CHANNEL LEVELS
COMPILED BY: HAROLD MAGALLANES
1. Channel Levels
2. Marketing Channel System
3. IMPORTANCE OF DISTRIBUTION
Channel Levels
If the product or service is provided to the end user
ZERO LEVEL directly by the company ( Service Channels )
ONE LEVEL Consist of one intermediaries
TWO LEVEL Consist of two intermediaries
Flow of transaction
PRODUCER
WHOLESALER
RETAILER RETAILER
CONSUMER
MARKETING CHANNEL SYSTEM
• VERTICAL MARKETING SYSTEM
• HORIZONTAL MARKETING SYSTEM
• MULTI CHANNEL SYSTEM
VERTICAL MARKETING SYSTEM
Various parties like producers, wholesalers and retailers act
as a unified system to avoid conflicts
Improves operating efficiency and marketing
effectiveness
3 TYPES OF VERTICAL MARKETING SYSTEM
1. Corporate
2. Administered
3. Contractual
CORPORATE VMS
Combines successive stages of production and
distribution under single ownership
One member of the distribution channels owns the
other members.
EXAMPLE:
Supplier of food items could be also their own
supplying firms - Jollibee
ADMINISTERED VMS
Co – ordinates distribution activities
Gain market power by dominating a
channel
EXAMPLE
Coca-Cola, PEPSI Co., Gillette
CONTRACTUAL VMS
Independent producers, wholesalers and retailers
operate on a contract
Could take the forms of:
• Wholesaler sponsored voluntary chains
• Retailer co-operatives
• Manufacturer sponsored retail or wholesale franchise
• Franchise organizations
• Service firm sponsored retail franchise
ADVANTAGES OF VMS
1. Company can control all of the
elements of producing and selling a
product.
2. Anticipate problem
3. Increase efficiency
HORIZONTAL MARKETING SYSTEM
Twoor more unrelated companies join
together to pool resources and exploit an
emerging market opportunity
• In – store banking in hotels, big stores
• Retail outlets in petrol bunks
Vertical marketing system refers to a
marketing system that aims to attract
and reach businesses operating in
the same industry and seeks to
appeal to a specific demographic.
On the other hand, horizontal
marketing system refers to a
marketing system whereby a business
which is at the same level join
together to gain economies of scale
and seeks to appeal to a wide
demographic that is not specific.
MULTI – CHANNEL DISTRIBUTION
Company uses different channels to
reach same or different market
segments
Most FMCG companies have separate
networks for retail markets and
institution
BENEFITS OF MULTI-CHANNEL
Allows more target market segments to
be reached
Customers increasingly expect products
to be available via more than one
channel
Enables higher revenues
EXPECTATION FROM CHANNEL
Variety and Assortment at one location
Bulk Breaking
Close to customer location
Speed of delivery
Additional Service
Support
Installation
After Sales
Financial
EVALUATING THE MAJOR
CHANNEL ALTERNATIVES
Economic Criteria
Control Criteria
Adaptive Criteria
1. Economic Criteria
➢ The first step is to determine whether a company
sales force or a sales agency will produce more sales.
➢ The next step is to estimate the costs of selling
different volumes through each channel.
➢ The final step is comparing sales & costs.
NOTE: Each channel will produce a different level of
sales & costs.
2. Control Criteria
The agents may concentrate on other
customers’ products or they may lack
the skills to handle our products
3. Adaptive Criteria
The
channel members must make some degree of
commitment to each other for a Specified period of time.
NOTE: Without distribution even the best product or service
fails.
According to Jean-Jacques Lambin, marketer has two roles:
(1) To organize exchange through distribution and
(2) To organize communication.
IMPORTANCE OF DISTRIBUTION
1. Firstly, it affects sales - if it’s not available it can’t be sold. Most customers
won’t wait.
2. Secondly, distribution affects profits and competitiveness. This affects
cost competitiveness as well as profits since margins are squeezed by
distribution costs.
3. Thirdly, delivery is seen as part of the product influencing customer
satisfaction. Distribution and its associated customer service play a big
part in relationship marketing.
END OF THE PRESENTATION
THANK YOU FOR LISTENING
AND GOD BLESS
ANY QUESTION OR
CONCERN?