MARKERTING CHANNELS

Prepared By, Sagar Gadekar

Definitions of Marketing Channels
 According to American Marketing Association,

“A channel of distribution, or marketing channel, is

the structure of intra-company organization units and extra company agents and dealers, wholesale and retail through which a commodity, product or service is marketed.”
 According to Philip kotler,

“Every producer seeks to links together the set of Marketing intermediaries that best fulfill the firm’s objectives. This set of marketing intermediaries is called the Marketing Channels. (Also called Trades channel or Channel of Distribution.)”

Definitions of Marketing Channels
 According To William J Stanton,

“ A Channel of distribution for product is the rout taken by the title to the goods as they move from the producer to the ultimate consumer or industrial user.”
 According to Cundiff, Still and Govani,

“Marketing

channel are the distribution network through which producers produce flow to the market.”

It is only through distribution that public and private goods and services can be made available for the use of consumptions. The major focus of channel of distribution is delivery. They help in the searching process. ii. typically called Intermediaries because they stand between production on other hand and consumption on other. can be explained in following terms. Intermediaries can improve the efficiency of the process. iii. i.  The emergence and arrangement of wide variety of distribution oriented institution and agencies. . They help in the proper arrangement of the rout of transactions.

 To build the channel members loyalty.  To develop managerial efficiency in the channel organization.  To have an effective and efficient distribution system. to make your product and services .  To identify your organization at buyer level.Objectives of the Marketing Channels  To ensure the availability of products at the point of sale.  To stimulate channel members to put greater selling efforts.

Consumer and Business Channels .

Services are distributed through short channels. Channels of Services  Most services are produced and consumed at the same time.g.  Service Provider – Service user  Service Provider – Agent – Service User  Producer – Agents – Organization buyers  Producer – Agents – Distributors – Organization Buyers .  When services use intermediaries they are usually agents or brokers e. So to buy financial advice you go to the people providing these services so the most common channel is A (Direct one). Insurance and Airline services.

Five Marketing Flows in the Marketing Channel for Forklift Trucks .

 Information to the producer. .  Stability in Prices.  Relive from Marketing Problems.  Storage of finished goods.Importance of Marketing Channels  Time and Place utility.  Finance the producer.  Convenience to Consumers.  Promotional Activities.

Importance of Marketing Channels  Time and Place utility. They help the producer in his production function by relieving him by marketing problem. They create time and place utilities to the buyer. Channel of distribution helps the consumer to buy in convenient units.  Convenience to Consumers. the producer can pay is full attention towards organization production function only smoothly to . Thus.  Relive from Marketing Problems. lots. packs and assorted varieties of the product.- Channel of distribution helps the consumers to buy goods at the time and place they need them.

 Stability in Prices. They perform promotional activities like advertising personnel selling and sales promotion etc. The channel of distribution helps in stabilizing prices of the product by stocking goods balancing demand and supply. competition in the market. current market trends and the product condition increased volume of sales because they have complete knowledge of the market.  Promotional Activities. The channel of distribution provide information to the producer regarding the taste and needs of consumers.Importance of Marketing Channels  Information to the producer. so as to .

. The channel of distribution keep the producer free from the problems of the storage of finished good. Channel of distribution finance the producer as well as the consumer.Importance of Marketing Channels  Storage of finished goods.  Finance the producer.

Functions of Marketing Channels  Information Provider.  Matching Buyer And Seller.  Matching Demand and Supply.  Financing.  Help in Production Function.  Title.  Promotion.  Price Stability. .

 Exclusive Distribution.  Selective Distribution. .  Intensive Distribution.Channels Strategies/ Policies.

This type of is used for those products that are characterized by low involvement of the customer and where customers look for location convenience. so they are easily available to the customer at their nearest location.  This strategy help long term but hurt long term . soaps and detergents are distributed in this manner. biscuits.  Products like chocolate.  Manufacturer are constantly tempted to move from exclusive or selective distribution to more intensive distribution to increase the coverage and the sales. shaving blades.Intensive Distribution  The intensive is a form of distribution in which the manufacturer distributes his products through as many outlets as possible.

and target different segments of customers. world of titan.Intensive Distribution  Example  Titan watches - Titan sells its through seven different channels. cover different price points. ValueMart. Tanishq boutiques. These channels – some of which are only present in selected cities – provide Titan with wide range coverage. It helps Titan generate sales volume while protecting its brand image at the same time. . and private multi brand outlets. Time zone. Sonata stores. Titan Signet Club.

Selective distribution can help the manufacturer gain optimum market coverage and more control but at lesser cost than intensive distribution. such as office equipments and Hand held tools. the firm selects some outlets to distribute its products.  Here.Selective Distribution. This alternative help to focus the selling efforts of the manufacturing firm on the few outlets rather than disappointing it over countless marginal ones.  Selective distribution is appropriate for consumers shopping goods.  It also enables the firm to establish a good working relationship with channel members. such as various types of clothing and appliances and business accessory equipments. .

The decision to change usually hinges on the high cost of intensive distribution or the unsatisfactory performance of middlemen. company may choose to be a more selective after some experience with intensive distribution. . improve quality control. and or maintain some influence over its prices.Selective Distribution. strengthen customer services.  In contrast.  A firm may move towards more selective distribution to enhance the image of its products.

 As the manufacturer uses a relative fewer number of distribution channel . he can maintain good relation . This is a common from products and brands that seeks high prestigious image.Exclusive Distribution  When the firm distributes its brand through just one or two major outlets in the market.  Typical example are designer ware. we say that the firm is using an exclusive distribution strategy. credit inventory and service policies. promotion.  By granting exclusive distribution rights . the manufacturer hopes to have control over the intermediaries price. major domestic appliances and even automobiles. who exclusively deal in it and not all competing brands.

Arrow. Lee and so on are available at exclusive showroom as well as other distribution channel. . Zodiac.Exclusive Distribution  Branded menswear like color plus.

(Final convenience oriented. good sales and profits Exclusive Distribution Prestige image. Marketing Emphasis Mass advertising. (outlets) reputable fir outlets (Outlets) Moderate in number. trends setters. nearby location. good services Personal selling.. all type of firms (outlets) Selective Distribution Moderate Market coverage. May be difficult to crave out niche Fewer in no. well Few in number. good services. Customers Many in number. . somewhat willing to travel to store. consumer s) Major Weakness Limited channel control. well established better firms established. Many in number.Attributes Intensive Distribution Objectives Wide spread market coverage. brand conscious. items in stock. pleasant shopping conditions. willing to travel to store. channel control loyalty. Limited sales potential. channel acceptance. prices stability and high margins. Promotional mix. some channel control and loyalty. brand loyal. solid image. Resellers Moderate in number. pleasant shopping condition. high volume sales and high profits.

Channel Design  Steps involved in Designing a Channel System. 7. Linking design to Product Characteristics. Evaluation of the distribution Environment. 1. Evaluating the Alternatives and Selecting the Best. 6. 5. 4. Evaluation of competitors Channels Design. . 2. Identifying Channel functions. Formulating Channel Objectives. Matching Channel Design to Company Resources. 3.

 Step II – Identifying channel functions.  The common objectives are a) b) c) d) e) The effective coverage of target market. Title. Promotion. The objective clarify what is to be achieved by having the channels.  There are various functions of channel like. confidence that the channels will take care of sales. Financing. Price Stability. Ensuring that consumer incur minimum effort in procuring product.Formulating Channel Objectives. they may also have some specific objectives depending on unique circumstances. Help in Production . Efficient and cost effective distribution. Partnering the firm in financing and sub distribution. Information Provider. In addition. Helping the firm to carry on manufacturing uninterrupted.  Formulation of channel objective is the first step in designing a channel systems. Step I . All firm seeks to realize certain common objectives by having the channel.

the firm should also take account the distribution environment pertaining in the country/territory. need different channels. Consumer goods and the and industrial goods. for example. Channel Design to Product  Different product requires different channel systems.  Step IV – Evaluation of the Distribution Environment. and specialty goods may need different channels. And within the category consumer goods. shopping goods. Distribution environment in the broader sense includes the trade .  While selecting the channel design. It should evaluate the vital features of the distribution environment and ensure that the proposed channel design is compatible with them. The firm should analyze the characteristics of product and choose the channel system that matches the product best. Step III – Linking Characteristics. different sub-category such as convenience goods.

 Step V – Evaluation of Competitors Channel Design. Firm with the Limited Resource Settle for conventional channels – firm with limited resources and small volume of business will normally find it difficult and uneconomical to opt for own channels.  The firm should also study the competitors channel patterns before deciding its channel design. it should analyze the plus and minus of channel pattern adopted by each of its competitors. establishing branch showrooms/depots/retail outlets of their own will result in high distribution cost .  Step VI – Matching the Channel Design to Company Resources. which they can not . I. For such firms. While the firm may not necessarily follow the competitors in channel design.

In fact.  Step VII . Flexibility and Capability. in India firms which may are strong resources usually operates two parallel channels one reaching out to the customers through company depots and showrooms and other through conventional intermediaries.Evaluating the alternative and selecting the best.  Conceptual Evaluation. . Balancing cost. Firms with larger resources have more options – Firms with larger resources and larger marketing operation can go in for varied distribution channels.  Economic evaluation. Efficiency and Risk.

 Evaluating Channel Members. .  Selecting Channel Members.  Modifying Channel design and Arrangement.  Training and Motivating Channel Members.Channel Management Decisions.

If the intermediaries are department store and want exclusive distribution. they should at least determine what characteristics distinguish the better intermediaries. growth and profit record. other lines carried. Whether producer find it very easy or difficult to recruit intermediaries.  If the intermediaries are sales agent. future growth potential and type . They will want to evaluate number of year in business.Selecting Channel Members.  Producer vary in their ability to attract qualified intermediaries. the producer will want to evaluate locations. producer will want to evaluate number of character of other line carried and the size and quality of sales force. solvency. cooperativeness and reputation.

e) Geographical concentration of Market. Size of order. d) Technical Nature.  Market consideration a) Consumer or industrial Market. Standardized Product. e) Bulk and weight. b) Product Line. b) Number of potential customers.  Product Considerations c) a) Unit value. d) Buying habits of customers. c) .Selecting Channel Members.

2. 3. Middleman Consideration Availability of desired middlemen. 2.Selecting Channel Members. 3. Desire for control of channels. Experienced and competent Management. . Financial ability. 5. 6.  1. 4. Services provided by the channels. Volume of Production. 4. Attitude of middlemen Sales potential Cost Competition and legal constraints.  Company Consideration 1. 5. Financial Resources.

because the intermediaries will be viewed as the company by end users. Servicing Training . Training for Paper work. Field Training Orientation Programme. Installation Training. Training for Care of Company Products. Training for Paper work.Training to Channel Members  Companies need to plan and implement careful         training programs for their distributors and dealers. Technical Training.

.Motivating Channel Members  A company needs to view its intermediaries in the same way that it views end users. market research programme and other capability building programme to improve intermediaries performance.  The company provide training programme. The company needs to determine intermediaries need and construct a channel positioning such that its channel offering is tailored to provide superior value to these intermediaries. The company must constantly communicate its view that the intermediaries are partner in joint effort to satisfy end using consumers.

. But the exercise of coercive power produces resentment and can lead the intermediaries to organize countervailing power. This power can be quite effective if intermediaries are highly dependent upon the manufacturer.Motivating Channel Members  Coercive Power:  Coercive Power occurs when manufacturer threatens to withdraw a resources or terminates a relationship if intermediaries fail to cooperate. Reward power typically produces better results than coercive but it can be overrated.  Reward power:  It occurs when the manufacturer offer intermediaries an extra benefits for performing specific acts or functions.

Once the intermediaries acquires this expertise. however the expert weakens. The manufacturer feels it has this right and the intermediaries have this obligation. Companies such . legitimate power works.  Referent Power:  It occurs when the manufacturer is so highly respected that intermediaries are proud to be associated. The manufacturer must continue to develop new expertise so that intermediaries will want to continue cooperating  Legitimate Power:  Legitimate Power is wielded when the manufacturer requires a behavior that is warranted under the contract.Motivating Channel Members  Expert Power:  Expert power can be applied when the manufacturer has special knowledge that the intermediaries value. As long as the intermediaries view the manufacturer as a legitimate leader.

 Evaluation criteria includes sales volume and value. profitability. . quality of services provided to customers. selling and marketing capabilities. level of stocks. ability and willingness to keep commitment. attitudes and personal capabilities. Shortfalls in distributor skills and competences may be identified through evaluation and appropriate training programmes organized by producer.Evaluating Channel Members  Evaluation provides the information necessary to decide which channel members to retain and which to drop. market information feedbacks. quality and position of display. new account opened.

But 2006 saw the company encounter a number of problems that led to step stock price decline. rather than through retailers. Customer could custom design the exact pc they wanted. First. Sound like a winning formula? It was for almost two decades. A shift in consumer preferences to buy in retail stores as opposed to buying direct didn’t help.inflicted damage from an ultra efficient supply chain model that squeezed costand quality. Always focused more on the business market. and rigorous cost cutting allowed for low everyday price. dell struggled to sell effectively to the consumer market.Dell  Dell revolutionized the personal computer category by selling product directly to customer via telephone and later the internet. reinvigorated competitors such as HP narrowed the gap in productivity and price.out of customer service was perhaps the most painful. but self. Managers evaluate call center employees primarily .

A lack of R&D spending that hindered new product development. Primarily on how long they stay on each call.a recipe for disaster as scores of customer felt there problem where ignored or not properly handled .  Design various marketing channels for Dell and give its various functions and importance. .

 Govt. Design the distribution channel for a mobile company to distribute these 3g enable hand sets and services to the end users. of India recently announced introduction of 3g spectrum which will enable integrated mobile services in the hand sets. .

THANK YOU .

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