• The term "marketing channels" refers to the path that products take

from the point of manufacture to the point of consumer purchase

• Every business that sells a tangible product participates as a member
of a marketing channel.
• Marketing channels come in two primary forms
• conventional marketing channels
• vertical marketing systems
 Conventional Marketing Channels
Ownership/Control Conventional marketing channels consist of one or more manufacturers,
wholesalers/distributors and retailers that operate under independent
ownership. Each business answers to its own owner, shareholders or board of
directors.
Cooperation As independent entities, each member in a conventional marketing channel
focuses on minimizing costs and maximizing its own profits with little regard for
other channel members. A powerful chain of toy stores, for example, might
negotiate an unfavorable deal with a wholesaler and give no consideration to
the impact of that deal on the relationship between the wholesaler and various
toy manufacturers.
Responsibility Conventional marketing channels limit the responsibility of each member of the
channel. Retailers focus efforts on selling products to customers, while
manufacturers focus on making products and wholesalers worry about getting
the products from one to the other.
Other Considerations Even in well-managed vertical marketing systems, problems common in
conventional marketing channels can crop up for different reasons.
Communication breakdowns often occur between manufacturers and
wholesalers or between wholesalers and retailers in the conventional approach
due to technical or logistical issues. Poorly managed personalities in vertical
marketing systems can result in the same problem.
Example Walmart, for example, wields sufficient power to direct much of the activity of
manufacturers and wholesalers,
Vertical Marketing Channels
one member of the channel either owns or wields sufficient leverage
to control and coordinate the activities of other members in the
channel. The channel members continue to operate as distinct entities
but become accountable to one owner or the most powerful channel
member.
Members in vertical marketing systems tend to recognize the
symbiotic nature of the relationship between all channel members
and aim to maximize benefits through cooperation.
In vertical marketing systems, the majority of responsibility tends to
fall on one channel member. The additional responsibility tends to
pose fewer problems for large companies with strong management
teams. For a smaller company engaging in vertical integration, buying
the next step in the marketing channel, the management problems
can prove significant.
Attempting to create a vertical marketing system through vertical
integration can also reduce profitability and, if the company doing the
buying lacks experience, lead to the demise of both businesses
through mismanagement.
Firestone owns all the elements of its marketing channels.