MARKETING CHANNEL

CONCEPT

A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Producers use intermediaries because they create greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than it can achieve on its own.

FUNCTIONS OF INTERMEDIARIES

1. Information2. Promotion3. Contact4. Matching5. Negotiation:6. Physical distribution7. Financing8. Risk taking

FUNCTIONS OF INTERMEDIARIES

1. Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.

2. Promotion: Developing and spreading persuasive communications about an offer.

FUNCTIONS OF INTERMEDIARIES

3. Contact: Finding and communicating with prospective buyers.

4. Matching: Shaping and fitting the offer to the

buyer’s needs, including activities such as

manufacturing, grading, assembling, and

packaging.

5. Negotiation: Reaching an agreement on price

and other terms of the offer so that ownership

or possession can be transferred.

6. Physical distribution: Transporting and storing goods.

7. Financing: Acquiring and using funds to cover the costs of the channel work.

8. Risk taking: Assuming the risks of carrying out the channel work.

TYPES OF MARKETING CHANNEL

1. Direct Marketing Channel: A marketing

channel that has no intermediary levels. The

company sells directly to consumers.

2. Indirect Marketing Channel: The channel

containing one or more intermediaries.

Direct Marketing Channel (Consumer Product)

Producer

Consumer

Direct Marketing Channel (Business Product)

Producer

Business Customer

Indirect Marketing Channel (Consumer Product)

Producer

Consumer Consumer

Retailer

Producer

Wholesaler

Retailer

Indirect Marketing Channel ( Business Product)

Producer

Business Distributor

Business Customer

Producer

Manufacturer’sRepresentativesor sales branch

Business Distributor

Business Customer

FACTORS AFFECTING CHOICE OF CHANNEL

A. Market Consideration:

- Type of market- Number of Potential customers- Geographic Concentration of the Market- Order Size

B. Product Considerations:- Unit value- Perish ability- Technical Nature of the Product

C. Middlemen Considerations:- Services provided by middlemen- Availability of middlemen- Attitude of middlemen towards producer’s

policies.

D. Company Considerations:- Desire for channel control- Service provided by seller- Ability of Management- Financial Resources.

E. Environmental Considerations:- Technological Advancement- Transportation Facilities- Storage Facilities

STEPS IN CHANNEL CHOICE DECISION

Designing an effective channel system requires:

1.Analyzing Customers Needs.

2.Setting Channel Objectives

3.Identifying Major Alternatives

4.Evaluating Major Alternatives.

1. Analyzing Customers Needs

Designing the marketing channel starts with finding out what

target consumers want from the channel. - Do consumers want to buy from nearby locations or are they

willing to travel to more distant and centralized locations? - Would customers rather buy in person, by phone, or online?- Do consumers want many add-on services (delivery,

installation, repairs), or will they obtain these services elsewhere?

2. Setting Channel Objectives

1. Which channel and intermediaries will provide the best coverage of the target market?

- Intensive distribution ( convenience goods)- Exclusive distribution (specialty goods)- Selective distribution (shopping goods)

2. Which channel and intermediaries will best satisfy the buying requirements of the target market?

3. Which channel and intermediaries will be most profitable?

The company’s channel objectives are also influenced by

the nature of the company, its products, its marketing

intermediaries, its competitors, and the environment.

3. Identifying Major Alternatives

• When the company has defined its channel

objectives, it should next identify its major

Channel alternatives in terms of:- the types of intermediaries,- the number of intermediaries, and the

- responsibilities of each channel member.

4. Evaluating Major Alternatives.

A company has to choose one channel out of

several channel alternatives. Each alternative

should be evaluated against:• (a) Economic, • (b) Control, and• (c) Adaptability criteria.

Conflict in Marketing Channels

Channel conflict arises when one channel

member believes another channel member is

engaged in behavior that prevents it from

attaining its goals.

1.Vertical conflict: It occurs between different levels in a channel.

2. Horizontal conflict: It occurs between intermediaries at the same level in the channel.

Types of Conflicts

1. Vertical conflict: It occurs between different levels in a channel.

2. Horizontal conflict: It occurs between intermediaries at the same level in the channel.

Important Reasons of Channel conflict

1. Duel distribution.

2. Vertical Integration.

3. Exclusive dealing

4. Tying agreements

5. Refusal to deal and

6. Resale restrictions

(Sherman Act 1890) ; Clayton Act (1914)