primciples of marketing -marketing channels

8/3/2019 Primciples of Marketing -Marketing Channels

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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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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.



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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.



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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.



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1. Marketing channels (B2C / B2B)1. Marketing channels (B2C / B2B)


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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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 / 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


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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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)


2. Horizontal marketing systems:- different

companies come together to exploit untapped

opportunities


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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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Channel Conflicts:- can happen due to otherdifferent corporate or marketing objectivesapart from place. See below

primciples of marketing -marketing channels

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