Marketing ChannelsIt is a set of practices or activities necessary to transfer the ownership of goods, from the point of production to the point of consumptionRole of marketing channel in marketing strategies:•Links producers to buyers•Influences the firm’s pricing strategy•Customizes profits, offer credit etc.•Affect product strategy through branding, willingness to stock.

EvolutionAgricultural products produced as per physical reachIndustrial Revolution brought assortment,

transportation etc. which brought ‘traders’ into the system.

Concept of branding and economies of scale was significant. Distribution was relevant only for the ‘place’ part of the marketing mix

Effort put on selling brought a host of independent intermediaries in the form of retailers and wholesalers.

Two major developments in the US impacted the distribution networks automobile & highway systems

Early 1950’s are credited with laying the foundation of the marketing concept which means each channel member had to meet the needs of his customers.

Relationship marketing

Channel Formats Possible Product Driven1. Company owned Retail outlets:-2. Consignment selling agents:-The

company passes on the physical stocks to the intermediary who pays the company only after products have been sold.

3. Brokers:- The intermediary contacts the user and sells the product on behalf of the company without taking any physical possession of goods. He takes a commission when the sale is consummated.

4. Franchisees:- product and merchandising are decided by the company and the franchisee has to pay from the company to sell

Channel Formats Possible Seller driven1. Existing retailers: These people are

established in the markets and are used by end-users.

2. Supermarkets: They are much bigger retailers who not only sell a large number of branded products but also sell other grocery, stationery and clothing items.

3. Specialty stores:-They are retailers who sell only one type of merchandise only

4. Discount stores: These stores sell the same products and brands as the supermarkets but at much lower prices

Channel Formats Possible Service Driven1. Transporters: They provide service on

contract for companies to reach their ultimate customers.

2. Warehouse owner: They provide space for storage of products closer to consumer markets and reach them with minimum waiting time.

3. Couriers: It is similar to C&FA but handle much smaller packets

4. C&FA: They are on contract and provide both time and place utility- both storage and transport.

Channel levelsZero – level channel

Customer

Manufacturer

Channel levelsOne – level channel

Manufacturer

Retailer

End-user

Channel levelsTwo level Channel Manufactur

er

C&FA

Wholesaler

Retailer

End-user

FunctionsPhysical DistributionKeep contact with the company customers.Helps build long term relationships.Market feedback to a companyCompany rules, promotions etc. are

communicated to the customers.Negotiates price with the company and its

customers.Handles risks for price fluctuations.Handles final stage product assembly.Provides after sales service