Channel-

Structure
Strategy
Objectives
 What is the nature of marketing channels?
 How do channel firms organize to do the work of the
channel?
 What problems do companies face in designing and
managing their channels?
 What role does physical distribution play in
attracting and satisfying customers?
 What are the changes taking place among channel
institutions?
Marketing Channel Functions
 Physical distribution. Transporting and storing
goods.
 Financing. Acquiring and using funds to cover the
costs of the channel work.
 Risk taking. Assuming the risks of carrying oi.it
the channel work.
Channel Levels
 A layer of intermediaries that performs some work
in bringing the product and its ownership closer to
the final buyer.
 The number of intermediary levels indicates the
length of a channel.
CHANNEL-STRUCTURE
STRATEGY
 The channel-structure strategy refers to the number of
intermediaries that may be employed in moving goods
from manufacturers to customers.
 A company may undertake to distribute its goods to
customers or retailers without involving any intermediary.
This strategy constitutes the shortest channel and may be
labelled a direct distribution strategy.
 Alternatively, goods may pass through one or more
intermediaries, such as wholesalers or agents. This is an
indirect distribution strategy.
Channel-Design Decisions
 Analyzing Customers' Desired Service Output
Levels
 Lot size
 Waiting and delivery time
 Spatial convenience
 Product variety
 Service backup
Channel-Design Decisions
 Establishing Objectives and Constraints
 product characteristics
 Marketers must adapt their channel objectives to the
larger environment
 Legal regulations and restrictions
Channel-Design Decisions
 Identifying and Evaluating Major Channel Alternatives
 Types Of Intermediaries
 Number Of Intermediaries
 Exclusive Distribution
 Selective Distribution
 Extensive Distribution
 Terms and Responsibility of channel members
 Price policy
 Conditions of sale
 Distributors' territorial rights
 Mutual services and responsibilities
Channel-Design Decisions
 Evaluating the Major Alternatives
 ECONOMIC CRITERIA
 CONTROL AND ADAPTIVE CRITERIA
Channel-Management Decisions

Training and
Selecting Channel Evaluating Channel
Motivating Channel
Members Members
Members
Channel Behaviour
 distributionchannel consists of firms that have
banded together and are dependent on each other
to achieve a common goal
 Each channel member plays a role in the channel
and specializes in performing one or more
functions
For example, Sony' role is to produce hi-fi
equipment that consumers will like and to create
demand through national and worldwide advertising.
The role of the specialist shops, department stores
and other independent outlets, that stock and sell
Sony' products is to display these items in
convenient locations, to answer buyers' questions, to
close sales and to provide a good level of customer
service. The channel will be most effective when
each member is assigned the tasks it can do best.
 Ideally, because the success of individual channel
members depends on overall channel success, all
channel firms should work together smoothly to secure
healthy margins or profitable sales.
 They should understand and accept their roles, co-
ordinate their goals and activities and co-operate to
attain overall channel goals.
 By co-operating, they can more effectively sense, serve
and satisfy the target market, thereby creating win-win
situations which they can mutually benefit from.
channel conflict
 Although channel members are dependent on one
another, they often act alone in their own short-term best
interests.
 They often disagree on the roles that each should play -
that is, on who should do what and for what rewards.
 Such disagreements over goals and roles generate
channel conflict.
 Conflict can occur at two levels.
 Horizontal Channel Conflict
 Vertical Channel Conflict
Horizontal Channel Conflict
 Conflict among firms at the same level of the channel.
 For instance, dealers may complain about other
dealers in the town that steal sales from them by being
too aggressive in their pricing and advertising, or by
selling outside their assigned territories.
 Car dealers, consumer appliance outlets and/or
industrial equipment dealers that do not have sole
distribution rights for the manufacturer's brand often
encounter such conflict
Vertical Channel Conflict
 refers to conflicts between different levels of the
same channel.
 For example, in the pharmaceutical industry,
concentration of the distribution systems in some
countries results in enhanced negotiating power for
channel intermediaries, particularly the big
wholesalers. Drug companies have to work harder
to manage their relationship with distributors and
other vital channel partners and to minimize conflict
Causes of Channel Conflict
 Goal incompatibility.
 Unclear roles and rights.
 Differences in perception.
 Intermediaries' dependence on the manufacturer.
Managing Channel Conflict
 adoption of superordinate goals
 exchange persons between two or more channel levels
 encouraging joint membership in and between trade
associations.
 Co-optation is an effort by one organization to win the
support of the leaders of another organization by
including them in advisory councils, boards of
directors, and the like
 diplomacy, mediation, or arbitration
Vertical Marketing Systems
 A conventional marketing channel comprises an
independent producer, wholesaler(s), and
retailer(s).
 Each is a separate business seeking to maximize
its own profits, even if this goal reduces profit for
the system as a whole.
 No channel member has complete or substantial
control over other members
Vertical Marketing Systems
 A vertical marketing system (VMS), by contrast,
comprises the producer. wholesaler(s), and
retailer(s) acting as a unified system.
 One channel member, the channel captain, owns
the others or franchises them or has so much
power that they all cooperate.
Vertical Marketing Systems
 Vertical marketing systems (VMSs) arose as a
result of strong channel members' attempts to
control channel behavior and eliminate the conflict
that results when independent members pursue
their own objectives.
 VMSs achieve economies through size, bargaining
power, and elimination of duplicated services
Types of VMS
 A corporate VMS combines successive stages of production and
distribution under single ownership
 Administered VMS
 An administered VMS coordinates successive stages of production and
distribution through the size and power of one of the members.
 Manufacturers of a dominant brand are able to secure strong trade
cooperation and support from resellers.
 CONTRACTUAL VMS
 A contractual VMS consists of independent firms at different levels of
production and distribution, integrating their programs on a
contractual basis to obtain more economies or sales impact than they
could achieve alone.
Horizontal Marketing Systems
 Two or more unrelated companies put together
resources or programs to exploit an emerging
marketing opportunity.
 Each company lacks the capital, know-how,
production, or marketing resources to venture
alone, or it is afraid of the risk.
 The companies might work with each other on a
temporary or permanent basis or create a joint
venture company.
E-Commerce Marketing Practices
 E-business describes the use of electronic means and
platforms to conduct a company's business.
 E-commerce means that the company or site offers to
transact or facilitate the selling of products and services
online.
 E-purchasing means companies decide to purchase goods,
services, and information from various online suppliers.
 E-marketing describes company efforts to inform buyers,
communicate, promote, and sell its products and services
over the Internet.
Pure-Click Companies
 those that have launched a Web site without any
previous existence as a firm
 There are several kinds of pure-click companies:
search engines, Internet service providers (ISPs) ,
commerce sites, transaction sites, content sites,
and enabler sites. Commerce sites sell all types of
products and services, notably books, music, toys,
insurance, stocks, clothes, financial services, and
so on.
brick-and-click
 existing companies that have added an online site
for information or e-commerce.