Marketing Channels and Distribution

Marketing Channels

• A set of interdependent organizations and individuals that facilitate the movement and transfer of ownership of commodities from producers to ultimate users
• Major focus of marketing channel is delivery
• Distribution makes public and private goods and services available for use and consumption

Marketing Intermediaries

• Agents: sales representatives of manufacturers and wholesalers, hired on a commission basis, do not own or take possession of goods
• Brokers: entities that bring buyers and sellers together, hired on a commission basis, do not own or take possession of goods
• Industrial distributors: independent wholesalers that buy related product lines from many manufacturers and sell them to industrial users
• Wholesalers: firms that sell finished goods to retailers, manufacturers, and institutions
• Retailers: firms that sell goods to consumers and to industrial users for their own consumption

Functions of Marketing Channels

• Routinization of Decisions: provides manufacturers with a reduced number of people to contact when transactions are made
• Financing: helps manufacturers with financing of sales calls, selling equipment, display stores, credit extension, and salesperson training
• Pricing: distributors provide important information regarding setting of a realistic factory price
• Channels of Communication: distributors relay changing user requirements to manufacturers
• Assistance in Promotional Activities: distributors complement manufacturers' promotional activities
• Minimization of Number of Transactions: distributors reduce the number of transactions within the system

Types of Marketing Channels

• Consumer Channels:
  • Direct Channel: producer sells goods or services directly to consumers
  • Retail Channel: one middleman interposes between the producer and the consumer
  • Wholesale Channel: wholesaler and retailer provide linkage between the producer and the consumer
  • Agent Channel: agent apart from wholesaler and retailer provides linkage between the producer and the consumer
• Industrial Channels:
  • Channel A: manufacturer sells directly to industrial users
  • Channel B: manufacturer assigns industrial distributors who sell directly to industrial buyers
  • Channel C: manufacturer deals with agents who call on industrial users

Factors that Influence Channel Selection

• Nature of the product: determines the best-suited channel of distribution
• Nature of the market: affects the choice of channel, e.g., scattered buyers require a specific channel
• Nature of the Company: company size and organizational set-up influence channel selection