Chapter-16

Channels of Marketing

Session-1 1

9
Objectives of the Session

To understand-
□ Nature of marketing channels
□ Role of marketing channels
□ Functions of marketing channels

Session-1 2

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 Nature of Marketing Channels
□ Facilitates the transfer of ownership &
physical exchange of products & service.
□ Determines the level of success/failure of the
business.

Nature

Diverse Complex

Session-1 3

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Role of Marketing
Channels
□ Channel flow
□ Channel levels:
* Intensive distribution
* Exclusive distribution
* Selective distribution
□ Service sector channels

Session-1 4

9
Channel Flow
Possession

Ownership

Financial flow

Information flow

Risk flow

Negotiation

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Session-19
Channel Levels
Intensive distribution

Exclusive distribution

Selective distribution

Company
SERVICE SECTOR CHANNELS showroom

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Session-19
Intensive distribution

“It is the form of distribution in which the

manufacturer distributes his products through
as many outlets as possible”.

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Exclusive distribution

“Limited number of intermediaries between

the producer & customers”.
Product & its
accessories

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Selective distribution

“This form, falls between two extremes of

exclusive & intensive distribution &
manufacturer uses more than one distribution
channel not all”.
Company
showroom

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Session-19
Functions and Importance of
Marketing Channels
promotion
Negotiation

Information

Breaking Bulk

Physical possession

Transfer of title

Financing
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Session-19
Functions and Importance of
Marketing Channels
Risk taking

Accumulating Bulk

Creating Assortments

Reducing Transactions

Transporting and storing

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Session-19
Types of intermediaries
□ Retailers
□ Wholesalers ( sells to retailers)
□ Distributors and dealers ( sales to
end consumers)
□ Franchises
□ Agents

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Levels of channels
Channel of Consumer market
1. Zero level: Manufacturer to consumer
Tupperware, aquaguard, factory outlets
2. One level: manufacturer to retailer to
consumer eg: big bazaar, walmart, reliance
fresh , etc
3. Two level: manufacturer to wholesalers to
retailers eg: FMCG products.
4. Three level: companies use these channels
when they enter foreign market

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Levels of channel
Channel of Industrial Market
1. Manufacturer to customer
2. Manufacturer to Agent to consumer
3. Manufacturer to distributor to
industrial consumer
4. Manufacturer to agent to distributor
to consumer.

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Factors affecting choices of
channel of distribution
1. Nature of product
A)Perishable product
B) size
C) Style
D) Unit value
2. Market ( consumer and business
market; highly concentrated and
scattered)
3. Competitors

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Factors affecting choices of
channel of distribution

4. Business environment
5. Technological inventions
6. Company ( large financial resources)
7. Cost of channel
8. Consumer buying habits
A) size of average sales
B) concentration of consumers

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Factors affecting choices of
channel of distribution
9.Middleman/ channel member: depends on
the strength and weakness of various types of
middleman performing various functions. Their
behavioural differences; location and size;
product lines, the number affect the design of
the channel.
a) Services provided by middleman
b) Attitude of middle man
c) Creditworthiness and financial capacity of
middleman

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Channel Management decisions
Channel member selection

Channel member training

Member motivation & evaluation

Modifying channel arrangement

Session-2 18

0
Channel member selection
“Organizations must focus on developing their
core competencies & for selection of their
channel partner there should be some
specific & effective selection criteria”.
1. Number of years in business
2. The lines carried by them
3. Growth and profit records
4. Solvency of the intermediary
5. Cooperativeness
6. Reputation

Session-2 19

0
Channel member training

“It is important because the channel member

actually deal with the end customers”.

Session-2 20

0
Motivation of channel
□ Coercive power:
□ Reward power
□ Legitimate power
□ Expert power
□ Referent power

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Evaluating channel member
□ Measuring performance against
standards such as
1. Sales quota attainment
2. Average inventory level
3. Customer delivery time
4. Treatment of damaged and lost goods
5. Cooperation in promotional and training
programme.

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Modifying channel arrangement

“It becomes very necessary when consumers’

purchase patterns change or when rapid
expansion of the market takes place” (may be
due to new entrant/technology).

Session-2 23

0
Retailing
□ Any business entity selling product
and service is “ Retailing”.
□ Retailing includes all the activities
involved in selling or renting
consumer products and services
directly to ultimate consumers for
their personal or home consumption.

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Types of retailers
□ Specialty store: Narrow product line.
□ Department store: several product lines
□ Supermarket: large, low-cost, low margin, self
service stores designed to meet total needs of
consumer.
□ Convenience store: small store in residential
area, often open for long time.
□ Discount store: standard or specialty
merchandise, low price, low margin , high
volume stores, eg: walmart

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Types of retailers
□ Off-price retailer
□ Superstore
□ Catalog showroom

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Marketing strategies
□ Target Market
□ Product Assortment/ Variety
□ Procurement
□ Services and atmosphere
□ Price decision
□ Communication Decision
□ Location Decision

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Wholesaling
□ The wholesaler is a trader, who
purchases goods in large quantities
from manufacturers and resells to
retailers in small quantities.
-----S.E.THOMAS

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Marketing strategies
1. Assembling and warehousing of the
goods.
2. Order booking and execution
3. Transportation of the goods
4. Financing of the business
5. Risk bearing
6. Grading and packing
7. Providing market information
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Physical distribution/ logistics/
supply chain management
□ Definition : physical distribution can be
defined as the set of operations for
tasks in planning, organizing and
controlling the actual flow of goods
whether raw materials, utility parts or
equipments and semi finished goods
from the point of source, production or
warehouse to the point of consumption
to meet the needs of customer or end-
users.
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Physical distribution/ logistics/
supply chain management
□ According to Philip Kotler: “Physical
distribution involves planning,
implementing and controlling the
physical flow of materials and final
goods from points of origin to points of
use to meet customer need at profit.”

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Activities involved in physical
distribution
□ Sales forecasting
□ Distribution planning
□ Production planning
□ Materials procurement
□ Inbound transportation
□ Receiving the materials

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Activities involved in physical
distribution
□ Inventory management
□ Packaging
□ In house warehousing
□ Customer orders
□ Out bound transportation
□ Field warehousing
□ Service after sales

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Summary
□ Channel management
□ Channels & conflicts
• Channel member selection
• Channel member training
• Member motivation &
evaluation
• Modifying channel
arrangement
• Legal & ethical issues
in channel management

• Types of channel conflicts

• Causes of channel conflicts
• Managing channel conflicts

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Session-20
Summary
Diverse
□ Nature of marketing channels Comple
x

□ Role of marketing channels

□ Functions of marketing channels

• Facilitating the exchange process
• Alleviating discrepancies
• Standardizing transactions
• Matching buyers & sellers
• Providing customer service

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Session-19