marketing channels

© Macmillan Publishers India Ltd. Chapter 27 / Slide 1

Marketing Channels


At the end of this chapter, you should be able to:

Understand the Nature and Importance of channelUnderstand the Pivotal Role Channels Play in Value Delivery Comprehend that Channels Provide Distributional Efficiency to

the Firm Grasp that there are Several Possible Patterns of Channels and

Many Types of Intermediaries

Chapter 27: Marketing Channels


Channel Plays a Pivotal Role in Value Delivery Supplies several products, in suitable assortments, as required Breaks the bulk and caters to small-size needs of consumers Takes care of the various flows involved in distribution Connects the Consumers to the Firm


Provides Distributional Efficiency to the Firm Minimizes the number of contacts needed for reaching consumers Provides salesmanship Helps in price mechanism Takes care of a part of physical distribution and financing Assists in merchandising Provides market intelligence Acts as change agents and generates demand A vital source of competitive advantage for the firm

Channel Functions Cannot be Eliminated Channels/middlemen are not to be viewed as parasites

Channel ‘Level’, Channel ‘Member’, and Channel ‘Length’

Functions performed by Marketing Channels

Facilitate selling by being physically close to customers Provide distribution efficiency to the firm by bridging the

manufacturer with the user. Break the bulk and cater to the tiny requirements of

buyers Assembles products into assortments to meet buyers

needs, match segments of supply with segments of demand

Look after a part of physical distribution/marketing logistics

Sub-distribution i.e. reselling, retransport, handling, accounting.


Functions performed by Marketing Channels

Stock holding Sharing financial burden Provide salesmanship to firms Presale and after sale services Assist in sales promotion, merchandizing, new product

introduction, price mechanism and sales forecasting provide market intelligence Maintain records Take care of liaison requirements Help diffusion of innovation/New product among

consumers and act as change agent and generate demand


Patterns of Channels and Types of Intermediaries


Manufacturer

Manufacturer sales man

User

Manufacturer

Manufacturer Show Room

User

Manufacturer

Retailer

User

Manufacturer

Franchisees

User

Manufacturer

Wholesaler/Distributor

Retailer

User

Manufacturer

Wholesaler/Distributor

Semi wholesaler

Retailer

User

Manufacturer

Marketing /sole selling

agent

Whole seller/distr

ibutor

Retailer

User

Semi whole seller


Types and Characteristics of Intermediaries

Sole-selling agent/marketer

C&F Agent (CFA)

Wholesaler/stockist /distributor

Semi-wholesaler

Retailer/dealer



Designing a Channel System Chapter 27: Marketing

Channels

Exhibit 27.2 Issues in Designing a Channel System (Page 510)


Designing a Channel System Formulating the Channel Objectives

Channel objectives will decide channel design Channel objectives differ from firm to firm; so, their channel designs differ

Identifying the Channel Functions Linking the Channel Design to Customer Characteristics Linking the Channel Design to Product Characteristics

Industrial and consumer products need different channels

Channels for industrial products Need for specialist distributors

Even within consumer products, channel requirements vary

• Special/premium products may need special channels

The product’s PLC stage too influences channel choice

Product influences the type of channel and number of members too


Chart 27.5 Channel Objectives (Pg 512)

Exhibit 27.3 Linkage Between Channel Design and Channel Objectives: Castrol, Reliance, Philips, Archies, Louis Philippe, ITC (Pg 513)

Chart 27.6 Channels for Industrial Products (Pg 514)


Designing a Channel System (…contd) Evaluating the Distribution Environment, Including Legal Aspects Evaluating Competitor’s Channel Designs Matching the Channel Design to Company Resources

Firms with larger resources have more options

Evaluating the Short-listed Alternatives Further and Selecting the Best Efficiency criterion Control criterion Adaptive criterion

A trade-off is inherent

Opting for Multi-Channel Model / Hybrid Distribution to Suit Diverse Customer Segments

Choosing Channel Intensity and Number of Tiers Choosing channel intensity: how many members, how close? How many tiers?


Exhibit 27.4 Exiting an Established Channel Structure is Difficult: P&G (Pg 517)


Designing a Channel System (…contd)

Channel Intensity• Intensive distribution• Selective distribution• Exclusive distribution

Within the same channel design, different firms may need different intensities

Choosing the number of tiers• Single-tier or Two-tier? Sometimes even three-tier considered• In recent years, number of tiers getting shorter

Firms choose different variants within the given design• HUL and Nirma use different variants within the same design

Adopting a Channel Design has a Bearing on Other Marketing Decisions

Wholesaling, Retailing and Other Channel Activities have to be Handled as One Unified System


Creating and Administering the Channel

Exhibit 27.5 Wrong Choice of Channel Intensity: P&G and Nestle (Page 519)

See SL 28.3, 28.4 and 28.5 in Chapter 28


Contemporary Channel Scenario in India

More and More Firms Take to a Multi-Channel Model Outsourcing of Channel Arrangement Becomes More Pronounced Radical Changes are Taking Place on the Retailing Front

Ascendancy of Multi- Format Retailing (MFR) Spread of Modern Format Stores (MFS)

Conventional Wholesale-Retail Trade Continues as the Mainstay Image and Profile of the Distributive Trade Undergo a Change

Distributors keep expanding and diversifying Distributing outfits, however, are still mostly family owned

Trade Margins Escalate as Costs of Distribution Keep Growing Power Equation among Distribution Triumvirate now Favour Lower Levels Distributors are Becoming Choosy Firms Go in for Different Forms of Non-Traditional Channel Arrangements Firms Embrace Different Forms of Non-Store Retailing Firms Embrace Different Forms of Direct Marketing


Chart 27.7 Contemporary Channel Scenario in India (Page 521)

marketing channels

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