Marketing Channels
A channel facilitates the transfer of
ownership and the physical exchange of
products and services.
Marketing channels vary from
simple to diverse and complex.
A simple channel links the
producer directly to the customer and a
complex one has several layers of
distributors linking the producer to the
end customer.
Role of Marketing Channels
An important role of a marketing
channel is to fill the gaps between the
production and consumption process.
These gaps can be in relation to
time, space, quantity and variety.
For consumer markets, the
possible levels of channels are zero,
one, two, and three levels based upon
the number of intermediaries between
the producer and the end consumers.
Depending on the number of
intermediaries required at each level,
distribution can be intensive, exclusive or
selective.
Intensive distribution – A form of distribution
in which the manufacturer distributes the
products through as many outlets as possible.
Exclusive distribution – A form of
distribution in which there are a limited
number of intermediaries between the
producer and the customer.
Selective distribution – It falls in between the
two extremes of exclusive and intensive
distribution.
Functions of Marketing Channels
The functions of marketing channel
are:
Facilitating the exchange process
Standardizing transactions
Matching buyers and sellers
Providing customer service
Help in Sales Promotion
Help in Demand Forecasting
Market Expansion
Creation of Utilities
Functions of Marketing Channels
They gather information about
potential and current customers,
competitors, and other factors and forces
in the marketing environment.
They develop communications to
stimulate purchasing.
They reach agreement on price and
other terms so that transfer of ownership
or possession can be effected.
They place orders with manufacturers.
They provide for the successive
storage and movement of physical
products.
Distribution
Distribution Channel
Channel Functions
Functions
Information
Information
Transfer
Transfer Communication
Communication
Payments
Payments Negotiation
Negotiation
Physical
Physical
Distribution Ordering
Ordering
Distribution
Risk
RiskTaking
Taking Financing
Financing
Channel
Channel Management
Management Decisions
Decisions
Selecting
Selecting
Training
Training
FEEDBACK
Motivating
Motivating
Evaluating
Evaluating
Designing Distribution Channels
Designing a distribution channel
involves making decisions for a new
distribution channel or for modifying
an existing one.
A properly designed channel will
enable the company to have a
competitive advantage in the market
place.
Distribution channels need to be
cost effective, cover the target market,
and adaptable in the long run.
Analyzing Customer Expectations of Service
Output
A marketing channel should be
designed after thorough analysis of target
customers’ expectations.
Formulating Objectives
Distribution channels should be
designed based on certain objectives. These
objectives may vary according to the size of
the firm.
Analysis of the channel members’ sales
volume, profitability, product portfolio, life
cycle, brand associations should be done by
the firm along with analysis of managerial
capabilities, performance, attitude, etc.
Evaluation of Distribution Environment
Evaluation of distribution channel
can be through analyzing, observing,
and forecasting the external factors
which could influence the channel
environment.
Evaluating Channel Alternatives
Evaluation of channel alternatives
by a firm should be based on three
criteria—economic, control, and
adaptive.
Channel Alternatives Selection
Channel Management
Channel management issues of a firm include
selection of channel members, their training,
motivation and evaluation, modifying the
channel arrangement, and the legal and
ethical issues. The success of a firm depends
on how efficiently it manages its channel
members.
Channel Member Selection
Selection of channel members should be
based on evaluation of the channel member’s
sales efficiency, product knowledge,
experience, administrative ability, and the
risk factors involved.
Channel Member’s Training
Channel members interact with the
end consumers more than the
manufacturers. Hence, manufacturers
conduct distributor training programs to
increase the efficiency of their
distributors.
Member Motivation and Evaluation
Manufacturers can adopt a
relationship marketing to strengthen their
relations and motivate distributors to
achieve higher sales levels.
The company can motivate the channel
members by helping distributors improve
their supply chain, reduce their capital
employed, enhance customer finance
schemes and adopt other measures like
improving sales promotional activities.
Modifying Channel Arrangement
Channel arrangement need to be
modified when there is change in
customer’s preferences, their purchase
patterns, when rapid market expansion
takes place, when a new competitor
enters the market, and if the existing
technology becomes obsolete.
Channel Dynamics
Channel dynamics refers to the impact
of changes in the environmental forces such as
economic, legal, political, social,
technological and competitive ones on the
marketing channel.
The characteristics which need to be
developed by channel members to adapt to the
changes in the environment are flexibility,
preparedness.
Channel members need to integrate
their functions so as to reduce costs, attain
economies of scale, stability in supplies, and
ensure better coordination among channel
members.
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