Module 3

Distribution Channels

Why Channel Intermediaries

Form Utility Time Utility Place Utility Create greater efficiencies Transform producers product assortment into assortment wanted by consumers Match supply with demand Services and ideas must be available to target market

Why Intermediaries (Contd)

An intermediary reduces the number of channel transactions

Number of contacts without a distributor MxC=3x3=9

Number of contacts with a distributor M x C = 3+ 3 =6

Channel Functions
Information Promotion Contact Matching Negotiation Physical distribution Financing Risk taking

Channel Flows
Physical Ownership Payment Information Promotion

Channel Levels
Channel Level
A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer Producer and Final Consumer in every channel

Direct Marketing Channel

Company sells directly to consumers and has NO intermediaries

Indirect Marketing Channels

Company sells through one or more intermediaries More levels increase customer contacts Fewer levels - more control and less complex

Consumer Marketing Channels

Channel 1 ManuManufacturer facturer Channel 2 ManuManufacturer facturer Channel 3 ManuManufacturer facturer Channel 4 ManuManufacturer facturer Retailer Retailer

Consumer Consumer

Consumer Consumer

WholeWholesaler saler WholeWholesaler saler Jobber Jobber

Retailer Retailer

Consumer Consumer

Retailer Retailer

Consumer Consumer

Business Marketing Channels

Channel 1 ManuManufacturer facturer Channel 2 ManuManufacturer facturer Channel 3 ManuManufacturer facturer Channel 4 ManuManufacturer facturer Manufacturers Manufacturers representative representative or sales branch or sales branch Manufacturers Manufacturers representative representative or sales branch or sales branch Business Business distributor distributor Business Business distributor distributor

Business Business customer customer Business Business customer customer Business Business customer customer Business Business customer customer

Types of Channels at Different Stage of PLC High Volume Channel Mass Merchandisers Lower Cost Channel

Channel Strategies
Exclusive Distribution Intensive Distribution Selective Distribution

Channel Dynamics

VMS: Vertical Marketing System HMS: Horizontal Marketing System (Symbiotic Marketing) MMS: Multichannel Marketing System Polarization

Hybrid Marketing Channel

Catalogues, telephone

Consumer Consumer segment 1 segment 1 Consumer Consumer segment 2 segment 2 Business Business segment 1 segment 1 Business Business segment 2 segment 2

Retailers Retailers Producer Producer Distributors Distributors Dealers Dealers

Sales force

As more retailers develop a web presence, they often move from a brick-andmortar to a click-and-mortar business model where customers expect channel integration. Can you identify any potential problems for these companies? Can you identify any unique marketing opportunities that such a change would offer these companies?

Choice of Channel of Distribution Market Consideration

a. b. c. d. a. b. c. d. e. f. g. a. b. c. d. e. Consumer or industrial market Number and location of buyers Size of order Customers buying habits Product Consideration Unit Value Perishability Bulk and Weight Standardization Technical Nature Product Line Age of the product Middlemen Consideration Availability Attitude Services Costs Sales Potential

The advent of print media, the telephone, radio, television, and the Internet have all provided new ways for marketers to get their message to their intended audience. As various technologies advance, these information channels offer more precise delivery of a message. Can you identify an emerging information distribution channel?

Exercise
A multinational is planning to launch its brand of Shoes in India. What channels of distribution it should adopt, to make an attempt in the crowded market?