SUMESH KUMAR

TUSHAR ANIL DAHIHANDEKAR

 Market channels are sets
MARKETING of interdependent
CHANNELS

organizations involved in the process of

making product/ service available for use/
consumption.
 Independent organizations are called marketing
intermediaries.

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 NEED
• Producer Typically produces goods:
 At limited locations.
 In large quantities.
 With limited variety.
 Over the year (As evenly spread as possible).
• Consumer consumes goods:
 All over the country at their own location.
 In limited quantity per consumer.
 With large variety/ assortment.
 Whenever they need.

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 The Well-Designed
Distribution Strategy

Specify
Select Determine
the role of Choose
type of appropriate
distribution specific
distribu- intensity
within the channel
tion of distri-
marketing members
channel bution
mix

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 What work do the channels perform?
Physical Physical Physical

Ownership Ownership Ownership

Promotion Promotion Promotion

Consumers:
Negotiation Negotiation Negotiation
Industrial
Producers Wholesalers Retailers and
Financing Financing Financing
Household

Risking Risking Risking

Ordering Ordering Ordering

Payment Payment Payment

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Risk
RiskTaking
Taking Matching
Matching
Financing
Financing Contact
Contact
Physical
Physical Promotion
Promotion
Distribution
Distribution
Negotiation
Negotiation Information
Information
Channel Functions
 1. Assuring product availability
 2. Providing customer service
 3. Extending credit and financial assistance
 4. Offering assortment convenience
 5. Breaking bulk
 6. Helping customers with advice and technical
support

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 LEVELS
• Zero Level Channel (Direct Marketing Channel):
 Manufacturer – Customer.
 Example: Dell.
• One Level Channel:
 Manufactures – Retailer – Customer.
 Example: Automobile.
• Two Level Channel:
 Manufacturer – Wholes-seller – Customer.
 Example: White Goods/ Consumer Durables.
• Three Level Channel:
 Manufacturer – Whole-seller – Distributor – Retailer – Customer.
 Example: FMCG.
  

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Consumer Channels
PRODUCERS OF CONSUMER GOODS

Agents Agents

Merchant Merchant
wholesalers wholesalers

Retailers Retailers Retailers Retailers

ULTIMATE CONSUMERS

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Business Channels
PRODUCERS OF BUSINESS GOODS

Agents Agents

Merchant wholesalers Merchant wholesalers

(industrial distributors) (industrial distributors)

BUSINESS USERS

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Service Channels
PRODUCERS OF SERVICES

Agents

ULTIMATE CONSUMERS OR BUSINESS USERS

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 CHANNEL DESIGN
 To design a marketing channel, procedure to be
followed is:
 Analyzing Customers Needs.
 Establishing Channel Objectives.
 Identifying Channel Alternatives.
 Evaluating Channel Options.

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Analyzing Customer Needs:

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 Establishing Channel Objectives:
 Channel objectives need to be stated in terms of targeted service
output levels.
 Channel institutions should arrange their final task so as to minimize
total channel costs with respect to desired outputs.
 Channel objectives vary with product characteristic.
 Product could be:
 Perishable.
 Bulky.
 Non-Standardized.
 Requiring Installation/Training.
 High Unit Value.
 Packaged.
 Channel design should take into account strengths & weakness of
different types of intermediaries.
 Also, competitive channels should be understood & analyzed. 17
 Identifying Channel Alternatives:
 Channel alternatives are described by:
 Types of Intermediaries Available.
 Number of Intermediaries Needed.
 Terms/ Responsibilities of each Channel Members.

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 TYPES OF INTERMEDIARIES
 Company Sales Force:
 To cover territory directly.
 Agents:
 Manufacturer’s agents who could be hired region-wise for sales.
 Dealers:
 Retailers who deal directly with manufacturer.
 Industrial Distributors:
 Distributors who would work with manufacturer to build markets
to corporate.
 Unconventional Intermediaries Required:
 Example: Value Added Reseller (VAR)/ Mail Order.
Software companies.

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 Number of Intermediaries Required
 Strategies could be:
• Exclusive Distribution:
 Involves limiting the number of intermediaries.
 Used when company desires more control over services provided by intermediaries.
 Intermediaries may agree not to carry competitive brands (Exclusive Dealing).
 Example: Automobiles.
  
• Selective Distribution:
 Involves use of more than a few, but less than all intermediaries who are willing to carry a
particular product.
 This enables producer to have just right amount of outlets to cover territory.
 This also helps intermediaries to be profitable.
 In turn helps producer to control services to customer better coverage. Coverage cost is lower for
company.
  
• Intensive Distribution:
 Manufacturer places goods in as many outlets as possible.
 Used for products where consumer demand location convenience. 20
 Terms & Responsibilities of Channel
Intermediaries:
 Producer must clearly indicate rights/ duties of each channel
member. Each channel member’s profitability is to be ascertained
& they should be treated with respect.
 Elements of terms (Trade-Relations Mix) could be:
• Price Policy:
 Producer should establish a price test & trade accounts that are fair.
• Conditions of Sale:
 Include payment terms & producer’s guarantees (Defects/ Price Decrease/ Warranty).
• Territorial Rights:
 Whether geographical division holds/ does not hold & applicability.
• Mutual Services & Responsibilities:
 Who would take care of what activity?
 Joint working norms for sales promotion.
 Training/ Technical support/ Record keeping.
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 Evaluating Channel Alternatives:

 Channel alternatives evaluated against:

 Economic Criteria.

 Control Criteria.

 Adaptive Criteria.

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 Channel Management Decision
 Once a company has chosen a channel alternative,
individual intermediaries must be:
 Selected.
 Motivated.
 Evaluated.

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 Selecting Channel Members:
 Financial Strength.
 Solvency (Ability to clear bills in specified time frame).
 Number of years in business.
 Reputation.
 Ability to develop down-line distribution.
 Corporate contacts.
 Sales force (Size/quantity).
 Location of stores (Especially for retailers).
 Future growth potential.
 Sales promotion experience.
 Transportation strength (For whole seller).
 Ware housing facilities (For whole sellers).
 Co-operativeness.
 Willingness to do company’s business.
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 Motivating Channel Members
 Intermediaries must be continuously motivated to do their job. This
is achieved through fair terms & good channel management
through:
 Training.
 Supervision.
 Encouragement.

Producer must first sell to them & then sell through them.

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 Evaluating Channel Members
 Every producer must periodically evaluate intermediaries performance.
 Performance parameters could be:
 Sales target/ quota achievement.
 Average inventory levels.
 Customer delivery time/ customer handling.
 Treatment of damaged/ lost goods.
 Co-operation in promotion/ training program.
 After sales service as applicable.
 Performers are motivated/ rewarded.
 Under performers need to be:
 Analyzed for under performance.
 Counseled.
 Retained & re-motivated.
 Consistent underperformance may need to be replaced without harming
company’s interest.
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