Session 28 & 29 Channel Decisions

Manufacturing use intermediaries for their products to the users. Intermediaries constitute marketing channel.

Functions:Minimise the no. of contacts needed for

reaching consumers.Break the bulk and cater to tiny requirements.Provide Salesmanship.Help in price mechanism.Look after a part of physical distribution and

financing.Assist in MerchandisingProvide Market Intelligence.

Act as Change Agents and Generate Demand: Facilitate selling by being physically close to customers.

Take care of the flows involved in distribution: The physical flow of products.

Sub-distribution: Reselling Retransport Handling Accounting

Stock holding: Providing warehouse space Storing the stocks Bearing risks

Assist in MerchandizingAssist in introducing new products.Assist in developing sales forecast.Provide market intelligence and feedback.Maintain records.Take care of liaison requirements.

Types of Marketing Intermediaries: Sole-selling agent Marketer Carrying and Forwarding Agents (CFA’s) Redistribution stockist Stockist/Distributor/Wholesaler Semi-wholesaler Retailer/dealer Broker Franchisees Authorized representatives Commission agents Jobbers

Steps involved in Designing a Channel System1. Formulating the channel objectives2. Identifying the functions to be performed by

the channel.3. Analysing the product and linking the channel

design to the product characteristics.4. Evaluating the distribution environment,

including legal aspects.5. Evaluating competitor’s channel design.6. Evaluating company resources and matching

the channel design to the resources.7. Generating alternative designs, evaluating

them and selecting the one that suits the firm best.

CASTROL INDIA

Provide locational convenience to customers; make the products available everywhere.

Go for vast network of outlets.

Channel Objective Channel Design

RELIANCE TEXTILES (VIMAL)

Use channel to project the exclusive image of Vimal fabrics.

Go for exclusive showrooms in all cities.

Channel Objective Channel Design

ARCHIES GIFTS AND GREETINGS

Make purchase of greetings cards/gifts an enjoyable experience.

Convert low involvement purchase into high involvement purchase.

Stock a wide range of highly appealing merchandise.

Go for trendy interior design and peppy ambience.

Channel Objective Channel Design

Evaluating company resources and matching the channel design to the resources.

Firms with limited resources settle for conventional channels

Firms with larger resources have more options

Evaluating the alternatives and selecting the one that suits the firm best.

Economic evaluation, balancing cost, efficiency and risk: Conceptual evaluation, flexibility and controllability:

Types of Distribution ChannelsConsumer Channels

1. Manufacturer to consumer:2. Manufacturer to retailer to consumer3. Manufacturer to wholesaler to retailer to

consumer4. Manufacturer to agent to wholesaler to

retailer to consumers

Industrial Channels1. Manufacturer to Industrial consumer2. Manufacturer to agent to Industrial

consumer3. Manufacturer to distributor to Industrial

consumer4. Manufacturer to agent to distributor to

retailer to consumers

Service Channels1. Service Provider to consumer or

Industrial consumer2. Service Provider to agent to

consumer or Industrial Consumer3. Service Provider via internet to

consumer or Industrial customer.

Consumer ChannelsManufacturer to consumer:

Direct Marketing includes Personal Selling, Direct Mail, Telephone Selling, Internet.

Company contacts customers directly through salespersons, mail, telephone or internet and make sales.

Examples : Tupperware, Aqua guard, Eureka Forbes, TMC Cookware Limited, Avon Cosmetics, Amazon.com

Consumer Channels

Manufacturer to retailer to consumer Supermarkets, Corporate Retailers Examples : Wal-Mart, Spencer’s, Big

bazaar Retailers exercise considerable power

over manufacturers because of their enormous buying capabilities.

Consumer Channels

Manufacturer to wholesaler to retailer to consumer

Wholesalers buy in bulk from producers and sell smaller quantities to numerous retailers.

Example: Local Fancy Stores

Consumer Channels

Manufacturer to agent to wholesaler to retailer to consumer

Companies use these channels when they enter foreign markets.

They delegate the task of selling their product to an agent who does not take title to the goods.

DISTRIBUTION CHANNELS FOR CONSUMER GOODS

Manufacturer

Wholesaler

Manufacturer Agent Wholesaler Retailer Consumer

Consumer

Consumer

Consumer

RetailerManufacturer

RetailerManufacturer

Industrial Channels

1. Manufacturer to Industrial Customers Companies use these channels for expensive

products like heavy equipments and machines. Needs to be close relationship between

manufacturer and the customer because the product affects the operations of the buyer.

Seller has to participate in activities like installation, commissioning, quality control, and maintenance jointly with the buyer.

Seller is responsible for many aspects of the operations of the product long after the product is sold.

Industrial Channels

2. Manufacturer to agent to Industrial Customers Companies employ the services of an agent who may

sell a range of goods from several suppliers on commission basis.

Little control over the agent, who is unlikely t devote the same amount of time and attention as compared with the dedicated sales team.

Industrial Channels

3. Manufacturer to distributor to Industrial Customers Distributors enable customers to buy small quantities

locally. Distributors generates enquiries.

Industrial Channels

4. Manufacturer to agent to distributor to Industrial Customers

Manufacturer employs an agent rather than a dedicated sales force to serve distributors mainly due to cost considerations.

DISTRIBUTION CHANNELS FOR INDUSTRIAL GOODS

Manufacturer

Manufacturer Agent DistributorIndustrial Customer

Industrial Customer

Industrial Customer

Industrial Customer

DistributorManufacturer

AgentManufacturer

Service Channels

1. Service provider to consumer or industrial customer

Example : Health Care

2. Service provider to agent to consumer or industrial customerAgents are used when the service provider is geographically distant from customers and where it is not economical for the provider to establish their sales team.

Example : Insurance Products, Travel Agents