MODULE TWO in

DISTRIBUTION
MANAGEMENT

| INSTR. REVENLIE G. GALAPIN |

 MODULE 2
EMERGENCE OF MARKETING CHANNELS

Learning Outcomes:

- Define and determine the need to have a marketing channels

- Discuss the background development of marketing channels
- Conduct a research in determining its structures and functions in the actual
workplace
- Determine the roles of the marketing channels and
- Design a framework for the structures in the implementation of the marketing
channels.

Marketing channel
- is a medium by which goods and services are made available to the customers for
use and consumption. For easier transfer of goods and services, both tangible and
intangible products, this concept in marketing channel will be emphasized.
- means by which goods moves from producers or manufacturers to consumers - A
level 1 channel of distribution or channel 1 of the distribution channel.
- Speed in product and service delivery and physical location significantly affects the
efficiency of a marketing channel. The middlemen or the channel of distribution
can affect the efficiency in transferring the products.
- another less known form of the marketing channel is the Dual Distribution
Channel.
- This channel is a less traditional form that allows the manufacturer or wholesaler
to reach the end-user by using more than one distribution channel. It can be a
wholesaler, retailer, jobber, agent etc.
- The producer can simultaneously reach the consumer through a direct market,
such as a website, or sell to another company or retailer that will reach the
consumer through another channel, i.e., a store.
- An example of this type of channel would be franchising. Franchising is offering
the right to sell other company's goods or services in an area (Merriam Webster
Dictionary).

MARKETING CHANNEL
- It operates as a team sharing resources and risks to move products and resources
from its point of origin to its point of final consumption.
- It helps unite organizations within marketing channels, particularly when the
organizations sense a chance to win a critical competition for market share.

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 - This was first used to describe the existence of a trade channel bridging producers
and users.
- It is any connection between individuals and/or organizations that allows or
contributes to the occurrence.
- It can be defined as an array of exchange relationships that create customer value
in the acquisition, consumption, and disposition of products and services.
- It is also called as Channel of Distribution or Trade Channel wherein it is a group
of interrelated intermediaries who directs products to consumer
- A marketing channel for channel of distribution or trade channel) is a group of
interrelated intermediaries who direct products to customers. It can be a salesman
broker, agent retailer, wholesaler etc.
- Merchants and agents are two major types of marketing intermediaries. The
purpose of this is to speed up the delivery or transfer of products to the ultimate or
final user of the products. They take title to merchandise and resell it, while agents
receive a commission or fee for expediting exchange. Agents enjoy the commission
from reselling the merchandise.
- Wholesalers and retailers are both intermediaries and can be either merchants or
agents.
- Marketing Channel is a set of independent organizations that help make a product
or service available for use or consumption by the consumer or business user
- Marketing department cannot go away or distribute products without the
intervention of the marketing channel which acts as a vehicle to transfer the goods
to their customers.
- It is the lifeblood where products transport from the manufacturer or the
producer.

THE MARKETING CHANNEL AS A SOCIAL SYSTEM

- When individuals or collectivities (firms/agencies) interact as members of
marketing channel, an inter-organizational social system exists.
- Networking can be used by the intermediaries to sell the product. One of the
company practices is to recruit more salesperson both fulltime and part time basis.
- World Financial Marketing Alliance, Inc has been created to continue a good
business opportunity. The company has the heart to encourage entrepreneurship
and promote financial awareness in the society. The commitment is to help realize
the dreams and develop a passion to share the concepts to others. The more
knowledgeable about how money works, it can help educate people financially
while also building a solid financial foundation for the family.
- The channel can be affected not only by economic variables, but also the
fundamental behavioral dimensions present in all social system such as conflict,
power, role, and communication processes. Aside from financial variables, the
other factors are disagreement influence, authority and communication barriers.

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Member of channel marketing
- Wholesalers - companies that specialize in moving goods from manufacturer to
retailer; they buy large quantities of product and then break the quantity down to
smaller lots that they then sell to many different retailers
- Bottlers - companies that buy ingredients in large quantity
- Dealers - companies that buy an inventory of product
- Retailers - store that sell products and services to consumer. Most of it include
drug store, food store and other specialty stores.

CHANNEL FUNCTIONS
- A marketing channel performs the work of moving goods from producer to
consumers overcoming the time, place, and possession gaps that separate goods
and services from those who need or want them. Members of the marketing
channel perform a number of key functions:
1. They gather information about potential and current customers, competitors and
other actors and forces in the marketing environment
2. They develop and disseminate persuasive communications to stimulate purchasing
3. They reach agreement on price and other terms so that transfer of ownership or
possession can be affected
4. They place orders with manufacturers;
5. They acquire the funds to finance inventories at different levels in the marketing
channel
6. They assume risks connected with carrying out channel work
7. They provide for the successive storage and movement of physical products,
8. They provide for buyers payment of their bills through banks and other financial
institutions, and
9. They oversee actual transfer of ownership from one organization or person to
another.

BACKGROUND DEVELOPMENT
Marketing channels always emerge out of a demand that marketplace needs be better
served. However, markets and their needs never stop changing, therefore, marketing
channels operate in a state of continuous change and must constantly adapt to confront
those changes. From its inception to its contemporary standing, the evolution of
marketing channels thought can be divided into four stages.

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THE PRODUCTION ERA AND DISTRIBUTIVE PRACTICES
The origins of marketing as an area of study are inextricably tied to distributive practices.
The earliest marketing courses, in fact, were essentially distribution courses Course titles
like Distributive and Regulative Industries of US Distribution of Agricultural Products'
and 'Techniques of Trade and Commerce abounded at Schools of Commerce during the
early 1900s. These courses addressed the ways in which marketing channels spawned
middlemen who, in turn, facilitated more efficient movements of goods and services from
producers to users. As American productivity and urbanization increased with each
passing decade of the twentieth century, the demand for a variety of production resources
to be used as manufacturing inputs naturally followed suit. Those urban centers who are
rapidly growing demanded larger and more diverse bundles of goods than has been
previously available. By 1929, retailing accounted for nearly $50 billion of US trade
Modern-looking market channels emerged in response the need for more cost- effective
ways of moving goods and raw resources. One description of marketing channels taken
from this era stated, 'Transportation and storage are concerned with those activities which
are necessary for the movement of goods through space and the carrying of goods through
time. Increasingly, facilitating devices were needed to transport, assemble, and reship
goods. Thus, the origins of the modern marketing channel cannot be separated from
purely distributive practices.

THE INSTITUTIONAL PERIOD AND SELLING ORIENTATION

The Gross National Product of the US grew at an extraordinary rate during the 1940s and
this industrial expansion contributed to the emergence of sizeable inventory stockpiles.
The cost of managing these inventories grew rapidly as well. Production techniques and
marketing channel processes each became more sophisticated during this period. Issues
pertaining to distribution primarily revolved around cost containment, controlling
inventory, and managing assets. Marketers were shifting from a production to a sales
orientation. The attitude that 'a good product will sell itself receded as marketers
encountered the need to expand sales and advertising expenditures to convince individual
consumers and organizations to buy their specific brands. The classic marketing mix or
Four Ps typology product, price, promotion, and place emerged as a guiding marketing
principle. Issues relating to distribution were relegated to the place domain. The i1dea that
relationships between buyers and sellers could be managed did not yet exist as a
Many new types of channel intermediaries surfaced during this period. For example,
industrial distributors emerged in the channel of distribution for most industrial products
and consumer durables. And by the late 1950s, sales by merchant wholesalers reached $100
billion. Producers were continuously seeking new ways to expand their market coverage
and distributive structures. Several giant retailers had emerged by this time, and small

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retailers were increasingly formalizing and specializing their operations to meet the needs
of a more refined marketplace.

THE MARKETING CONCEPT

In 1951, Robert Keith, Vice President of Marketing at Pillsbury, introduced a seminal

marketing principle to the business world: the marketing concept. According to the
marketing concept, the customer is the nucleus of all marketing mix decisions.
As such, organizations should only make what they can market instead of trying to market
what they have made. The marketing concept is intuitively appealing because its focus is
on the customer. In this sense, however, the marketing concept paints a very one sided
approach to reconciling a firm's mission with the markets it serves because it positions
marketers as reactive exchange partners adapting channels of distribution to meet market
needs.

RELATIONSHIP MARKETING ERA

The marketing concept proved a logical precursor to the Total Quality

Management (TQM) philosophy espoused by the late W. Edwards Deming. TQM suggests
a highly interactive approach in which customers become active partners with producers,
wholesalers, or retailers (channel members) to solve marketplace problems. The TQM
philosophy initiates a mindset among managers that a firm's relationship with its
customers fosters market-share gain and customer retention.
This mindset developed alongside an era in marketing theory and practice known as
relationship marketing. The relationship marketing era is characterized by a fundamental
shift from a customer voice to a customer dialogue. Rather than just reacting to customer-
initiated feedback, the channel member proactively initiates and maintains a participative
exchange with its customers. The concept of participation infers a high degree of
cooperation and coordination between customers and their suppliers. Close relationships
between customers and their suppliers have revolutionized marketing channels in two
ways:

 Close relationships emphasize a long-term, win-win exchange relationship based

on mutual trust between customers and their suppliers.

 They reinforce the relationship dimension of exchange that is at the heart of

marketing.

The progression through these four stages from a production to a relationship approach in
marketing channels- has been fostered by the evolving contributions channel
intermediaries have made toward the creation of customer value.

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EVOLUTION OF MARKETING CHANNELS

There have been major stages in the history of marketing, which are:

 The Trade Era: Production consisted in handmade goods that were limited
generally traded through exploration.

 The Production Orientation Era: Enter the industrial age. Since goods were
scarce, businesses focused mainly in manufacturing. As long as someone was
producing, someone else would want to buy it. This orientation rose to popularity
due to shortages in the market, hence creating the foundation of Jean-Baptiste
Say's famous remark: "Supply creates its own demand."

 The Sales Orientation Era: After the Industrial Revolution, competition grew
and focus turned to selling. Marketing, branding and sales became an important
pillar as outputs surpassed demand, and companies competed for customers.

 The Marketing Orientation Era: From the second half of the 20th century
onward, the saturation of markets led companies to bestow upon marketers the
opportunity to perform on a more strategic level. Through a profound knowledge
on the customer, these professionals were involved in what the company would
produce, its distribution channels and pricing strategy. Employees within an
organization were also motivated to acquire marketing knowledge, which set the
grounds to clients obtaining a general brand experience.

 The Relationship Marketing Era: The focus of companies shifts toward building
customer loyalty and developing relationships with clients. Authors such as Don
Peppers, Martha Rogers and Philip Kotler were instigators of the importance of
creating bonds, considering that "the cost of attracting a new customer is
estimated to be five times the cost of keeping a current customer happy.

 The Social/Marketing Era: It concentrates on social interaction and a real-time

connection with clients. Businesses are connected to current and potential
customers 24/7 and engagement is a critical success factor. Consider how much
marketing has changed in the last century and will continue to shift as channels of
communication, production levels and a society alter. As markets expand and new
marketing platforms emerge, the science and practice of this profession is being
transformed by the minute. What we consider today to be the fastest way to reach
our customers might be obsolete tomorrow. Therein lies the beauty of this
profession-change.

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CONTACTUAL EFFICIENCY

Channels consist of sets of marketing relationships that emerge from the exchange
process. An important function performed by intermediaries is their role in optimizing the
number of exchange relationships needed to complete transactions.
Contractual efficiency describes this movement toward a point of equilibrium between the
quantity and quality of exchange relationships between channel members.
Without channel intermediaries, each buyer would have to interact directly with each
seller, making for an extremely inefficient state of affairs.

SORTING

Organizations strive to ensure that all market offerings they produce are eventually
converted into goods and services consumed by those in their target market. The process
by which this market progression unfolds is called sorting. In a channels context, sorting
is often described as a smoothing function. This function entails the conversion of raw
materials to increasingly more refined forms until the goods are acceptable for use by the
final consumer. The product is then packaged and distributed to retailers.

Two principal tasks are associated with the sorting function. They are:

1. Categorizing-every channel at large amounts of heterogeneous supplies have to be

converted into smaller homogeneous subsets. The items within these categories are then
categorized further to satisfy the specific needs of individual consumers.

2. Breaking Bulk - it is necessary for intermediaries to break homogeneous lots into

smaller units. The opportunity to acquire smaller lots means smaller capital outflows are
necessary at a single time. The sorting function's contributions to profit are astounding
and convert billions of pesos of unproductive inventory into more sales.

MINIMIZING UNCERTAINTY

The role that intermediaries helps in reducing uncertainty is the most unnoticed tasks.
Several types of uncertainty develop normally in all market settings.

NEED UNCERTAINTY

Need uncertainty refers to the doubts that sellers often have regarding whether they
actually understand the needs of their customers. Most of the time neither sellers nor
buyers understand the exact machines, tools, or services required to reach optimal levels

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of productivity. Since intermediaries function as bridges linking sellers to buyers, they can
become much closer to both producers and users than producers and users are to each
other. In channels where there is a lot of need uncertainty, intermediaries generally evolve
into specialists. The ranks of intermediaries must then increase, while the roles they play
become more complex. Conversely, the number of intermediaries generally declines as
need uncertainty decreases.

MARKET UNCERTAINTY

Market uncertainty depends on the number of sources available for a product or service.
Market uncertainty is generally difficult to manage because it often results from
uncontrollable environment factors such as social, economic, and competitive factors.
One means by which organizations can reduce their market uncertainty is by broadening
their view of what marketing channels can do.

TRANSACTION UNCERTAINTY

Transaction uncertainty relates to channel flows between buyers and sellers. The delivery
of materials frequently must be timed to precisely imperfect coincide with the use of those
goods in the production processes of other products or services. Problems arising at any
point during these channel flows can lead to higher transaction uncertainty. Uncertainty
within marketing channels can be minimized through careful actions taken over a
prolonged period of exchange. Naturally, as exchange processes become standardized,
need, market, and transaction uncertainty is lessened. The functions performed by
marketing intermediaries concurrently satisfy the needs of channel members in several
ways.

1. Facilitating Strategic Aims

The most basic way that the needs of market channels can be assessed and then satisfied
center on the role channel intermediaries can perform in helping channel members reach
the goals mapped out in their strategic plans.

2. Fulfilling Interaction Requirements

This refers to the degree of coordination and on-site service required by members of a
marketing channel. Coordination provides the means by which harmony in ordering
systems, delivery timing, and merchandising is achieved between buyers and sellers.

3. Satisfying Delivery and Handling Requirements.

These questions typify the processes involved in matching channel functions to the need
for efficient resource management within marketing channels. Channel members are

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often unaware of their precise delivery and handling requirement needs. By minimizing
transaction uncertainty, channel intermediaries help clarify these processes.

4. Managing Inventory Requirements.

The costs of financing and carrying inventory differ across product categories and channel
members. The proficiency, with which they determine and ultimately satisfy warehousing,
stock-out, and product substitutability needs, sets intermediaries apart from each other.
Channel intermediaries help by bridging producers and their customers, are instrumental
in aligning an independent organization's mission with the market(s) it serves. Channel
intermediaries foster relationship-building by providing these fundamental functions in
the marketing channel.

STRUCTURES AND FUNCTIONS (FRAMEWORK)

The concept of channel structure is one that often is not explicitly defined in the
marketing literature. Perhaps the most typically discussed is length- the number of levels
of intermediaries in the channel.

Manufacturer Consumer (two-level)

Manufacturer Retailer Consumer (three-level)

Manufacturer Wholesaler Retailer Consumer (four-level)

Manufacturer Agent Wholesaler Retailer Consumer (five-level)

CHANNEL STRUCTURE

- Manufacturer to customer manufacturer makes the goods and sells them to the
consumer directly with no intermediary, such as a wholesaler, agent or retailer.
Goods come from the manufacturer to the user without an intermediary or
middleman. For example, a farmer may sell some produce directly to customers.
For example, a bakery may sell cakes and pies directly to customers.

- Manufacturer to retailer to consumer purchases are made by the retailer from the
manufacturer and then the retailer sells the merchandise to the consumer. This
channel is used by manufacturers who specialize in producing shopping goods. For
example, clothes, shoes, furniture and fine china. This merchandise may not be
needed immediately and the consumer may take her time and try on the items

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 before making a buying decision. Manufacturers that specialize in producing
shopping goods prefer this method of distribution.

- Manufacturer to wholesaler to customer consumers can buy directly from the

wholesaler. The wholesaler breaks down bulk packages for resale to the consumer.
The wholesaler reduces some of the cost to the consumer such as service cost or
sales force cost, which makes the purchase price cheaper for the consumer. For
example, shopping at some of the warehouse clubs, the customer may have to buy
a membership in order to buy directly from the wholesaler.

- Manufacturer to agent to wholesaler to retailer to customer distribution that

involves more than one intermediary involves an agent called in to be the
middleman and assist with the sale of the goods. An agent receives a commission
from the producer. Agents are useful when goods need to move quickly into the
market soon after the order is placed. For example, a fishery makes a large catch of
seafood; since fish is perishable it must be disposed of quickly. It is time
consuming for the fishery to contact many wholesalers all over the country so he
contacts an agent. The agent distributes the fish to the wholesalers. The
wholesalers sell to retailers and then retailers sell to consumers.

CHANNEL TYPES AND FUNCTIONS

Every manufacturer needs to distribute its product to customers and/or consumers. Some
do this directly; an industrial manufacturer with a small number of customers, or a
supplier of components to a larger manufacturer, a very few manufacturers of consumer
goods (such as Avon, which sells and distributes cosmetics directly to buyers in their
homes). The majority of companies, however, use intermediaries. There may be one or
more levels between manufacturer and consumer or customer, such as:

1. One level manufacturer retailer - consumer, or manufacturer distributor industrial

buyer
2. Two levels manufacturer wholesaler - retailer consumer, or manufacturer-agent-
distributor - buyer.
3. Three levels manufacturer - wholesaler - jobber - retailer - consumer.

There are many different functions performed by channel members:

1. Physical distributions -the transport and storage goods.
2. Matching - making available the assortment of goods and services desired by the
channel member's customers.

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3. Time and place - making them available at the time and in the place desired by the
customers and consumers.
4. Finance - finances the first three functions.
5. Transferring title - ensuring the legal and ownership passes to the final buyer.
6. Risk-taking - bearing part of the risk inherent in business.
7. Research and prospecting - finding out what potential buyers want.
8. Promotion and selling -persuading potential buyers to buy.
9. Service - pre-and after-sales service.
10. Support services - insurance, documentation, management.

CHANNEL STRUCTURES

Structures may change overtime. For instance, there has been a growth in what is called
"vertical marketing systems", in which there is a greater degree of control between the
different levels of the system than in a conventional system in which all members are
independent business making their own decisions. A vertical marketing system may
reflect vertical integration by a manufacturer. Another form is the contractual system in
which there are legalities between channel members, such as wholesaler-retailer voluntary
chains. Finally there franchise systems, which cover, for instance, Coca-cola's franchised
bottlers, motor manufacturer franchised dealers, and a wide variety of businesses from
fast-food outlets through hotels to car hire and print shops, as stated by Kotler.

Channels for consumer products- Producers can use different channels of distribution
in the process of supplying their products to the final consumers.

Consumers are the final or ultimate user of a finished product.

There are alternative ways to select type and number of channel.

1. The legal right and ownership of goods go on transferring from one to another channel
member before reaching the hands of final consumers. There must be a legality of
documents needed in the final transaction.

2. The levels and numbers of distribution channels should be selected and used carefully
considering the nature of products, market situation, firm's capacity, etc.

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Types of Marketing Channel

Distribution Channels are best described by the number of channel levels or it can be
stated that the number of channel levels determines the type of distribution channel that
a company adapts.

Company have its own way to distribute their products and sometimes they want an
outside marketing arm to sell their products, but most of the time they have inside
personnel who sell their product either in a fulltime or part time basis.

Each middleman who brings products or services, the consumer is a channel level.
Therefore, producers, distributors, and final consumers are part of channel level.

Below are examples of four channels generally adapted by the companies to bring their
goods and services to the consumers for use or consumption.

Direct Marketing Channel

Direct marketing channel: The first type of marketing channel is a direct marketing
channel. This structure has no middlemen and intermediary levels.
Goods and services are sold or serve directly to the customers/consumers.

Retailer Marketing Channel

Retailer marketing channel: This structure has middlemen and one intermediary level.
The market intermediary in this type of marketing channel is the retailer. The retailer is
the conduit of the manufacturer and the consumers. Here, goods and services are sold or
served indirectly to the consumers/customers through the retailers. These retailers get the
goods and resell them to the consumers at a higher price. The added amount will include
their operational expenses in bringing the products/services to the customers and their set
profits.

Wholesaler/Retailer Marketing Channel

Wholesaler/retailer marketing channel: This structure has middlemen and two

intermediary levels. The market intermediary in this type of marketing channel are the
wholesaler and the retailer. The wholesaler and the retailer are the conduits of the
manufacturer to the consumers. Here, goods and services are sold or served directly to the
consumers/ customers through first, the wholesalers who sell them to retailers. These
wholesalers purchase the goods in bulks at a certain price, more likely with big discounts.

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These discounts are shared by the wholesalers to retailers who find the business viable and
profitable. They purchase these products to sell to the financial consumers.

Wholesaler/Jobber/Retailer Marketing Channel

Wholesaler/jobber/retailer marketing channel: This structure has middlemen and three

intermediary levels. The market intermediaries in this type of marketing channel are the
wholesaler, the jobber, and the retailer. The wholesaler, jobber, and retailer are the
conduits of the manufacturer to the consumers. Here, goods and services are sold or
served indirectly to the consumers/customers through first, the wholesalers who sell them
to jobbers who the sell them to retailers. These wholesalers purchase the goods in bulks
with big discounts, a percent of which is shared to both jobbers and retailers. The retailers
sell these products to final consumers.

NUMBER OF MIDDLEMEN

A channel of distribution is a path that a product takes as it moves from the

manufacturing or producer to the final consumer. It is also known as trade channel or
marketing channel.

Under product trade channel, middlemen play a vital role. Middlemen serve as links
between producer and the ultimate consumer or industrial user.

The channel members are the manufacturers, wholesalers and retailer and ultimate
consumer. These institutions directly participate in the transfer of goods.
Middlemen are the wholesalers and retailers. Therefore, in a channel of distribution it
always include from products point of origin to consumption.

"The number of middlemen is always minus two (2) from the number of channel
members".

Types of Distribution Systems

The following are the different ways to present the systems used in the marketing
channels are created in order to cater the needs of other distribution process.

Conventional Distribution System "traditional/customary channel for g0ods, is the

most popular and widely used channel organization. In this structure, various channel
members make little or no effort to cooperate with each other. They simply buy and sell

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from each other: and that is all. Each channel member consider only his/her own best
interest and nothing else.

Vertical Marketing System (VMS) in contrast to Conventional Distribution System,

wherein the whole channel focuses at the end of the channel on the same target markets.
This type of distribution channel organization system is the vertical marketing system.

 Corporate Channel: Some corporations develop their own vertical marketing

systems. They do this by undergoing international expansions and/or buying other
firms. In a corporate vertical marketing system, a firm at one channel level owns
the firms at the next level or owns the entire channel. Middlemen can engage in
this vertical integration structure. For example, many grocery chains own food
processing facilities such as dairies that supply their own store.

 Administrative VMS: In an administered channel system, the channel members

informally agree to cooperate with each other. They can agree to schedule
ordering, standardized accounting activities, and coordinate promotion efforts. An
administered VMS coordinates distribution activities through the market and/or
economic power of one channel member or through the shared power of two
channel members. Typically brand and market position are effective enough to
gain the voluntary cooperation of retailers in the aspect of inventory levels,
advertising, and store displays.

 Contractual VMS: In a contractual channel system, the channel members agree

by contract to cooperate with each other. In this system, the members achieve
some of the advantages of corporate integration while retaining some of the
flexibility of a traditional channel system. In a contractual VMS, independent
firms, producers, wholesalers, and retailers operate under contracts that specify
how they will endeavor to improve distribution efficiency and effectiveness. Three
contractual systems have developed today. They are wholesaler-sponsored
voluntary chains, retailer owned cooperatives, and franchise system. In wholesaler-
sponsored voluntary chains, retailers are organized to compete with other large
chain organizations, while retailer owned cooperatives, organize new or joint firms
to do wholesaling. The franchise systems involve linking with franchisee to sell the
products and services to companies.

Coordinated Channel Marketing

Brands carry out online and offline advertising on behalf of channel partners to aid them
in generating sales of their branded products. Those online and offline marketing
initiatives can either be isolated or coordinated to inform one another.

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An alternative term is a distribution channel or 'route-to-market. It is a 'path or 'pipeline
through which goods and services flow in one direction (from vendor to the consumer),
and the payments generated by them flow in the opposite direction (from consumer to the
vendor). A marketing channel can be as short as being direct from the vendor to the
consumer or may include several inter-connected (usually independent but mutually
dependent) intermediaries such as wholesalers, distributors, agents, retailers. Each
intermediary receives the item at one pricing point and moves it to the next higher pricing
point until it reaches the final buyer.

Marketing Channels can be long term or short term

Short term channels are influenced by market factors such as: business users,
geographically concentrated, extensive technical knowledge and regular servicing
required, and large orders. Short term products are influenced by factors such as:
perishable, complex, and expensive. Short term producer factors include whether the
manufacturer has adequate resources to perform channel functions, Broad product line,
and channel control are important. Short term competitive factors include manufacturing
feels satisfied with marketing intermediaries’ performance in promoting products.

Long term market factors include consumers, geographically dispersed little technical
knowledge and regular servicing is not required, and small orders. Product factors for long
term marketing channels are durable, standardized, and inexpensive. Producer factors are
manufacturer who lacks adequate resources perform channel functions, limited product
line, and channel control is not important. The competitive factors consist of
manufacturer who feels dissatisfied with marketing intermediaries' performance in
promoting products.

ROLES OF MARKETING CHANNELS

1. To provide an effective link between production and the target consumer in

today's environment, the main question is who will perform this task and will it be
executed given the new tools of technology and management?"
2. Marketing channel decisions are among the most important factors facing
marketing managers. A company's channel decisions directly affect every other
marketing decisions. Companies often pay too little attention to their distribution
channels. Distribution channel decisions often involve long-term commitments to
other firms."
3. Marketing channel selection largely depended on two criteria. One consideration
is the circumstances existing in the market and the second is dependent on

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consumer needs. Furthermore, distribution channels may vary overtime. For
example, the channel for distributing beer has been redirected from clubs and
entertainment houses to supermarkets and groceries. Hence, there is a need for
marketers and their modes of distribution to be consistently aware of consumer
needs. This will help them keep their distribution methods updated."

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