MARKETING CHANNEL ELEGANCE OF MARKETING CHANNELS

MARKETING CHANNEL
 A marketing channel is a medium by which goods and services are made available to the
customers for use and consumption. For easier transfer of goods and services, both tangible and
intangible products, this concept in marketing channel will be emphasized.
DUAL DISTRIBUTION CHANNEL
 Another less known form of the marketing channel.
 This channel is a less traditional form that allows the manufacturer or wholesaler to reach the
end-user by using more than one distribution channel.
 It can be a wholesaler, retailer, jobber, agent etc.
MARKETING CHANNEL
 Marketing channels operate as a team, sharing resources and risks to move products and
resources from origin to final consumption.
 They unite organizations within marketing channels to seize market share opportunities.
 Initially used to describe trade channels linking producers and users.
 Any connection facilitating exchange between individuals or organizations.
 Also known as Channel of Distribution or Trade Channel.
 Consists of interrelated intermediaries directing products to consumers.
 Types of intermediaries include salesmen, brokers, agents, retailers, and wholesalers.Major
types of marketing intermediaries are merchants and agents.
 Wholesalers and retailers can act as merchants or agents.
 Marketing channels make products or services available to consumers or business users.
 They serve as a vehicle for transferring goods from manufacturers to customers.
 Marketing mix includes "place," which refers to placing products within reach of consumers.
 Distribution marketing structure ensures convenient accessibility of goods to consumers.
 Marketing channel decisions significantly impact other marketing decisions.
 Distribution channel decisions involve long-term commitments and are often overlooked
CHANNEL FUNCTIONS
 They place orders with manufacturers
 They acquire the funds to finance inventories at different levels in the marketing channel.
MARKETING CHANNEL AS A SOCIAL SYSTEM
 When individuals or firms interact within a marketing channel, it forms an inter-organizational
social system.
 Intermediaries can utilize networking to facilitate product sales.
 Companies may recruit additional full-time and part-time salespersons as a practice.
 World Financial Marketing Alliance, Inc. aims to foster entrepreneurship and financial awareness
in society.
 The company is committed to helping individuals realize their dreams and share financial
concepts with others.
 Increasing financial knowledge can empower individuals and families to build a solid financial
foundation.
  Economic variables can impact marketing channels, along with behavioral dimensions like
conflict, power dynamics, roles, and communication processes.
 Other factors influencing the channel include disagreements, influence, authority, and
communication barriers.
MEMBERS OF MARKETING
 Wholesalers - companies that specialize in moving goods from manufacturers to retailer;
they buy large quantities of product and then break the quantity down to smaller lots that
they then sell to many different retailers.
 Bottlers - companies that buy ingredients in large quantity.
 Dealers - companies that buy an inventory of product.
THE PRODUCTION ERA AND DISTRIBUTIVE PRACTICES
 The origins of marketing are closely linked to distributive practices.
 Early marketing courses primarily focused on distribution.
 Course titles such as 'Distributive and Regulative Industries of US Distribution of Agricultural
Products' and 'Techniques of Trade and Commerce' were common in Schools of Commerce
during the early 1900s.
 These courses examined how marketing channels gave rise to middlemen, facilitating more
efficient movement of goods and services.
 Increasing American productivity and urbanization led to a growing demand for diverse
production resources.
 Urban centers demanded larger and more varied bundles of goods.
 By 1929, retailing accounted for nearly $50 billion of US trade.
 Modern marketing channels emerged to address the need for cost-effective transportation of
goods and raw materials.
INSTITUTIONAL PERIOD AND SELLING ORIENTATION
 The Gross National Product (GNP) of the US experienced remarkable growth in the 1940s,
leading to substantial inventory stockpiles.
 Both production techniques and marketing channel processes became more sophisticated
during this period.
 Marketers transitioned from a production to a sales orientation, recognizing the need to expand
sales and advertising expenditures to persuade consumers and organizations to purchase their
brands.
 The classic marketing mix, consisting of product, price, promotion, and place, emerged as a
foundational marketing principle.
 Distribution issues were primarily categorized under the "place" element of the marketing mix.
 Various new types of channel intermediaries appeared, including industrial distributors for
industrial products and consumer durables.
 By the late 1950s, sales by merchant wholesalers had reached $100 billion.
MARKETING CONCEPT
 In 1951, Robert Keith, Vice President of Marketing at Pillsbury, introduced a seminal marketing
principle to the business world: the marketing concept. According to the marketing concept, the
customer is the nucleus of all marketing mix decisions.
RELATIONSHIP MARKETING ERA
 The marketing concept proved a logical precursor to the Total Quality Management (TQM)
philosophy espoused by the late W. Edwards Deming.
 TQM suggests a highly interactive approach in which customers become active partners with
producers, wholesalers, or retailers (channel members) to solve marketplace problems.
 The TQM philosophy initiates a mindset among managers that a firm's relationship with its
customers fosters market-share gain and customer retention.
 The relationship marketing era is characterized by a fundamental shift from a customer voice to
a customer dialogue. Close relationships between customers and their suppliers have
revolutionized marketing channels in two ways
 Close relationships emphasize a long-term, win-win exchange relationship based on mutual trust
between customers and their suppliers.
 They reinforce the relationship dimension of exchange that is at the heart of marketing.
EVOLUTION OF MARKETING CHANNELS
 The Trade Era - Production consisted in handmade goods that were limited and generally traded
through exploration.
 The Production Orientation Era - Enter the industrial age. Since goods were scarce, businesses
focused mainly in manufacturing.
 The Sales Orientation Era - After the Industrial Revolution, competition grew and focus turned to
selling. Marketing, branding and sales became an important pillar as outputs surpassed demand,
and companies competed for customers.
 The Marketing Orientation Era - From the second half of the 20th century onward, the
saturation of markets led companies to bestow upon marketers the opportunity to perform on a
more strategic level.
 The Relationship Marketing Era - The focus of companies shifts toward building customer loyalty
and developing relationships with clients. Authors such as Don Peppers, Martha Rogers and
Philip Kotler were instigators of the importance of creating bonds, considering that "the cost of
attracting a new customer is estimated to be five times the cost of keeping a current customer
happy."
 The Social /Marketing Era - It concentrates on social interaction and a real-time connection with
clients. Businesses are connected to current and potential customers 24/7 and engagement is a
critical success factor.
CONTACTUAL EFFICIENCY - Channels consist of sets of marketing relationships that emerge from the
exchange process. An important function performed by intermediaries is their role in optimizing the
number of exchange relationships needed to complete transactions. Contactual efficiency describes this
movement toward a point of equilibrium between the quantity and quality of exchange relationships
between channel members.
SORTING
 In a channels context, sorting is often described as a smoothing function. This function entails
the conversion of raw materials to increasingly more refined forms until the goods are
acceptable for use by the final consumer. The product is then packaged and distributed to
retailers.
Two principal tasks are associated with the sorting function. They are:
1. Categorizing - every channel at large amounts of heterogeneous supplies have to be converted into
smaller homogeneous subsets.
2. Breaking Bulk - it is necessary for intermediaries to break homogeneous lots into smaller units.
MINIMIZING UNCERTAINTY - The role that intermediaries helps in reducing uncertainty, is the most
unnoticed tasks. Several types of uncertainty develop normally in all market settings.
NEED UNCERTAINTY - Need uncertainty refers to the doubts that sellers often have regarding whether
they actually understand the needs of their customers. Most of the time neither sellers nor buyers
understand the exact machines, tools, or services required to reach optimal levels of productivity.
MARKET UNCERTAINTY - Market uncertainty depends on the number of sources available for a product
or service. Market uncertainty is generally difficult to manage because it often results from
uncontrollable environment factors such as social, economic, and competitive factors.
TRANSACTION UNCERTAINTY - Transaction uncertainty relates to channel flows between buyers and
sellers. The delivery of materials frequently must be timed to precisely imperfect coincide with the use
of those goods in the production processes of other products or services.
 Facilitating Strategic - Aims The most basic way that the needs of market channels can be
assessed and then satisfied center on the role channel intermediaries can perform in helping
channel members reach the goals mapped out in their strategic plans.
 Fulfilling Interaction Requirements - This refers to the degree of coordination and on-site service
required by members of a marketing channel.
 Satisfying Delivery and Handling Requirements - These questions typify the processes involved in
matching channel functions to the need for efficient resource management within marketing
channels.
 Managing Inventory Requirements - The costs. of financing and carrying inventory differ across
product categories and channel members. The proficiency, with which they determine and
ultimately satisfy warehousing, stock-out, and product substitutability needs, sets intermediaries
apart from each other.
CHANNEL STRUCTURE
 Manufacturer to customer: Goods are produced and sold directly to consumers without
intermediaries, as seen with farmers selling produce or bakeries selling baked goods.
 Manufacturer to retailer to consumer: Retailers purchase merchandise from manufacturers and
then sell it to consumers, typically used for shopping goods like clothes or furniture.
 Manufacturer to wholesaler to customer: Consumers can buy directly from wholesalers, who
break down bulk packages and reduce costs for consumers, often seen in warehouse club
memberships.
 Manufacturer to agent to wholesaler to retailer to customer: This distribution involves an agent
facilitating the sale of goods between manufacturers and wholesalers, useful for quickly moving
perishable items like seafood, with agents receiving commissions for their services.
CHANNEL TYPES AND FUNCTIONS
 One Level manufacturer - -retailer - consumer, or manufacturer - distributor - industrial buyer
 Two Levels Manufacturer - - wholesaler - retailer - consumer, or manufacturer - agent -
distributor - buyer.
 Three Levels Manufacturer - - wholesaler - jobber - retailer - consumer.
There are many different functions performed by channel members:
 Physical distributions - the transport and storage goods.
 Matching - making available the assortment of goods and services desired by the channel
member's customers:
 Time and place - making them available at the time and in the place desired by the customers
and consumers.
 Finance - finances the first three functions.
 Transferring title - ensuring the legal and ownership passes to the final buyer.
 Risk-taking - bearing part of the risk inherent in business.
 Research and prospecting - finding out what potential buyers want.
 Promotion and selling - persuading potential buyers to buy.
 Service - pre-and after-sales service.
 Support services - insurance, documentation, management.
CHANNEL STRUCTURE
Channels for consumer products - Producers can use different channels of distribution in the process of
supplying their products to the final consumers.
There are alternative ways to select the type and number of channel.
1. The legal right and ownership of goods go on transferring from one to another channel member
before reaching the hands of final consumers.
2.The levels and numbers of distribution channels should be selected and used carefully considering the
nature of products, market situation, firm's capacity etc.
Each intermediary involved in distribution channel is counted as one level of the channel. If a producer
sells his products directly to consumers, then it is 'zero level channels.
Channels for industrial product - the products, which are used by industrial firms to produce other
finished goods, are called industrial products. These are the goods that need to be processed for industry
purposes. These are the raw materials, machines, equipment, management materials and production
supplies etc.
MARKETING CHANNELS CAN BE SHORT TERM OR LONG TERM
Short term channels are influenced by market factors such as: business users, geographically
concentrated, extensive technical knowledge and regular servicing required, and large orders.
 Short term products are influenced by factors such as: perishable, complex, and expensive.
 Long term market factors include consumers, geographically dispersed, little technical
knowledge and regular servicing is not required, and small orders.
 Product factors for long term marketing channels are durable, standardized, and inexpensive.