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‡ Distribution is one of the four most important tools of marketing. Firms rarely
work alone and need distributors for;
1. Creating value for the customers
2. Building profitable customer relationship
‡ As such the firm¶s success depends upon how well its network competes with
competitors¶ channels. Most firms cannot bring value to customers themselves
and they have to therefore work very closely with others in large value delivery
network. These are called as Marketing Channels which are a set of
interdependent organisations involved in the process of making the product or
services available to end users.
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‡ A marketing channel system is a particular set of channels employed by a firm

to reach the targeted segments / customers. The channels typically take
almost about 30 to 50 percent of the ultimate selling price to the consumer
‡ The channels¶ job is;
1. Channels are basically FACILITATORS for;
‡ Buyers ± sellers relationships
‡ Sorting / assortments of products
2. to convert potential buyers into actual buyers for profits
3. not just serve the markets but create markets as well
4. they affect marketing decisions such as;
i. Price and trade discounts
ii. Primary and secondary packaging
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iii. Long term decisions on product, line of products, new products,

diversification and discontinuation of a product
iv. Policies and procedures of the firm with regard to;
a. Manpower
b. Paper work
c. Sales procedures
d. To adopt push or a pull strategy
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‡ A new firm normally starts as a local operation selling in a limited market
‡ Then expand as they increase their production, from single dealer /
distributor to multiple outlets
‡ Similarly when the firm is already established or successful they may
expand into newer markets and use;
i. Different channels for different markets
ii. Different products for different channels or
iii. Different products for different markets
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‡ Functions of the channels are as under;

1. Gather information about potential and current customers, competitors
and other forces in the markets
2. Develop and propagate persuasive communications to stimulate
purchasing
4. Reach agreement on price and other terms so that effective sales could
be progressed
5. Place orders with the manufacturers, keep stocks of products to timely
service customers and assume risks
6. To part finance / finance manufacturers for the inventories at different
levels of channels
7. Transfer of ownership from one to another organisation
8. After sales service / technical support
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of different items would be as under;

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± Manufacturers > Transporter > Distributor >
Transporter > Dealer > Transporter > Customer/user

*'  #% ± Manufacturers > Dealer > Customer/user

+' ()#% ± Customer > Retailer > Banks > Distributor > Bank >
Manufacturer

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