Marketing Channel Strategy & Management

MKT 460. Taufique Hossain

Marketing Channel A marketing channel is the structure linking a

group of individuals or organisations through which products are made available to the consumer or industrial user.

The structure of channels may vary depending on the type of market, needs of the end consumer and type of product.

Intermediaries

Play an important role in increasing efficiency and reducing costs.

There are several different types that come together to characterise distribution channels between manufacturer and consumer.

Each intermediary adds a margin to the price of the products handled.

Not all intermediaries take legal title or physical possession of the products.

Different functions are performed by the different intermediaries.

Types of Intermediary

Wholesalers are intermediaries that buy products in bulk, usually from manufacturers, and resell them to trade customers, usually small retailers.

Types of Intermediary Retailers sell direct to the consumer and may

either purchase direct from the manufacturer or deal with a wholesaler, depending on purchasing power and volume. They come in many different formats, sizes and locations.

Channel Structure Channel structure concerns the route selected to

move a product through different intermediaries.

Rationale for Using Intermediaries

The channel selection decision

Manager must conduct a through market analysis to identify the target markets that will be served by a prospective marketing channel. Managers need to ask: Who are the potential customers?

Where do they buy?

When do they buy?

How do they buy?

The design of marketing channels

Direct Versus Indirect Distribution: Use intermediaries to reach target markets or

Contact ultimate buyers directly using its own sales force or distribution outlet or the Internet.

The design of marketing channels

Direct Distribution: Target market is composed of easily identifiable buyers

When personal selling is the major component of the organization’s communication process

When the organization have a wide variety of offerings for the target market

When sufficient resources are available to satisfy target market requirements

When intermediaries are not available for reaching target markets

When intermediaries do not poses the capacity to service the requirements of target markets

Channel selection at retail level

Which channel and intermediaries will provide the best coverage of the target market?

Which channel and intermediaries will best satisfy the buying requirements of the target market?

Which channel and intermediaries will be most profitable?

Target Market Coverage

Intensive distribution

Selectivedistribution

Exclusivedistribution

Intensive Distribution Characteristics

Maximum number of outlets

Maximum availability

Convenience products

High number of potential purchasers

High purchase frequency

Low level of planning for purchases

Low price

Selective Distribution Characteristics

Number of outlets varies

Specialist retailer knowledge

Shopping products

Medium number of potential purchasers

Occasional purchase frequency

Medium level of planning for purchases

Medium price

Exclusive Distribution Characteristics

Few outlets

Close retailer/consumer relationship

Specialty products

Low number of potential purchasers

Low purchase frequency

High level of planning for purchases

High price

Satisfying buyer requirements/Intermediary

benefits Information: In store displays, Demonstration,

Personal Selling,

Convenience: Delivery, Proximity or driving time, Sorting, Storage, Web page: easy to locate & navigate

Variety: Both breadth & depth of products.

Attendant Services: Installation, Credit, Technical assistance, Post sale service

Dual Distribution & Multi channel Marketing

Dual distribution occurs when an organization distributes its offering through two or more different marketing channels that may or may not compete for similar buyers. E.g. Using both direct distribution and indirect distribution

Multichannel marketing involves the blending of an electronic marketing channel & a traditional channel.

Channel Relation Actively managing your agents and distributors is

a vital part of getting the best results from these sales channels.

Keeping them up to date with product information and selling the benefits to them of any new initiatives you want them to be involved with.

Regular communication

Regular visits

Product training

Joint promotions

Channel commission and loyalty

Pricing decision

Competitive advantage

Creating channel loyalty