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PPRINCIPLESRINCIPLES OFOF MMARKETINGARKETING
Marketing Channels
Prof. Rushen Chahal
Prof. Rushen Chahal 1
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1. Marketing channels1. Marketing channels
A marketing channel is a structure that links
a group of individuals or organisations
through which products/services are madeavailable to the consumer or industrial user.
The structure of channels can varydepending on the type of market, the
needs of the end consumer, and the type
of product.
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1. Marketing channels1. Marketing channels
Different types of intermediary who come
together to create different kinds of
distribution channels between manufacturerand consumer.
Different functions are performed by the
different intermediaries.
Not all intermediaries necessarily take legal
title or physical possession of the goods.
Prof. Rushen Chahal 3
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1. Marketing channels1. Marketing channels
Types of intermediaries:-
a. Wholesalers - do not normally deal with
the end consumers, instead deal withother intermediaries, usually retailers.Wholesalers do not take legal title to thegoods.
b. Retailers - sell direct to the consumerand may purchase direct from themanufacturer or wholesaler.
Prof. Rushen Chahal 4
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1. Marketing channels1. Marketing channels
c. Distributors and dealers - add valuethrough services associated with
stocking or selling inventory, credit andafter sales service.
d. Agents and brokers have legal
authority to act on ones behalf withouttaking legal title to the goods or
handling the products directly.
Prof. Rushen Chahal 5
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1. Marketing channels (B2C / B2B)1. Marketing channels (B2C / B2B)
Prof. Rushen Chahal 6
Channel levels:-the length ofthe channel
zero level
one level
two level three level
reverse flow
channel
B2C
B2B
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2. Functions of intermediaries2. Functions of intermediaries
Functions
Sales channel: Increase emotional buying
through information gathering, bargaining,
Delivery channel: Reduce storage costs for
producers or taking possession of goods
Service channel: Carry more added value
products and services, e.g. financing or taking
risk or assembling products/packaging
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2. Functions of intermediaries2. Functions of intermediaries
Push strategy:- using sales force or
trade promotions to promote
Pull strategy:- using advertising to
promote
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3. Channel Design3. Channel Design
1. Customers service needs:-
Lot size:- number of units allowed to purchase
Waiting time:- time between production and
arrival
Product variety:- product assortments
Spatial convenience:- ease of access
Service backup:- added value services
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3. Channel Design3. Channel Design
2.Channel Objectives:-
Channel structure - this should reflect the
market and product characteristics (marketcoverage, value, quantity sold, marginavailable, etc.).
Market coverage - considerations hereinclude who the end customer is, demandpatterns, frequency of ordering, degree ofcomparison shopping, associated services
required, etc. Prof. Rushen Chahal 10
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3. Channel Design3. Channel Design
Prof. Rushen Chahal 11
3. Channel / Distribution Strategies:-
Intensive:- maximum number of outlets or
shops to sell convenience goods, e.g. drinks
Selective:- some number of outlets to sell
shopping products, e.g. GE electrical products
Exclusive:- limiting the number of outlets.
Possibly a few dealers, e.g. rolls royce
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3. Channel Management3. Channel Management
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a. Selecting channel members
Depending on:-
Financial strength
Years in business
Expertise levels, e.g. stockholding, networks Cooperative and control issues, e.g. joint
ventures profit sharing
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3. Channel Management3. Channel Management
b. Training channel members:- planning
and providing programs to deal with channel
issues
c. Motivating and evaluating channel
memb
ers:- giving value and benefits tointermediaries and reinforcing message of
building capabilities and relations
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4. Channel Systems4. Channel Systems
1. Vertical marketing systems (VMS):- to
co-operate and maximise possible
benefits
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4. Channel Systems4. Channel Systems
Direct (manufacturer consumer) / Indirect
(manufacturer intermediary consumer)
There are 3 types of channel systems:-
1. Vertical marketing systems (VMS)
2. Horizontal marketing systems (HMS)3. Multi-channel marketing systems (MMS)
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4. Channel Systems (VMS)4. Channel Systems (VMS)
a. Corporate VMS exist where an organisation owns andoperates other levels in the channel, e.g. Bata retailhave its own production
b. Contractual VMS is the most common. There arecontractual agreements specifying rights and dutiesbetween producers and members, e.g. franchises,licenses.
c. Administered VMS achieve co-ordination and controlthrough the power of one of the channel members.
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4. Channel Systems (HMS)4. Channel Systems (HMS)
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2. Horizontal marketing systems:- different
companies come together to exploit untapped
opportunities
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4. Channel Systems4. Channel Systems
3. Multi-channel marketing systems:- using
different intermediaries to serve different
segments at the right time right place, e.g. Fuji
Xerox sells its copiers to copier distributors,
retailers at the same time.
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4. Channel Systems4. Channel Systems
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Channel Conflicts:- can happen due to otherdifferent corporate or marketing objectivesapart from place. See below