CHAPTER 8

MARKETING CHANNELS
OBJECTIVES:

• The Nature and functions of marketing Channels

• Types of Marketing Channel
• Selecting a marketing Channel
• The Channel selection process
• Evaluating the prospective channel member
• Factors that influence channel selection
• Distribution strategies
• Marketing Channel- it is the firm’s of products, even if
their quality and price cater to the requirements of the
target ,market, must be made available at the place and
time they are needed.

• This chapter presents the marketing channel as a means

to help the marketer realize his marketing goals.
THE NATURE AND FUNCTIONS OF MARKETING CHANNELS

• Products are really meant to be sold to buyers. This is possible if the

products are able to reach the customers. The firm must devise some
means to bring the products to the customers.

• Marketing channels - are human creations and they may be designed

and structured to serve the needs of the user.

• A marketing channel may be defined as a set of independent

organizations and individuals that facilitate the movement and transfer of
ownership of commodities from the producers to the ultimate users.
FUNCTIONS OF MARKETING CHANNELS

• Marketing Channels play an important role in the marketing of goods

and services. Specially, they perform the following functions:
1. They routinize decisions and work;
2. They finance the process for moving goods from the producers to
the consumers;
3. They are active participants in the pricing process;
4. They serve as a channel of communication between the products
and the consumers;
5. They assist in the promotional aspects of marketing ;and
6. They minimize the number of transactions in the system.
• Routinization of Decision- the marketing channels provides the manufacturers with
a much number people to contact when transactions are made .

• Financing- when manufacturers sell directly to costumers, they may have to

reckon with the financing of the following:

1. Sales calls to prospective customers;

2. Purchase of selling equipment;
3. Construction of display stores;
4. Extension of credit to customers; and
5. Training of retail salespersons.
• Pricing- The difficulty of pricing one’s product is aggraveted by lack of
direct contract with consumers, especially if they are scattered
throughout a wide area of concern.

• Channels of communication- the changing requirements of users are

oftentimes relayed to the distributor. Individual buyers, for instance, may
inform the retailer that they will be buying next season only items with
new designs. This information will be relayed by the distributor to the
manufacturer. The distributor, in effect, is acting as a channel of
communication.

• Assistance in Promotional activities- when the distributor attempts to

increase his sales by promoting his products, he is actually completing
the promotional activities of the manufacturer .
W Manufacturer
User X
A

WITHOUT DISTRIBUTOR
number of contacts = 9
Manufacturer
User Y
B

Manufacturer
User Z
C
 Manufacturer
AWITH DISTRIBUTOR User X
number of contacts= 6

Manufacturer
Distributor User Y
B

Manufacturer
C User Z
• Minimization of Number of Transaction- the distributor plays an important
role in minimizing the number of transactions with the system. As
shown in figure 28, the number of transaction is reduced from 9 to
6 when distributor is placed between the manufacturers and the
users.

• TYPES OF MARKETING CHANNELS

Marketing channels consist of two basic types:
1. Consumer channels
2. Industrial channels
Consumer channels- are those that are used in the distribution
of consumer goods. As shown in figure 29 channel A is direct
distribution channel.

Examples of this are the ‘’puto’’ vendor(who is also the

producer), the TV company (which directly sells its service to
televiewers), and the chicken farmer (who sells his products
directly to the consumers).

Channel B is the type wher one middleman interposes between

the producer and the consumer.Z
• Channel C is that type of channel where the wholesaler
and the retailer provide linkage between the consumer
and the producer.

• Channel D is that type of channel where an agent apart

from the wholesaler and the retailer provides linkage
between the producer and the consumer.
• Industrial Channels- are those which are use in distribution of industrial
goods. As shown in figure 30. they consist of three types.

• 1. The manufacturer selling directly to the industrial users. An example

are the manufacturer of trucks and buses in Japan directly selling the bus
companies like Baliwag, transit.

• 2. The manufacturer assigning industrial distributors which sells directly

to industrial buyers. An example the spare parts manufacturer who sells
in industrial distributors in metro Manila who, in turn, sell jeepney
operators.

• 3. The manufacturer dealing with agents who call on industrial users.

Universities are often time called on by agents who sells books published
by will-known firms.
• Selecting or Marketing Channel - the selection of marketing channel must not
be taken likely.this so because any any mistake in making a choice could
means considerable amount of making income.

• The ability of various channels pose a challenge to the marketer to make an

intelligent decision on which channel is best suited to his firm. In the selection of
• marketing channel, the company is faced with any the following situations.
• 1. It may have an option of choosing from among the various channels existing;
or
• 2. It may not have that option to chose.
• Companies which are financially sound have bigger facilities, and with
products are already known in the market, may have an option to consider
any of the existing channels.

• The small entrepreneur who have just started operations and whose
products are not yet known are, oftentimes, not provided with the option to
chose from among the existing channels.
•
• THE CHANNEL SELECTION PROCESS
• The assuming that the manufacturer has the option to choose from among
the various channel options, he may have to adapt the following steps:
1. Identification of the target customers.
2. Determination of consumer buying habits regarding the goods
under consideration.
3. Determination of the location of the potential costumers.
4. Listing of channel alternatives.
5. Evaluation of channel alternatives ; and
6. Selection of channel members.
• The identification of target consumers will provide much information to the
manufacturer in deciding which channel is best.

• Ultimate consumers by from retailers whom they consider catering to there

needs.

• Potential costumers could be scattered over a wide area or they could be

concentrated in specific areas.

• After completing the first three steep, a listing of channel alternatives must be
prepared.
• The evaluation of the listed alternatives will be made next, followed by the final
selection of the appropriate channel.

• Experts have develop certain models for effective decision making which maybe
useful in selecting the right marketing channel.

EVALUATING THE PROSPECTIVE CHANNEL MEMBER

• The list of channel alternatives is really an inumeration of the distributors
with the facilities of serving the company as middleman.
• A set of criteria may be useful in evaluating a channel is as follows.
• 1. Credit and financial condition of the distributor.
• 2. Sells strength.
• 3. Products lines
• 4. Reputation
• 5. Market Coverage
• 6. Sells performance
• 7. Management succession
• 8. Management ability
• 9. Attitude
• 10. Size
FACTORS THAT INFLUENCE CHANNEL
SELECTION

• There are several factors that influence the selection of an channel. They are the
following
• 1. The nature of the product ;
• 2. The nature of the market ;and
• 3. The nature of the company

• The nature of the product will determine witch channel distribution is best suited.
• The nature of market is also an important consideration.
• The size of the company and its organizational set up will also be a factor in
selecting a channel.
DISTRIBUTION STRATEGIES

• Decision must be made by the firm on how broadly or narrowly its products
will be distributed. This will determine the number of intermediaries that will
be tapped.
•
• Distribution strategies consists of three types :
• 1. Intensive distribution
• 2. Selective distribution
• 3. Exclusive distribution
• Intensive distribution - is a strategy that requires the firm to sell its
products through every available outlet in a market where a
consumer might reasonably try to find them.

• Selective distribution - is selling through only those outlets which

will give the product special attention. This strategy decrease the
number of outlets who will carry the product. Selective distribution
is used for purposes like avoiding making sales to middlemen with
any of the characteristics as follows :
• 1. Poor credit rating;
• 2. A reputation for making too many returns or requesting too much service ;
• 3. Place orders that are too small to justify making calls or service; and
• 4. Are not in a position to perform satisfactorily.

• An exclusive distribution-- agreement is one where the producer grants

exclusive selling rights to a middleman in a certain area. On return the
middleman is required to carry all the producer's products. Exclusive
distribution is applicable to specialty products or services like automobiles
and expensive watches. The agreement is designed to help control prices
and the service offered in a channel.
Thank you