CHANNEL MANAGEMENT

Learning Modules

Module 1 :
Module 2 : Module 4 : Module 5 :
Module 1 : Module 3 : New Age IT
Basics of Third Party
Distribution
Tied Agency Insurance Broking Distribution
Enabled
Channel Distribution
Channel Channel Channel
Channels
Management
Learning Modules

Module 6 : Module 7 :
Micro & Rural
Distribution Managing Distribution Channel
Learning Objectives –Module 1

 Distribution Channels– Introduction,

 Importance, and Value Creation.
 Channel Design / Selection of Channel –Relevant Factors
What is a distribution channel ?

According to Philip Kotler- “Every producer seeks to link together

the set of marketing intermediaries that best fulfill the firm’s
objectives. This set of marketing intermediaries is called the
marketing channel, also trade channel or channel of
distribution.”

W.J. Stanton defines the channel of distribution as “the route taken by the title to the
goods as they move from the producer to the ultimate consumer or industrial users.”

In other words “The processes and people(partners) that move or connect products
or services from producers to consumers” is a channel
Producer Channel Customer
HOW and WHERE a consumer receives a
product or service ?

Channels provide answers to the

question how and where consumers it
get the product or service required by
them
Channels part of Marketing Strategy

Product

Price

Place CHANNEL

Promotion
Channel Management is part of overall
marketing strategy and not separate
• Case of Star Bucks

• Video
• Marketing Channel
• Distribution Channel
• Channel of Distribution
Are Synonymous
• Channel
• Delivery Channel
• Channel Sales
• Place (in Four P’s)
Broad Type of Channels

Direct Sales : When a good or

service reaches the customer from Sales
the producer /service provider Producer Internet Force
directly or when the producer
connects with ultimate customer Consumer Company
directly Owned
Outlets

Indirect Sales: When there is one or

Intermediary
many intermediary(ies) or channel
Producer (Channel Consumer
partner(s) in between the final
consumer and Partner)
producer/manufacturer
What does a channel do for a firm

• It provides
• Place Utility
• Time Utility
• Acquisition or possession Utility
Other Advantages of having a Channel of Distribution

Forming
Providing Providing storage
Breaking Bulk customer Developing Creating
working capital facilities and
Items into small relationships and Markets and Awareness/After
or financing facilitate physical
stock providing sales planning sales services
/Liquidity movement
feedback
Channel Sales Management

• Channel management is part of marketing management process that

consists of managing the different channels used by a company to sell
its products or services.
• It can be defined as the set of marketing strategies used by a
company to manage its different distribution channels.
 Channel Levels

• The most common distribution channels wholesalers and retailers.

• Companies can categorize its distribution process depending on how
many players are between the manufacturer and the consumer.
• These different stages are called levels.

First
Zero
Level
Level
channel

Two Three
Level level

For example a zero level strategy means the company sells directly to the customer.
Channel Levels
CHANNELS - LEVELS
Channel Management for Services

Services are different from products/goods

• Intangibility
• Simultaneous consumption
• Heterogeneity
• Perishability /Non Storage

• Zero level = Direct / One level=Indirect

 Channel management in Services

ZERO LEVEL
CSerSService Provider

CCCustomer
AGENT
Channel Management of Industrial Products

• Small Chain of Channels

• Limited Customers
• Big transactions/Costly goods
• Generally heavy goods/products - (Raw
Materials/Spares/Components to manufacture end product)
• Buyers located in specific area

• Generally Zero Level or One or two (depending on company

needs/strategy)
 Channel management in Industrial Products

ZERO LEVEL

One level

Industrial Customer
Industrial Distributor
CSerSCompany

Two Level

Company Industrial
Representative Distributor

Three Level

Company Industrial
Agent Distributor
Representative
Types of Distribution

• Intensive – Presence of Strong competitor/Customer can switch as

low differentiation– Large no channel partners
• Selective – Few Outlets/Customer preference for brand
• Exclusive – Derived from selective/ Single outlet within a
location/area/town etc..
Types of marketing channel Systems

Vertical

Multi
Horizontal
Channel
 VMS/HMS/Multi Channel

• Vertical Marketing Systems (VMS)

Distinct entities to operate as one to prevent duplication
Avoid conflicts .
Types
Corporate – Producer and Distributor owned by same entity
Administered – One channel member is the dominating member –e.g. wholesaler/dealer /
distributor
Contractual – All channel members work together – whole seller /retailer/dealer etc..

• Horizontal Marketing Systems (HMS) – Unrelated business come together/Share

resource. ATM in Mall /Library –snack shop etc..
• Multi Channel Marketing Systems –combination of channels /Hybrid / Unrelated
products – B2B/B2C both
Push and Pull Strategy

• Push --- Incentives to channels to increase sales

• Pull --- Creating demand among consumers to increase sales

• Insurance changing from push to pull

Types of Channel Intermediaries

• Own Employees or Feet on Street (FOS)

• Company Owned Outlets

• C & F As *(carrying and forwarding agents) / Consignment Selling

Agents
• * Store goods in warehouse---transport --- distributors---no title
• CSA – Sell

• Wholesalers/Distributor / Dealer / Stockists /Retailers ---

(exclusive/non exclusive –customer visit/ Stockist exclusive –no
customer visit)
Wholesale B2B Sellers

• Walmart (Best Price)

• Metro Cash and Carry
• Reliance – (Reliance Market)
• Lots Wholesale
Franchising

• Franchisor
• Franchisee

• SOP / Royalty /Fee / One time Franchise fee / Logo use /Brand and processes
• Franchisee Agreement

• Case Study of Goli Vada Pav

• IMD Business School – Switzerland
• Financial Times London
• Harvard Business School
• Indian School of Business (ISB)
• CSB
Goli Vada Pav – A successful Franchising model
Activity - Discussion

What type of Channel would you use to sell

(a)Buses (b) Aircraft (c ) Potato Wafers (d) Mobile

Discuss
Interrelated Activities with channel management

Supply Chain
Logistics
Management

Inventory Production
Management Planning
Logistics and Supply Chain Management
• Logistics is about getting the right product, to the right customer, in
the right quantity, in the right condition, at the right place, at the right
time, and at the right cost (the 7 Rs)" - John J. Coyle
• Supply Chain Management (SCM) includes all of traditional logistics
and also includes activities such as marketing, new product
development, finance, and customer service
Logistics Management
Channel Management- SCM & Logistics
 END OF MODULE 1
End of Session
Manoj Pareek