UNIT 12

 
THE NATURE OF MARKETING CHANNELS.
WHAT IS A MARKETING CHANNEL?
• A marketing channel is also called distribution channel
• It is the path or the route a company’s products and
services take from the point of production to the end-user.
• Marketing channels are the ways that products and
services are made available for use by the consumers.
• All goods go through channels of distribution, and the
marketing will depend on the way the products are
distributed.
• Marketing channel is an important element of marketing
mix.
• a marketer must decide which route or
channel is best for his particular product.
• It is created through a series of relationships
between middlemen, or intermediaries, who
sell the product or service on behalf of the
company.
 TYPES OF MARKETING / DISTRIBUTION
CHANNELS
1. Direct Channel or Zero Level Channel
2. Indirect channel
1. Direct Channel or Zero Level Channel

Producer → Customer

• A direct or zero-level channel is one in which the

manufacturer sells directly to the end-user with no
intermediaries involved.
• This type of channel is often used by businesses that
produce perishable goods, expensive goods, or whose
target market is small and concentrated.
For example :
– selling directly through online platforms,
– jewellers use direct channels
Advantage
• The advantages of a direct distribution
channel are that it can provide lower prices
and the customer has more choice.
Disadvantage
• The disadvantages of a direct distribution
channel is the lack of opportunity to reach
customers who may require intermediaries. 
2. Indirect Channel
Producer → Intermediaries → Customer
• When the manufacturer takes the help of one
or more intermediaries to reach the end-user,
it is known as an indirect channel.
• Intermediaries include wholesaler, retailer,
agents
 TYPES OF INDIRECT CHANNELS
a) One-Level Channel
b) Two-level Channel
c) Three-level Channel
 TYPES OF INDIRECT CHANNELS
a) One-Level Channel
Producer → Retailer → Consumer
• A one-level channel has only one intermediary – the
retailer – between the manufacturer and the end-user.
• In this type of channel, the manufacturer sells directly
to a retailer, who then sells the product to the
consumer.
• This type of channel is often used for goods like
clothes, food, and home furnishings.
Advantage
• The company does not have to spend money on
opening stores, hiring employees to sells their
products to consumers.
Disadvantages
• The disadvantages of one-level distribution
channels are that the retailers set the prices and
the company does not have much control in
marketing their products to customers.
b) Two-Level Channel
Producer → Wholesaler → Retailer → Customer
• A most commonly used channel of distribution that
involves two intermediaries for the sale of products
is
–  the wholesaler and the retailer
• In this type of channel, the manufacturer sells to a
wholesaler who, in turn, sells to the retailer who
then sells to the consumer.
• A two-level distribution channel can help a
company sell their products within a larger area
• It is a most adopted distribution channel for
consumer products.
• Advantage
A two-level distribution channel can help a company sell
their products within a larger area than a one-level
channel can do. It will help the company reach a larger
amount of customers.
• Disadvantage
The disadvantage is that because it has more
intermediaries, there can be barriers to entry. One
example of a barrier to entry is if the price of the product
is too high then customers may not buy the product.
c) Three level channel
• means that there are three intermediaries involved
between the manufacturer and the customer for the
sale of products.
• The three intermediaries involved are Agent
Distribution, Wholesalers, and Retailers. 
• It is usually used when the goods are distributed
across the country and for that different distributors
are appointed for different areas. 
Producer → Agent→ Wholesaler or Retailer → Customer
• Advantage
The company does not have to invest too much on
advertising and sale forces, as it is done by the
agents.
• Disadvantage
The company has a little control on the prices
charged to final consumers. Some agents &
brokers can make price deals which harm the
image of the company.
 Wholesaler
• A wholesaler is normally an intermediary between the
producer and the retailer;
• Wholesalers are prepared to buy in considerable bulk from a
producer.
• They break bulk by distributing smaller quantities to
individual retailers.
• Goods are normally stored in regional warehouses where
they are distributed using the wholesaler's vehicles to
retailers.
• Wholesalers, like major retailers, may have international
networks and distribute worldwide. 
 FUNCTIONS OF WHOLESALER
• REFER SEMINAR SLIDES
 Retailer
• A retailer is an intermediary, which buys
products either from manufacturers or
from wholesalers and resells them to
consumers.
• The retailers usually accept responsibility for
storing stock and for any unsold items
• They may also have strong customer loyalty
which may is an attractive proposition for the
brands that they stock.
 FUNCTIONS OF RETAILER
• REFER SEMINAR SLIDES
 FACTORS AFFECTING THE SELECTION OF
DISTRIBUTION CHANNEL
1. Factors related to Product
2. Factors related to consumers or market
3. Factors related to intermediaries/middlemen
4. Factors related to producer / company

Refer seminar slides

End of Unit 12