Primciples of Marketing -Marketing Channels

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Marketing Channels

Prof. Rushen Chahal

                      Prof. Rushen Chahal   1
        1. Marketing channels

• A marketing channel is a structure that links
  a group of individuals or organisations
  through which products/services are made
  available to the consumer or industrial user.

• The   structure of channels can vary
  depending on the type of market, the
  needs of the end consumer, and the type
  of product.
                              Prof. Rushen Chahal   2
      1. Marketing channels
• Different types of intermediary who come
  together to create different kinds of
  distribution channels between manufacturer
  and consumer.

• Different functions are performed by the
  different intermediaries.

• Not all intermediaries necessarily take legal
  title or physical possession of the goods.
                              Prof. Rushen Chahal   3
     1. Marketing channels
Types of intermediaries:-
a. Wholesalers - do not normally deal with
  the end consumers, instead deal with
  other intermediaries, usually retailers.
  Wholesalers do not take legal title to the

b. Retailers - sell direct to the consumer
  and may purchase direct from the
  manufacturer or wholesaler.
                            Prof. Rushen Chahal   4
        1. Marketing channels
c. Distributors and dealers - add value
  through      services  associated     with
  stocking or selling inventory, credit and
  after sales service.
d.     Agents and brokers have legal
     authority to act on one’s behalf without
     taking legal title to the goods or
     handling the products directly.

                             Prof. Rushen Chahal   5
1. Marketing channels (B2C / B2B)

Channel levels:-
the length of
the channel        B2C
• zero level
• one level
• two level
• three level      B2B
• reverse flow
                         Prof. Rushen Chahal   6
2. Functions of intermediaries
• Sales channel: Increase emotional buying
  through information gathering, bargaining,

• Delivery channel: Reduce storage costs for
  producers or taking possession of goods

• Service channel: Carry more added value
  products and services, e.g. financing or taking
  risk or assembling products/packaging
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2. Functions of intermediaries

• Push strategy:- using sales force or
  trade promotions to promote
• Pullstrategy:- using advertising to

                        Prof. Rushen Chahal   8
3. Channel Design
1. Customers’ service needs:-

• Lot size:- number of units allowed to purchase
• Waiting time:- time between production and
• Product variety:- product assortments
• Spatial convenience:- ease of access
• Service backup:- added value services

                                 Prof. Rushen Chahal   9
      3. Channel Design
2. Channel Objectives:-
• Channel structure - this should reflect the
  market and product characteristics (market
  coverage, value, quantity sold, margin
  available, etc.).

• Market    coverage - considerations here
  include who the end customer is, demand
  patterns, frequency of ordering, degree of
  comparison shopping, associated services
  required, etc.
                            Prof. Rushen Chahal   10
     3. Channel Design
3. Channel / Distribution Strategies:-

•Intensive:- maximum number of outlets or
shops to sell convenience goods, e.g. drinks

•Selective:- some number of outlets to sell
shopping products, e.g. GE electrical products

•Exclusive:- limiting the number of outlets.
Possibly a few dealers, e.g. rolls royce

                                Prof. Rushen Chahal   11
3. Channel Management

a. Selecting channel members

Depending on:-
• Financial strength
• Years in business
• Expertise levels, e.g. stockholding, networks
• Cooperative and control issues, e.g. joint
 ventures profit sharing

                              Prof. Rushen Chahal   12
3. Channel Management

b. Training channel members:- planning
 and providing programs to deal with channel

c. Motivating and evaluating channel
  members:- giving value and benefits to
  intermediaries and reinforcing message of
  building capabilities and relations
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    4. Channel Systems

1. Vertical marketing systems (VMS):- to
 co-operate and maximise possible

                         Prof. Rushen Chahal   14
4. Channel Systems

Direct (manufacturer  consumer) / Indirect
(manufacturer  intermediary  consumer)

There are 3 types of channel systems:-

1. Vertical marketing systems (VMS)
2. Horizontal marketing systems (HMS)
3. Multi-channel marketing systems (MMS)

                             Prof. Rushen Chahal   15
       4. Channel Systems (VMS)
a. Corporate VMS exist where an organisation owns and
   operates other levels in the channel, e.g. Bata retail
   have its own production
b. Contractual VMS is the most common. There are
   contractual agreements specifying rights and duties
   between producers and members, e.g. franchises,
c. Administered VMS achieve co-ordination and control
   through the power of one of the channel members.

                                    Prof. Rushen Chahal   16
     4. Channel Systems (HMS)
2. Horizontal marketing systems:- different
companies come together to exploit untapped

                           Prof. Rushen Chahal   17
4. Channel Systems

3. Multi-channel marketing systems:- using
 different intermediaries to serve different
 segments at the right time right place, e.g. Fuji
 Xerox sells its copiers to copier distributors,
 retailers at the same time.

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4. Channel Systems
Channel Conflicts:- can happen due to other
different corporate or marketing objectives
apart from place. See below

                            Prof. Rushen Chahal   19

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Description: Prof. Rushen's notes for MBA and BBA students