productivity
• Relaxed consumer • Sales force too high
• • High compensation as a % of
Alternative/ no competing brands
revenue (20%)
• Older consumers/ Parents with • Higher then average prices
young children's
• Low overhead costs

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Nonstore Retailing – Vending Machines

• Involves coin or card operated dispensing of goods and services .

• Eliminates use of sales personnel and round the clock sales

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Nonstore Retailing – Electronic Retailing

• Internet: Global Electronic super highway of computer networks that use a

common protocol and linked by telecom lines/ satellite

• World Wide Web: Is one way of accessing information on the internet

whereby people work with easy to use web addresses (sites) and pages.
Click and Mortar Vs Brick and Mortar
Positive Negative
• Prices, convenience, choice, fun • No touch, feel and see
• Image • Want to talk to sales people
• Cost efficient
• Customer feedback
• Provide information to customers
• Reach geographically dispersed
customers

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Nonstore Retailing – Video kiosk

• It is a free standing, interactive, electronic, computer terminal that

displays product and related information on the video screen ( touch
screen). Kiosks can be linked to retailer’s computer networks or tied
into the web.

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Thank You

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