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Marketing Channels
I. Supply Chain

A. Functions of Marketing Intermediaries

• Information collection and dissemination – Marketing intermediaries can provide
manufacturers with vital manufacturing research information on customer profiles and
product movements. These are valuable for decision-making.
• Product storage and movement – Manufacturers without many warehousing facilities are
relieved of large amounts of merchandise. Intermediaries or channels take care of storage
and transport of products to the customer.
• Operational financing – Distribution channels that take care of storage and transport
assume the cost of these activities.
• Product promotion – Intermediaries, particularly retailers, help in the development and
implementation of communication programs to enhance product sales.
• Risk taking – Most marketing intermediaries eventually pay for the merchandise that they
carry. They assume financial risk if the product does not sell as expected.

B. Supply Chain
• Product distribution type
o Exclusive distribution – Distribution is limited to a select number of dealers, usually
one (1) or few.
o Intensive distribution – This distribution type is typically used by fast-moving
consumer goods and convenience goods. It involves making a product available in as
many locations as possible. This type of product distribution gives consumers the
highest level of place utility and convenience. However, manufacturers have very little
control on how the product is placed, displayed, or promoted.
o Selective distribution – This is positioned between exclusive and intensive
distribution. This uses more than one but not many dealers as in intensive distribution.
This distribution type allows the manufacturer to have adequate control of the retail
prices, displays, and promotions.

II. Channel Design and Management

A. Major channels of distribution
• Distributing consumer goods
o Producer to consumer – It is the shortest and simplest method of distribution channel
for consumer goods because there are no middlemen involved.
o Producer to distributor then consumer – Many wholesale distributors buy directly
from the producer and handle marketing activities directly to the consumers. An
example of this would be manufacturers who buy shelf space in big supermarkets.
o Producer to distributor to retailer then consumer – This is the most common
distribution channel employed by the producer to reach to a greater number of the target
market. This is because in the Philippines, retailers are found even in remote areas. An
example of this would be a manufacturer who sells his product to supermarkets, who in
turn would sell their products to owners of small businesses like sari-sari stores. This
way, the product eventually gets to the consumers.

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o Producer to agent distributor to retailer and eventually the consumers - Some

producers employ agent middle men to reach out to the retail market. For example,
some manufacturers of bags employ agents who also recruit agents for personal selling.
• Distributing industrial goods
o Producer to user – This is the most common strategy in business buying. Producer
will send equipment such as plant installations, higher capacity generators, and
manufacturing machines.
o Producer to industrial distributor then users – These are used by producers of
operating supplies and accessory equipment for small industrial firms.
o Producer to agent then user – There are some producers consider it more economical
if they hire a third party to handle all their marketing efforts.
o Producer to agent to industrial distributor to retailer and the users – In this type
of marketing channel, the producer assigns agents on commission and allowance basis
to contact and sell the product to industrial distributors, who in turn sell to the direct
consumers at a reasonable profit.
• Distributing service goods
o Producer to consumer – Due to the intangibility of services, the sales activity often
requires personal contact between the producer of the service and the consumers. Direct
distribution is typical for many professional services.
o Producer to agent then the consumers – Some big insurance companies need the
services of agents to penetrate the market. Travel agencies hire agents to promote their
services to clients. The agent frequently assists the service provider to maximize profit
by getting more customers.

B. Factors affecting the channel of distribution

• Market consideration
o The type of product – Consumer products are served by most wholesalers and retailers
that could be found even in the remote sector of towns and cities. Business products,
on the other hand, reach the market through dealers or agents.
o Number of potential customers – Wider potential markets for consumer products need
the services of more outlets. Business products have lower volume of customers, and
so companies that sell to businesses can use their own salespeople or distributors.
o Geographic concentration – The market for consumer goods is dispersed and spread
all throughout the various locations in the urban centers and in the rural areas. It is
impractical to use few outlets to serve consumers’ needs. Business product users are
mostly concentrated in urban centers.
o Volume of orders – Consumer goods are ordered in big volume while business
products have less volume but higher price per unit.
• Product consideration
o Unit value – The price attached to each unit affects the amount of money available for
distribution. Products with low unit value are sold through indirect channels while
products with higher sales value are sold through sales people.
o Perishability – Some food products have a low lifespan and must be sold immediately
through direct channels. These goods have expiry dates or must have cold storage
facilities to reach their market.

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o Technical mature of the product – Business products that are highly technical are
distributed directly to the users. It provides pre-selling and post-selling services before
the transaction is completed.
• Choice of middlemen
o The service of middlemen – The choice of middlemen is based on their ability to reach
the market that the producers cannot do on their own. It must be based on efficiency
and economy of skill in reaching out to the ultimate customer.
o Availability of desired middlemen – The middlemen must be trusted by the producer
to deliver the product to the end users. They must have the financial and physical
capabilities to market the product with utmost efficiency.
o Attitude of the middlemen about the producer’s policies and product – The terms
and conditions of the middlemen and producer must be compatible with the objectives
of both organizations. Middlemen would like to carry the products of the manufacturers
if they are assured of the support in the marketing of the product.
• Company considerations and decisions
o Desire for control of channel of distribution – Producers would like to control the
channel of distribution to achieve more aggressive promotion and advertising to sustain
product superiority. It may be more costly to maintain the distribution channels, but the
end result is provision of better services to the consumers and sustaining patronage
loyalty for the brand.
o Service of the middlemen in handling the product – Some middlemen only take on
products that are already known to the market. This requires more promotion and
advertising expenses on the part of the producer. Some producers would like to share
the burden of promotion with the sellers as they are working more closely with the
consumers and can identify the customer’s needs and wants.
o The ability and capability of management – Some producers are good in product
conceptualization but weak in marketing strategy. Therefore, they would need the
services of an organization with a wider marketing experience to handle the distribution
system for cost effectiveness and efficiency.
o Company’s financial resources – Product manufacturing involves costs – small
companies may not have enough finances to create their products and effectively
market their product at the same time. On the other hand, big companies may have
enough financial resources to be granted good credit terms and promotional budgets
that can handle an intricate distribution system.

References:
Chua-Delayco, M. L. (2016). Learning to Succeed in Business with Marketing Senior High School.
Quezon City : Phoenix Publishing House.
Kotler , P., & Armstrong , G. (2012). Principles of Marketing, 14th Edition. Upper Saddle River:
Prentice Hall.
Lamb, C., Hair , J., & McDaniel, C. (2012). Essentials of Marketing, 7th Edition . Independence:
Cengage Learniing .
Pereda, P., Pereda, P., & Castillo, V. (2014). Principles of Marketing . Intramuros : Mindshapers Co.,
Inc.
So, R. C., & Torres, O. G. (2016). Principles of Marketing . Quezon City : Vibal Group, Inc.

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