2. Definitions of Marketing Channels
According to American Marketing Association,
“A channel of distribution, or marketing channel, is the
structure of intra-company organization units and extra
company agents and dealers, wholesale and retail through
which a commodity, product or service is marketed.”
According to Philip kotler,
“Every producer seeks to links together the set of Marketing
intermediaries that best fulfill the firm’s objectives. This set of
marketing intermediaries is called the Marketing Channels. (Also
called Trades channel or Channel of Distribution.)”
3. Definitions of Marketing Channels
According To William J Stanton,
“ A Channel of distribution for product is the rout taken by
the title to the goods as they move from the producer to the
ultimate consumer or industrial user.”
According to Cundiff, Still and Govani,
“Marketing channel are the distribution
network through which producers produce
flow to the market.”
4. The major focus of channel of distribution is delivery. It is
only through distribution that public and private goods and
services can be made available for the use of consumptions.
The emergence and arrangement of wide variety of
distribution oriented institution and agencies, typically called
Intermediaries because they stand between production on
other hand and consumption on other, can be explained in
following terms;
iii.Intermediaries can improve the efficiency of the process.
iv.They help in the proper arrangement of the rout of
transactions.
v. They help in the searching process.
vi.They help in sorting process.
5. Objectives of the Marketing
Channels
To ensure the availability of products at the point of sale.
To build the channel members loyalty.
To stimulate channel members to put greater selling
efforts.
To develop managerial efficiency in the channel
organization.
To identify your organization at buyer level.
To have an effective and efficient distribution system, to
make your product and services available.
8. Importance of Marketing Channels
Time and Place utility.
Convenience to Consumers.
Relive from Marketing Problems.
Information to the producer.
Stability in Prices.
Promotional Activities.
Storage of finished goods.
Finance the producer.
9. Functions of Marketing Channels
Information Provider.
Price Stability.
Promotion.
Financing.
Title.
Help in Production Function.
Matching Demand and Supply.
Matching Buyer And Seller.
11. Intensive Distribution
The intensive is a form of distribution in which the manufacturer
distributes his products through as many outlets as possible. This
type of is used for those products that are characterized by low
involvement of the customer and where customers look for
location convenience.
Products like chocolate, biscuits, shaving blades, soaps and
detergents are distributed in this manner, so they are easily
available to the customer at their nearest location.
Manufacturer are constantly tempted to move from exclusive or
selective distribution to more intensive distribution to increase
the coverage and the sales.
This strategy help long term but hurt long term performance.
12. Intensive Distribution
Example
Titan watches - Titan sells its through seven different
channels; world of titan, Time zone, ValueMart, Sonata stores,
Titan Signet Club, Tanishq boutiques, and private multi brand
outlets. These channels – some of which are only present in
selected cities – provide Titan with wide range coverage, cover
different price points, and target different segments of
customers. It helps Titan generate sales volume while protecting
its brand image at the same time.
13. Selective Distribution.
Here, the firm selects some outlets to distribute its products. This
alternative help to focus the selling efforts of the manufacturing
firm on the few outlets rather than disappointing it over countless
marginal ones.
It also enables the firm to establish a good working relationship
with channel members. Selective distribution can help the
manufacturer gain optimum market coverage and more control
but at lesser cost than intensive distribution.
Selective distribution is appropriate for consumers shopping
goods, such as various types of clothing and appliances and business
accessory equipments, such as office equipments and Hand held
tools.
14. Selective Distribution.
In contrast, company may choose to be a more selective after some
experience with intensive distribution. The decision to change
usually hinges on the high cost of intensive distribution or the
unsatisfactory performance of middlemen.
A firm may move towards more selective distribution to enhance
the image of its products, strengthen customer services, improve
quality control, and or maintain some influence over its prices.
15. Exclusive Distribution
When the firm distributes its brand through just one or two major
outlets in the market, who exclusively deal in it and not all
competing brands, we say that the firm is using an exclusive
distribution strategy. This is a common from products and brands
that seeks high prestigious image.
Typical example are designer ware, major domestic appliances and
even automobiles.
By granting exclusive distribution rights , the manufacturer hopes
to have control over the intermediaries price, promotion, credit
inventory and service policies.
As the manufacturer uses a relative fewer number of distribution
channel , he can maintain good relation with the channel members
and as a result, expect an increased marketing effort from them.
16. Exclusive Distribution
Branded menswear like color plus, Arrow, Zodiac, Lee and so on
are available at exclusive showroom as well as other distribution
channel.
17. Attributes Intensive Distribution Selective Distribution Exclusive
Distribution
Objectives Wide spread market Moderate Market coverage, Prestige image,
coverage, channel solid image, some channel channel control
acceptance, high volume control and loyalty, good loyalty, prices stability
sales and high profits. sales and profits and high margins.
Resellers Many in number, all type of Moderate in number, well Few in number, well
firms (outlets) established better firms established, reputable
(outlets) fir outlets (Outlets)
Customers Many in number, Moderate in number, brand Fewer in no., trends
(Final convenience oriented. conscious, somewhat setters, willing to
consumers) willing to travel to store. travel to store, brand
loyal.
Major Limited channel control. May be difficult to crave Limited sales
Weakness out niche potential.
Marketing Mass advertising, nearby Promotional mix, pleasant Personal selling,
Emphasis location, items in stock. shopping condition, good pleasant shopping
services conditions, good
services.
18. Channel Design
Steps involved in Designing a Channel
System.
2.Formulating Channel Objectives.
3.Identifying Channel functions.
4.Linking design to Product Characteristics.
5.Evaluation of the distribution Environment.
6.Evaluation of competitors Channels Design.
7.Matching Channel Design to Company
Resources.
8.Evaluating the Alternatives and Selecting the
Best.
19. Step I - Formulating Channel Objectives.
Formulation of channel objective is the first step in designing a
channel systems. The objective clarify what is to be achieved by
having the channels. All firm seeks to realize certain common
objectives by having the channel. In addition, they may also have
some specific objectives depending on unique circumstances.
The common objectives are
d) The effective coverage of target market.
e) Efficient and cost effective distribution.
f) Ensuring that consumer incur minimum effort in procuring product.
g) Helping the firm to carry on manufacturing uninterrupted, confidence that
the channels will take care of sales.
h) Partnering the firm in financing and sub distribution.
S t e p II – Id e n t if y in g c h a n n e l f u n c t io n s .
There are various functions of channel like, Information Provider, Price
Stability, Promotion, Financing, Title, Help in Production Function,
Matching Demand and Supply, Matching Buyer And Seller.
20. Step III – Linking Channel Design to Product
Characteristics.
Different product requires different channel systems. The firm should
analyze the characteristics of product and choose the channel system that
matches the product best. Consumer goods and the and industrial goods,
for example, need different channels. And within the category consumer
goods, different sub-category such as convenience goods, shopping goods,
and specialty goods may need different channels.
Step IV – Evaluation of the Distribution Environment.
While selecting the channel design, the firm should also take account the
distribution environment pertaining in the country/territory. It should
evaluate the vital features of the distribution environment and ensure that
the proposed channel design is compatible with them. Distribution
environment in the broader sense includes the trade related legal
environment as well. The legal implication of channel design must be
carefully examined before taking a final decision.
21. Step V – Evaluation of Competitors Channel Design.
The firm should also study the competitors channel patterns before
deciding its channel design. While the firm may not necessarily
follow the competitors in channel design, it should analyze the plus
and minus of channel pattern adopted by each of its competitors.
Step VI – Matching the Channel Design to Company
Resources.
n Firm with the Limited Resource Settle for conventional
channels – firm with limited resources and small volume of
business will normally find it difficult and uneconomical to opt for
own channels. For such firms, establishing branch
showrooms/depots/retail outlets of their own will result in high
distribution cost , which they can not afford. They are better of by
depending on unconventional channels.
22. Firms with larger resources have more options –
Firms with larger resources and larger marketing operation
can go in for varied distribution channels. In fact, in India
firms which may are strong resources usually operates two
parallel channels one reaching out to the customers through
company depots and showrooms and other through
conventional intermediaries.
Step VII - Evaluating the alternative and selecting the best.
Economic evaluation; Balancing cost; Efficiency and Risk.
Conceptual Evaluation; Flexibility and Capability.
23. Channel Management
Decisions.
Selecting Channel Members.
Training and Motivating Channel Members.
Evaluating Channel Members.
Modifying Channel design and Arrangement.
24. Selecting Channel Members.
Producer vary in their ability to attract qualified intermediaries.
Whether producer find it very easy or difficult to recruit
intermediaries, they should at least determine what
characteristics distinguish the better intermediaries. They will
want to evaluate number of year in business, other lines carried,
growth and profit record, solvency, cooperativeness and
reputation.
If the intermediaries are sales agent, producer will want to
evaluate number of character of other line carried and the size
and quality of sales force. If the intermediaries are department
store and want exclusive distribution, the producer will want to
evaluate locations, future growth potential and type of clientele.
25. Selecting Channel Members.
Market consideration
b) Consumer or industrial Market.
c) Number of potential customers.
d) Size of order.
e) Buying habits of customers.
f) Geographical concentration of Market.
Product Considerations
h) Unit value.
i) Product Line.
j) Standardized Product.
k) Technical Nature.
l) Bulk and weight.
26. Selecting Channel Members.
Company Consideration
2. Volume of Production.
3. Financial Resources.
4. Experienced and competent Management.
5. Services provided by the channels.
6. Desire for control of channels.
Middleman Consideration
8. Availability of desired middlemen.
9. Financial ability.
10.Attitude of middlemen
11.Sales potential
12.Cost
13.Competition and legal constraints.
27. Training to Channel Members
Companies need to plan and implement careful training
programs for their distributors and dealers, because the
intermediaries will be viewed as the company by end users.
Field Training
Orientation Programme.
Training for Paper work.
Training for Paper work.
Training for Care of Company Products.
Technical Training.
Installation Training.
Servicing Training
28. Motivating Channel Members
A company needs to view its intermediaries in the same way that
it views end users. The company needs to determine
intermediaries need and construct a channel positioning such that
its channel offering is tailored to provide superior value to these
intermediaries.
The company provide training programme, market research
programme and other capability building programme to improve
intermediaries performance. The company must constantly
communicate its view that the intermediaries are partner in joint
effort to satisfy end using consumers.
29. M o t iv a t in g C h a n n e l
Me mbe rs
Coercive Power:
Coercive Power occurs when manufacturer threatens to withdraw a
resources or terminates a relationship if intermediaries fail to
cooperate. This power can be quite effective if intermediaries are
highly dependent upon the manufacturer. But the exercise of
coercive power produces resentment and can lead the
intermediaries to organize countervailing power.
Reward power:
It occurs when the manufacturer offer intermediaries an extra
benefits for performing specific acts or functions. Reward power
typically produces better results than coercive but it can be
overrated.
30. Me mbe rs
Expert Power:
Expert power can be applied when the manufacturer has special knowledge
that the intermediaries value. Once the intermediaries acquires this
expertise, however the expert weakens. The manufacturer must continue
to develop new expertise so that intermediaries will want to continue
cooperating
Legitimate Power:
Legitimate Power is wielded when the manufacturer requires a behavior
that is warranted under the contract. The manufacturer feels it has this
right and the intermediaries have this obligation. As long as the
intermediaries view the manufacturer as a legitimate leader, legitimate
power works.
Referent Power:
It occurs when the manufacturer is so highly respected that intermediaries
are proud to be associated. Companies such as IBM, caterpillar and
Hewlett-Packerd have high referent power.
31. Evaluating Channel Members
Evaluation provides the information necessary to decide which
channel members to retain and which to drop. Shortfalls in
distributor skills and competences may be identified through
evaluation and appropriate training programmes organized by
producer.
Evaluation criteria includes sales volume and value,
profitability, level of stocks, quality and position of display, new
account opened, selling and marketing capabilities, quality of
services provided to customers, market information feedbacks,
ability and willingness to keep commitment, attitudes and
personal capabilities.
32. Dell
Dell revolutionized the personal computer category by selling product
directly to customer via telephone and later the internet, rather than
through retailers. Customer could custom design the exact pc they
wanted, and rigorous cost cutting allowed for low everyday price.
Sound like a winning formula? It was for almost two decades. But 2006
saw the company encounter a number of problems that led to step stock
price decline. First, reinvigorated competitors such as HP narrowed the
gap in productivity and price. Always focused more on the business
market, dell struggled to sell effectively to the consumer market. A shift
in consumer preferences to buy in retail stores as opposed to buying
direct didn’t help, but self- inflicted damage from an ultra efficient
supply chain model that squeezed cost- and quality- out of customer
service was perhaps the most painful. Managers evaluate call center
employees primarily on how long they stayed on each call- a recipe for
disaster as scores of customer cell center employees
33. Primarily on how long they stay on each call- a recipe for disaster
as scores of customer felt there problem where ignored or not
properly handled . A lack of R&D spending that hindered new
product development.
Design various marketing channels for Dell and give its various
functions and importance.
34. Govt. of India recently announced
introduction of 3g spectrum which will
enable integrated mobile services in
the hand sets. Design the distribution
channel for a mobile company to
distribute these 3g enable hand sets
and services to the end users.
