Place

A channel is a passageway that allows the happening

of certain processes
They are a set of interdependent organizations
involved in the process of making a product available
for use or consumption

1.
2.
3.
4.

Development of marketing channels took place in four

stages
Production era & distributive practices
Rapid expansion of industries & development of
inventory management
Marketing concept
Relationship marketing

Channels move the goods from the

producer to the end user& help close the
gaps such as those of time, space,
quantity, & variety

Marketing Distribution Channels

Extremely critical function
Create utility
Time
Place
Possession
Create efficient method of exchange through use
of intermediaries
There are two primary channels
Consumer channel
Business-to-business (b-2-b) channel
Channels create a supply chain

Marketing Distribution Channels

Very difficult to modify or change
Relationship-oriented
The combination of organizations and
individuals that perform the required
activities to link producers of products /
services to users of those products.
Just-in-time Inventory (JIT) a fact of life
today

Channel flow
Possession
Ownership
Financial flow
Information flow
Risk flow
negotiations

Functions performed by marketing

channels
Facilitate selling
Provide distribution efficiency
Break the bulk
Assemble products into assortment
Look after a part of physical distribution
Sub-distribution
Stock holding
Share the financial burden
Provide salesmanship to the firm
Provide pre-sale and after sale service
Assist in sales promotion
Assist in merchandising

Assists in introducing new products

Assists in implementing the price
mechanism
Assists in sales forecasting
Provide market intelligence
Maintain records
Take care of liaison requirements
Help diffuse innovations

Levels of channels
Zero
One
Two
Three
Reverse flow

Intensive distribution
Exclusive distribution
Selective distribution

Designing distribution channels

1)Analysing customer expectations of
service output
Lot size utility
Convenience utility
Selection utility
Service utility

2)Formulating objectives & constraints

3)Evaluation of distribution environment
4)Identifing major channel alternatives
Types of intermediaries
Number of intermediaries
Terms & responsibilities of channel members
5)Evaluating channel alternatives
Economic criteria
Control criteria
Adaptive criteria

Factors in choice of channels

1)Market consideration
-consumer or individual market
-number of potential consumers
-size of order
-buying habits of consumers
-geographical concentration of markets

2)Product considerations
-unit value
-product line
-standardized product
-technical nature
-bulk & weight
-perishability

3)company considerations
-volume of production
-Financial resources
-experience & competence of management
-services provided by the channels
-desire for control of channels

4)Middlemen considerations
-availability of desired middlemen
-financial ability
-attitude of middlemen
-sales potential
-cost
-competition & legal constraints

Types of Marketing Channels

Direct
Often seen in medical and professional
services
Most Business-to-business goods &
services
Use of the Internet
Indirect
Most consumer products
Some business-oriented products

Channel management decision

Channel member selection
Channel member training
Member evaluation & motivation
-coercive power
-reward power
-legitimate power
-expert power
-referent power
Modifying channel arrangement

Types of Marketing Channels

Vertical Marketing Systems
Corporate channel
Contractual channel
Administered channel
Single Channel System
Multiple Channel System

Channel conflicts
Vertical channel conflicts
Horizontal channel conflicts
Multichannel conflicts

Managing channel conflicts

Negotiations
Problem solving strategies
Persuasive mechanism
Legalistic strategies
Climate management
Cooperation & coordination

Legal & ethical issues in channel

management
Dual distribution
Exclusive dealing agreement
Tying agreements
Restricted sales territories
Dealers rights