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MARKETING CHANNEL

MARKETING CHANNELS

DEFINITION

A set of interpendent organizations that ease the transfer of

ownership as products move from producer to business user/consumer

THE CHANNEL MEMBERS

Members

-Intermediaries

-Resellers

-Middleman

Roles

To help producers sell their products

MARKETING CHANNEL FUNCTION

-Specialization & Division of labor

-Overcoming discrepancies

-Providing contract efficiency

SPECIALIZATION & DIVISION OF LABOR

- To provide efficiency and cost savings.

- To attain economic of scale.

OVERCOMING DISCREPANCIES

1) Discrepancies of quantity 4) Discrepancies of assortment

3) Temporal of discrepancies 5) Spartial Discrepancies

Discrepancies of Quantity

The difference between the amount of product produced & the amount consumer wants to buy

Discrepancies of Assortment

Occur when a consumer does not have all of the items necessary or needed to receive full satisfaction from a product

Temporal of discrepancies

A situation that occur when a product is produced but a customer is not ready to buy it

Spartial Discrepancies

The difference between the location of a producer & location

Providing Contact Efficiency

- Products available close to customers or residents and quantity is available always in the right quantity and at the right time.

CHANNEL INTERMEDIARIES

&

THEIR FUNCTIONS

TYPE

Retailer

A channel intermediary that sells mainly to customers

Merchant wholesaler

An institution that buys good from manufacturers, take title to goods,

stores, resells and ships them

Agents & Brokers

Wholesaling intermediaries who facilate the sale of a product by representing channel member

FUNCTION

Transactional functions Logistical functions Facilitating functions

-Contacting & Promoting -Physically distributing -Research

-Negotiating -Storing -Financing

-Risk taking -Sorting out

-Accumulation

-Allocation

-Assortment

CHANNEL

STRUCTURES

CHANNEL STRUCTURES

For consumer products For business to business Alternative channel

-Direct channel -Direct channel(users) -Multiple channel

-Retailer channel -Industrial distributor -Non traditional channel

-Wholesaler channel -Agent/Broker channel -Strategic channel alliances

-Agent/Broker channel -Agent/Broker distributor channel

-Direct channel(government)

Alternatives Channel Arrangement

  • Multiple Channel

- Two or more channels selected is call dual distribution.

  • Non-traditional Channel

- Including the internet and mall-order channels.

  • Strategic Channel Alliances

- Producers use another manufacter's already established channel.

CHANNELS

STRATEGY DECISIONS

CHANNELS STRATEGIES

- Marketing channel strategy involves several critical decisions:

i) What role distribution will play in the overall marketing strategy.

ii) Consistency with product,promotion,and pricing strategies.

LEVEL OF DISTRIBUTION INTENSITY

Intensive Selective Exclusive

Definition Definition Definition

A form of distribution A form of disribution achieved A form of distribution

aimed at having a product by screening dealers to eliminate that established or a few

available in every oulet all but a few in any single area dealers within a given area

Objective Objective Objective

-Achieve mass market selling -Work with selected intermediaries -Work with single intermediaries

-Convenience goods -Shopping & some specialty goods -Specialty goods

Example of company Example of company Example of company

-Nestle -HP -BMW

-Coca Cola -Samsung -Apple

FACTORS AFFECTING CHANNEL CHOICE

Market factors Product factors Producer factors

-Target customers -Complex, customized & expensive products -Producer resources

-Geographic location -Delicacy of products -Number of product lines

-Size of the market -Bulky products -Desire for channel control

-Non standardized products

-PLC of product

These are Factors Affecting Channel Choice:

Type of Channel Relationships

  • Arm’s length relationships
  • Integrated relationships
  • Cooperative relationships

Arm’s length relationships

  • Arm’s length relationship are loose relationships, characterized by low relational investment and trust,and usually taking the form of a series of discrete transactions with no or low expectation of future or service
  • Both parties retain their independence and pursue only their own interest while attempting to benefit from the goods or services provide by the other
  • Arm’s Length is often used when a company has a sudden and/or unique need for a product or services does not anticipate this need will arise again in the near future.

Integrated relationships

  • A relationships between companies that is tightly connected relationship with linked processes across and between firm boundaries, and high levels of trust and inter-firm commitment.
  • Integrated relationships is a situation where one company (vertical integration ) or several companies acting as one, perform all channel functions
  • Integrated relationships are characterized by formal arrangements that explicitly define the relationships to involved channel members.

Cooperative relationships

  • Which exist between arm’s-length and integrated relationships, take the form of informal partnership with moderate levels of trust and information sharing as needed to further each company’s goals.
  • cooperative relationships include non-equity agreements such as franchising and licensing, as well as equity-based joint ventures and strategic alliances.

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