the marketing channels

Wednesday, April 12, 2023

Dr. Ashutosh Kumar 1

“Necessity is the mother of

Invention”



“God couldn’t be everywhere: therefore- He created mothers”

Similarly manufacturers couldn’t be omnipresent;

human needs created Distribution



THE MARKETING CHANNELS



KEY DEALERSDISTRIBUTORS

DIGICOMP + RCV

BTLDEMONSTRATIONS

DEALERS \ SUB DEALERSDEALERS \ SUB DEALERS

TYPE OF BUSINESS•Consumer Electronics•Cable Hard ware•Home appliances•Super Market•FMCG•Telephony

DIRECT SELLINGDIRECT SELLINGCALL CENTERDEMO VAN

RCV

CONSUMERSCONSUMERS

YOUR ROLE



The Marketing Channels

• Marketing channel is a set of institution that transfer the ownership of and move goods from the point of production to the point of consumption

• Independent organizations are called marketing intermediaries.



Q: Why Are Marketing Intermediaries Used?

Producer Typically produces goods:• At limited locations• In large quantities• With limited variety• Over the year

Consumer consumes goods:•All over the country at their own location•In limited quantity per consumer•With large variety/ assortment•Whenever they need



PUSH Effect



PULL Effect



The push & the pull selections

Producerpromotes

aggressively

ChannelsPromotes

aggressively

RetailerPromotes

aggressivelyConsumer

Push Strategy

ProducerPromotes

aggressively to Channels Retailer Consumer

Pull Strategy

A Push strategy involves the manufacturer for using the sales force and trade promotion activities to induce intermediaries to carry, promote and thus sell the product to the end users

A Pull strategy involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it.



Transportation Modes

Rail Cost-effective for shipping bulk products.

Rail Cost-effective for shipping bulk products.

WaterLow cost for shipping bulky, low-value,

non perishable goods, slowest form.

WaterLow cost for shipping bulky, low-value,

non perishable goods, slowest form.

TruckMost important carrier for consumer

goods, flexible.

TruckMost important carrier for consumer

goods, flexible.

AirHigh cost, ideal when speed is needed or

distant markets have to be reached

AirHigh cost, ideal when speed is needed or

distant markets have to be reached

PipelineCarry petroleum based products,

very low cost, requires little energy.

PipelineCarry petroleum based products,

very low cost, requires little energy.

InternetWeb sites have products available, used

especially for services.

InternetWeb sites have products available, used

especially for services.



Role of Marketing Channels

To fill the gaps between the production and consumption process.



The Role of Marketing Channels in Marketing Strategy

Channels provide the means by which the firm moves the goods and services it produces to ultimate users

Facilitate the exchange process by cutting the number of contacts necessary

Adjust for discrepancies in the market’s assortment of goods and services via sorting

Standardize exchange transactions



Think Efficiency and Effectiveness



Add a Distributor



How intermediaries improve exchange efficiencies



Channel Intermediaries

RetailerRetailer

MerchantWholesalerMerchant

Wholesaler

Agents andBrokers

Agents andBrokers

A channel intermediary that sells mainly to customers.

A channel intermediary that sells mainly to customers.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.



Channel Intermediaries

RetailersRetailersRetailersRetailers

Merchant Merchant WholesalersWholesalersMerchant Merchant

WholesalersWholesalers

Agents Agents andand

BrokersBrokers

Agents Agents andand

BrokersBrokers

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Take Take TitleTitle to Goods to GoodsTake Take TitleTitle to Goods to Goods

Do NOT Take Do NOT Take TitleTitle to Goods to GoodsDo NOT Take Do NOT Take TitleTitle to Goods to Goods



Channel functions & Flow

• Marketing Channels performs work of moving goods from producers to consumers.

• For this, they perform some key functions.

• They are:



P

R

O

D

U

C

E

R

WHOLESELLER

RETAILER

CONSUMER

Physical Possession (PP)

Ownership (Own)

Negotiation (N)

Promotion (Pr)

Financing (F)

Risk Taking (R)Ordering (Ord)Payment (P)

Information (I)

Fig: 1.1 Marketing Flows in the marketing Channel



Direct Vs. Indirect Channels

Direct channel- a marketing channel that does not use intermediaries to distribute the product. Why sell directly?

Indirect channel – a marketing channel where intermediaries are used to help distribute the product. Why sell indirectly?



Channel levels

Zero Level Channel (Direct Marketing Channel):Example: Dell.

One Level Channel:Example: Automobile.

Two Level Channel:Example: White Goods/ Consumer Durables.

Three Level Channel:Example: FMCG.



Dual Distribution: Network that moves products to a firm’s target market through more than one marketing channel

Reverse Channels: Channels designed to return goods to their producers

Example: Soft-drink Bottles/ Old Newspapers.



Channels for Consumer Products

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel



Channels for Business-to-Business Products

Producer

IndustrialUser


Producer

Govt.Buyer


Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

IndustrialIndustrialDistributorDistributor

Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel



Channel Design Decisions

To design a marketing channel, procedure to be followed is:

Analysing Customers Needs

Establishing Channel Objectives

Identifying Channel Alternatives

Evaluating Channel Options



(A) Analyzing Customer Needs:-Firstly, we try to understand:

“What”

“Where”

“Why”

“When”

“How”

Target Customer Buy ?



What are the service outputs

Waiting time

Breaking the bulk

Spatial convenience

Product assortment

Service back-up



Example of a service output delivered template

Service dimension Service output delivered1. Bulk-Breaking Units are delivered in ones

2. Spatial convenience There is at least one outlet for almost every

3 km radius

3. Waiting time Not more than 2 days for any model

4. Assortment Other consumer goods items including that of other competitors are available at all

theOutlets.

5. Installation support Available

6. After sales support Free for first two years, but available on payment afterwards. Also available at

every city from where the product was bought.

7. Consumer financing Available



(B) Establishing Channel Objectives:

•Channel objectives need to be stated in terms of targeted service output levels.

•Channel objectives vary with product characteristic. Product could be:

Perishable (bread, butter, newspaper etc) Bulky (building materials) Requiring Installation/maintenance services (Computer, AC) High Unit Value (generators & turbines)



• Channel design should take into account strengths and weakness of different types of intermediaries.

• Also, competitive channels should be understood & analysed.



(C ) Identifying Channel Alternatives:

Channel alternatives are described by:

• Types of Intermediaries Available.• Number of Intermediaries Needed.• Terms/ Responsibilities of each Channel Members.



Types of Intermediaries Company Sales Force, Manufacturer’s Agents, and Industrial

Distributors

Number of Intermediaries Intensive distribution Exclusive distribution Selective distribution

Terms & Responsibilities of Channel Members Price Policy Conditions of sale Distributor’s territorial rights Mutual services and responsibilities



Types of Intermediaries Company Sales Force, Manufacturer’s Agents, and

Industrial Distributors

Example: sale of food grains to rural market.1. Mobile vans for direct distribution2. Periodic markets (haats)3. Agricultural markets (mandis)

HUL’s Operation shakti, involves self-help groups(SHGs) of women to distribute its products in ruralareas.

ITC’s e-Choupal.



Number of Intermediaries

Exclusive distribution What is it? When is it used?

Selective distribution What is it? When is it used?

Intensive distribution What is it? When is it used?



Exclusive distribution

*

*



Exclusive Distribution:

• Involves limiting the number of intermediaries

• Used when company desires more control over services provided by intermediaries

• Intermediaries may agree not to carry competitive brands (Exclusive Dealing)



Exclusive Distribution:

• Example: Textile mills like Mafatlal group, Delhi cloth and General Mills & Bombay Dyeing

•Tata Engineering & Locomotive Co. Ltd (TELCO) and Ashok Leyland

•Pioma Industries, Ahmedabad, manufacturer of Rasna soft drink



Selective distribution

**

*

***



Selective Distribution:

• Involves use of more than a few, but less than all intermediaries who are willing to carry a particular product

• This enables producer to have just right amount of outlets to cover territory

• In turn helps producer to control services to customer better coverage. Coverage cost is lower for company.

• Example: Stihl company dealing with power equipment



Intensive distribution

****

**************

********

**********

******

***** * *****

***

***

*******

***



Intensive Distribution:

• Manufacturer places goods in as many outlets as possible

•Marketers of convenience products like cigarettes, chewing gum, salt, biscuits, bread, soaps, detergents & soft drinks want intensive distribution

•Example: Titan Watches, Asian Paints, HUL etc.



Intensive Distribution:

• Asian Paints distribution network consists of 21 sales offices, 3 agencies and 6000 dealers

•HUL network consists of 4000 redistribution stockists and 3,00,000 dealers spread over the entire country



Intensity of Distribution



Terms & Responsibilities of Channel Intermediaries

Producer must clearly indicate rights/ duties of each channel member. Each channel member’s profitability is to be ascertained & they should be treated with respect.

Elements of terms could be:

•Price policy:•Conditions of sale:•Distributor’s territorial rights:•Mutual services & responsibilities:



(D) Evaluating Channel Alternatives:

Channel alternatives evaluated against:

• Economic Criteria.• Control Criteria.• Adaptive Criteria.



Evaluating Channel Alternatives:

Lets take an examples: A Jodhpur based branded furniture manufacturer wants to sell furniture in the Southern markets. The manufacturer has to decide between two alternatives:

First Channel alternative is:-•Hiring Ten new sales representatives who will operate from offices in Bangalore, Chennai, and Hyderabad. They would receive a base salary plus commissions. Also, the company will have to meet the expenses of setting up the office-cum-residence for these employees



Evaluating Channel Alternatives:

Second Channel alternative is:-•Using a Bangalore based industrial distributor dealing in furniture with offices in Chennai and Hyderabad. The distributor has 30 sales representatives, who would receive commissions based on their respective sales.

???



DISCUSSION

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