Marketing Channel Strategy

(Place); this “P” in the Marketing Mix has

been largely neglected.

But this is changing....

Distribution Channel, Marketing Channel or
simply The Channel

Set of firms and individuals that take

title, or assist in transferring title, to
the particular good or service as it
moves from the producer to the
consumer.
 Number of Channel Levels
• Zero-level Channel
• Direct Marketing
• One-level Channel
• Consumer Markets – Retailer
• Organisational Markets – Sales Agent or Broker
• Two-level Channels
• Consumer Markets - Wholesaler / Retailer
• Organisational Markets – Industrial
Distributor / Dealers
• Multiple-levels
• Complex
 How Channel Members Add Value

• Information, promotion and communication

• Contact and matching
• Negotiation
• Physical distribution
• Financing and risk-taking

12-4
 Channel Flows

• Physical Flow
• Title Flow
• Payment Flow
• Information Flow
• Promotion Flow
 
 Number of Intermediaries

• Intensive Distribution
• Exclusive Distribution
• Selective Distribution
Terms & Responsibilities of Intermediaries

• Price Policy
• Conditions of Sale
• Territorial Rights
• Mutual Services & Responsibilities
 Motivating the Channel Members

• Co-operation
• Partnership
• Distribution Programming
 Choice of Channels: Product

Intensive
Unit Perishability
Selective Value

Exclusive
Technical
Nature
Who Controls the Channels?

Expertise
Legal Considerations

Exclusive Tying
dealing contracts

Refusal Exclusive
to deal territory
Motivating the Members: Channel
as a Partnership

2. Cooperation 3. Collaboration

4. Relationship
1. Coordination
Marketing
Managing Channel Relationships

Channel
Channel Power
Power

Channel
Channel Control
Control
Social
Social
Dimensions
Dimensions
of Channel
Channel Leadership
Leadership
of Channels
Channels

Channel
Channel Conflict
Conflict

Channel
Channel Partnering
Partnering
Channel Power
 

A channel member’s capacity to

control or influence the behavior of
other channel members
Channel Control
 
A situation that occurs when one
marketing channel member
intentionally affects another
member’s behavior
Channel Leader
 
A member of a marketing channel
that exercises authority/power over
the activities of other members,
also referred to as the Channel
Captain
 Channel Conflict
  A clash of goals and methods between
distribution channel members
 Horizontal Conflict
Occurs among channel members on the same
level
 Vertical Conflict
Occurs among channel members at different
levels
 Sources of Channel Conflict
• Channel member bypasses another
member and sells or buys direct.
• Uneven distribution of profit margins
among channel members
• Manufacturer believes channel member
is not giving its products adequate
attention
• Manufacturer engages in dual
distribution
 Channel Partnering
  The joint effort of all channel members to
create a supply chain that serves
customers and creates a competitive
advantage.
Channel Organisation
 Conventional Marketing Systems
 Highlyfragmented networks in which
loosely aligned manufacturers,
wholesalers and retailers have bargained
with each other at arms’ length, negotiated
aggressively over teams of sale, and
otherwise behaved autonomously.

 Each entity seeks to maximise its own

profits, even at the expense of maximising
the profits for the system as a whole.
Channel Organisation

 Vertical Marketing Systems

Professionally managed and centrally

programmed networks, pre-engineered to
achieve operating economies and
maximum market impact
Physical Distribution or Logistics

The planning, implementation, and control of the

flow of materials and final goods from points of
origin to points of use to meet the needs of
customers at a profit.

Objective of Physical Distribution

Getting the right goods to the right places at the

right time for the least cost.
Physical Distribution Decisions

 Order Processing
 Warehousing
 Inventory
 Transportation
 Transportation Modes
Rail
Rail
Cost-effective
Cost-effectivefor
forshipping
shipping
bulk
bulkproducts;
products;easily
easilyavailable
available
Road
Road
Flexible
Flexibleininrouting
routing&&time
timeschedules;
schedules;efficient
efficient
for
forshort-hauls
short-haulsof
ofhigh
highvalue
valuegoods
goods
Water
Water
Low
Lowcost
costfor
forshipping
shippingbulky,
bulky,low-value,
low-value,
non-perishable
non-perishablegoods;
goods;slowest
slowestway
way
Pipeline
Pipeline
Ships
Shipspetroleum,
petroleum,natural
naturalgas,
gas,and
andchemicals
chemicals
from
fromsources
sourcesto
tomarkets
markets
Air
Air
High
Highcost;
cost;ideal
idealwhen
whenspeed
speedisisneeded
neededor
or
distance
distancemarkets
marketshave
haveto
tobe
bereached
reached
 Wholesaling

All activities involved in selling goods and

services to those buying for resale or
business use.
Types of Wholesalers

Merchant
Merchant Brokers/
Brokers/ Agents
Agents
Wholesaler
Wholesaler
They
TheyDon’t
Don’tTake
TakeTitle
Titleto
to
Independently
IndependentlyOwned
Owned the
theGoods,
Goods,and
andThey
They
Business
BusinessthatthatTakes
Takes Perform
PerformOnly
OnlyaaFew
Few
Title
Titleto
tothe
the Functions.
Functions.
Merchandise
Merchandise
ititHandles.
Handles.
Manufacturers’
Manufacturers’
Sales
Sales Branches
Branches
and
and Offices
Offices
Wholesaling
Wholesalingby
bySellers
Sellers
or
orBuyers
BuyersThemselves
Themselves
Rather
RatherThan
ThanThrough
Through
Independent
Independent
Wholesalers.
Wholesalers.
 Wholesalers Functions

• Selling and • Warehousing

promoting • Transportation
• Buying and • Financing
assortment • Risk bearing
building • Market
information
• Bulk breaking
 Retailing

All business activities involved with the

sale of goods and services to the final
consumer for personal, family or
household use.
 Different Ways to Classify Retail
Outlets

• Amount of Service
• Product Line Sold
• Relative Price Emphasis
• Nature of Business Premises
• Control of Outlets
• Type of Store Cluster
 Wheel of Retailing

The lifecycle of retailers, moving from an

entry position with low prices to gain
market share to eventually moving
upscale with higher-quality products
aimed at more affluent consumers.
 The Wheel of Retailing
With time, outlet adds
still more services
2.2.Outlet
Outletnow
nowhas:
has:
Higher prices
Higher prices 3.3.Outlet
Outletnow
nowhas:
has:
Higher
Highermargins
margins Still
Stillhigher
higherprices
prices
Higher
Higherstatus
status Still higher margins
Still higher margins
Still
Stillhigher
higherstatus
status
Passage
of time
As time passes,
outlet adds
services
44. .New
Newform
formofofoutlet
outlet
enters
entersretailing
retailing
1.1.Outlet
Outletstarts
startswith: environment
with: environmentwithwith
Low prices characteristics
Low prices characteristicsofof
Low
Lowmargins outlet
Low
margins outletininBox
Box11
Lowstatus
status
 Supply Chain Management
• The management of the flow of goods and services,
involving the movement and storage of raw materials,
work-in-process inventory, and finished goods from
points of origin to points of consumption.

• A long-term “partnership” among marketing channel

participants aimed at reducing inefficiencies, costs, and
redundancies in the logistical system in order to
provide high levels of customer service.

• Supply Chain Management views logistics as an

integral part of the marketing channel relationship.
Supply Chains & the Value Delivery Network
Supply Chain Partners

• Upstream partners include the set of firms that

supply raw material, components, parts, information,
finances, and expertise to create a product or
service.

• Downstream partners include the marketing

channels or distribution channels that look forward
toward the customer.

12-33
Strategic Alliances and Partnerships

Continuing and mutually supportive relationship

between the manufacturer and its channel members
in an effort to provide a highly motivated team,
network, and alliance of channel partners

Relationship Marketing

The practice of building long-term relations

with key parties - customers, suppliers,
distributors- in order to retain their long-term
preference and business
 What is Click & Mortar

Click and mortar is a type of business model that

includes both online and offline operations,
which typically include a website and a physical
store. A click-and-mortar company can offer
customers the benefits of fast online
transactions or traditional face-to-face service.

Source: Investopedia
 From Bricks to Clicks
Bricks go to clicks
• Nearly 70% of shoppers use the internet at some
stage of the shopping process, esp. for complex
products
• Recognizing the lost opportunity, major retailers
have developed online channels to complement
their physical store channels.
• Some retailers utilize customer data and in-store
Wi-Fi to connect with customers while they shop
to make special offers or guide them to areas of
interest.
• Click-and-mortar retailers benefit from having
customers browse while in the store.
 From Clicks to Bricks
Clicks go to bricks
• Pure online retailers are finding that, by
adding physical storefronts, they can increase
traffic on their websites while reducing their
digital marketing expenses.
• The stores typically have web kiosks that allow
shoppers to place orders right in the store.
• The practice has captured a segment of
shoppers who are not confident about buying
certain types of products from online-only
brands.
 Are traditional marketing channels dead?
Internet marketing has revolutionized the distribution
planning during the last decade… (and the revolution isn’t
over)!
• Sell to a geographically dispersed market
• Able to target and focus on specific segments
• Use of e-commerce technology (for payment, shopping
software, etc.)
• Relatively low set-up costs
• Paradigm shift in commerce and consumption
• Websites
• Email marketing
• Web marketing
• Search engine and pay-per-click marketing
• Social media
• Interactive marketing
Can traditional channels survive in the modern world?