Marketing Channels Overview

Marketing Channels

• A marketing channel refers to the path products, ownership, communication, financing, payment, and risk flow through to reach the consumer.
• Products move through marketing channels via physical distribution.

Benefits of Marketing Channels

• Specialization and division of labor: Each channel member specializes in a specific function, leading to greater efficiency.
• Overcoming discrepancies: Channels help bridge gaps between producers and consumers, addressing discrepancies in quantity, assortment, time, space, and ownership.
• Providing contact efficiency: Channels streamline the process of connecting producers with consumers, enhancing efficiency and minimizing costs.

Functions of a Marketing Channel

• Contacting and promoting: Channel members engage in communication and promotional activities to reach potential customers.
• Transactional functions: Channels handle negotiations, orders, and the transfer of ownership.
• Risk taking: Channel members assume the risk associated with inventory holding, price fluctuations, and market demand changes.
• Logistical functions: Channels ensure the physical distribution, sorting, and storage of products.
• Facilitating functions: Channels provide services like financing, market research, and after-sales support.

Marketing Channel Structures

• Direct channel: Producers sell directly to consumers without intermediaries.
• Retailer channel: Producers use retailers to sell products to consumers.
• Wholesale channel: Producers sell to wholesalers who then sell to retailers who sell to consumers.
• Agent/broker channel: Producers use agents or brokers to facilitate transactions between them and wholesalers or retailers.
• Internet channel: Channels utilize the internet for direct sales to consumers or as a platform to support traditional channels.
  • Disintermediation: The elimination of intermediaries, resulting in lower costs and faster delivery.
  • Reintermediation: The reintroduction of intermediaries to add value to customers.

Alternative Channel Arrangements

• Multiple channels: Employing two or more channels to reach different customer segments.
• Non-traditional channels: Utilizing unconventional methods such as the internet, mail order, or farmer’s markets.
• Strategic channel alliances: Partnering with another organization to utilize their existing channel.
• Reverse channels: Facilitating the return of products from consumers back to the manufacturer.

Factors Influencing Channel Strategies

• Market factors: Consumer needs, demographics, location, and competition.
• Product factors: Complexity, perishability, and value.
• Producer factors: Resources, financial strength, and expertise.

Levels of Distribution Intensity

• Intensive distribution: Making products available in as many outlets as possible.
• Selective distribution: Selectively distributing products through a limited number of outlets.
• Exclusive distribution: Granting exclusive distribution rights to a single retailer or a small number of retailers in a specific area.

Channel Conflict

• Horizontal conflict: Arises between channel members at the same level, like retailers competing with each other.
• Vertical conflict: Occurs between channel members at different levels, such as manufacturers and retailers.

Causes of Channel Conflict

• Differences in goals, objectives, and expectations: Channel members may prioritize different aspects of the business, leading to conflict.
• Lack of communication and coordination: Poor communication can create misunderstandings and conflicts.
• Power imbalances: A dominant channel member can influence the actions of others, leading to disputes.

Channel Leadership

• Forward integration: A producer or manufacturer establishes or purchases its own wholesale or retail outlets.
• Backward integration: An intermediary establishes or buys a production facility.

Physical Distribution and Logistics

• Physical distribution: Ensures the efficient movement and storage of goods from the point of origin to the consumer.
• Logistics: Encompasses physical distribution and includes the procurement and management of raw materials and components for production.

Retail Intermediaries

• Types of ownership: Independent ownership, chain stores, franchising, branches, retail owned by manufacturers, shops owned by the state.
• Types of merchandise sold: Department store, specialty store, supermarket, convenience store, full-line discount store, warehouse club, off-price retailer.
• Location: Regional shopping centres, community centres, neighbourhood centres, local centres.
• Size of the market area: Smaller areas for convenience goods shops, larger areas for more mobile consumers, larger areas for large shop floor space, larger areas for competitors far away.
• Type of service rendered: Self-service, self-selection retailing, limited-service retailers, full-service retailers.