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Distribution is one of the four most important tools of marketing. Firms rarely work alone and need distributors for; 1. Creating value for the customers 2. Building profitable customer relationship As such the firms success depends upon how well its network

competes with competitors channels

Most firms cannot bring value to customers themselves and they have to therefore work with other firms for value delivery network

These are called as Marketing Channels which are a set of

interdependent organisations involved in the process of making the product or services available to end users.

Importance of Channels
A marketing channel system is a particular set of channels employed by a firm to reach the targeted segments / customers. The channels typically take almost about 30 to 50 percent of the ultimate selling price to the consumer Channels are basically FACILITATORS for; Buyers sellers relationships Sorting / assortments of products These are a set of intermediaries to whom the manufacturers delegate the responsibility of selling the product or services and moving goods from producers to consumers

The channels job is; 1. to convert potential buyers into actual buyers for profits 2. not just serve the markets but create markets as well

they affect marketing decisions such as;

i. Price and trade discounts ii. Primary and secondary packaging

iii. Long term decisions on product, line of products, new

products, diversification and discontinuation of a product iv. Policies and procedures of the firm with regard to; a. Manpower b. Paper work c. Sales procedures d. To adopt push or a pull strategy

1. The explosion of information technology and e-commerce
2. A greater difficulty in gaining a sustainable competitive advantage

3. The growing power of distributors, especially retailers in marketing channels

4. The need to reduce distribution costs

How does marketing channel strategy relate to the rest of the marketing mix?
Marketing Mix or the four Ps Challenges


Limited ability to gain and hold competitive advantage

Price wars erode profitability & provide unstable basis for sustaining competitive advantage Expensive and short-lived Marketing channels support & enhance other Ps to meet demands of target markets

Promotion Place (Distribution)

Channel Design
Decisions involving the development of new Marketing Channels either, non existed previously or modifications of the existing ones is the channel design process

The Channel Design Process is;

1. A decision taken by the marketer for;

Creation of distribution channels Allocation of distribution tasks to develop an efficient structure to sell the product or service of the firm
2. Selection of channel partners 3. Use as a strategic tool for gaining differential advantage over competitors

Who are the channel members;

1. Firms manufacturers, service providers, franchisors 2. Wholesalers the firms representing or stocking manufacturers products of for selling in bulk sales to retailers for reaching the ultimate consumers 3. Retailers who sell unit products to the ultimate consumers / end user

Steps for Channel Design;

1. Recognise the need for channel design 2. Set the objectives of channels design 3. Specify the tasks for the channels 4. Develop the channel structure 5. Evaluate variables 6. Choose the best alternative 7. Select the channel members

When to make a channel design decision

Starting a new firm Developing a new product/product line Entering new market/new geographical area for the existing products Making a major change in other marketing strategies Strategising to meet the competition

Changes in environments at macro or micro level

Conflicts may develop with the channel partners

While reviewing and evaluating, the need be felt for change