channels & Value
3.The importance 6.Value
of channels networks
Most producers do not sell
their goods directly to final
users. Between producers and
final users stands one or more
marketing channels, a host of
performing a variety of
Ordering, Financing, risk taking,
physical possession, payment
Conflict in Marketing Channels results from:
Poorly defined roles
How do Companies Manage Conflict in Marketing Channels???
Strive for Super ordinate Goals
Exchanging people among two or more channel levels
Opting for Leader’s support from different parts of the channel
Encouraging Joint Membership in and between trade associations
Mediation or arbitration
Pursuing legal recourse HOME
Most producers do not sell their goods
directly to the final users; between them
stands a set of intermediaries
performing a variety of functions.
A marketing channels includes one or
more marketing intermediaries
performing variety of functions:
1. Provides Value
2. Performs a function and
3. Expects an economic return
These intermediaries constitute a marketing channel (also called a trade channel or
Marketing channels are sets of interdependent organizations involved in the process of
making a product or service available for use or consumption.
Channel Marketing most often relates to the sale of products. However it is not limited to
the distribution of physical goods.
oBank and Credit unions depend on a network of ATMs to offer their services.
oFinancial Management and insurance organizations disseminate information
through systems provided by other vendors.
There are basically three types of Intermediaries:
Merchants: These type of intermediaries buy, take title to and resell the merchandise.
Agents: These type of intermediaries search for customers and may negotiate on the
producers behalf but they do not take title to the goods.
Facilitators: These type of intermediaries only assist in the distribution process but
neither takes title to the goods nor negotiates, purchase or sales.
What is a Marketing Channel?
Set of interdependent organizations
involved in the process of making a product or
service available for use or consumption by the
consumer or business user.
The Importance of Channels
• Fill the gaps between the production and
• Reduces the amount of time and expenditure of the
• Promote the product through efficient display etc.
• Apprising manufacturers of customer requirements
time to time.
• Add value to a company’s product.
Why are Marketing Intermediaries
The use of intermediaries results from their greater
efficiency in making goods available to target
Offers the firm more than it can achieve on its own
through the intermediaries:
Scale of operation.
Purpose: match supply from producers to demand
Marketing channel strategies
• Manufacturer uses its sales force and trade
promotion money to induce intermediaries to
carry,promote,and sell the product to the end
• It is appropriate where there is low brand loyalty
in a category,brand choice is made in the
store,product is the impulse item,and poduct
benefits are well unserstood.
• Manufacturer using advertising and promotion to
persuade consumer to ask intermediaries for the
product,thus inducing intermediaries to order it.
• It is appropriate where there is brand loyalty and
when people perceive defferences between brands
and when people choose the brand before they go
to the store.
How a channels Reduces the time and
expenditure of manufacturer
•A new firm typically starts as a local operation selling in a limited market, using
existing intermediaries. If the firm is successful, it might branch into new
markets and use different channels in different markets.
•International markets pose distinct challenges. Customers’ shopping habits
can vary by countries.
•International marketing involves coordinating the firm’s marketing activities in
more than one nation.
•The international marketing strategy is effectively realized by choosing the
suitable international marketing channel
•. The channel is the medium through which the firm’s global marketing strategy
is among the customers scattered all around the globe.
•Tata Nano will be imported to Malaysia by Tata Industries in parts.
•It will be assembled in its two factories i.e in Shah Alam, Selangor and Pasir
Gudang, Johor Bahru.
•There are four distribution centres in Peninsular Malaysia i.e. in Kuala Lumpur,
Penang, Johor Bahru and Kuantan.
•All Tata Nano cars will be distributed through these distribution centres only.
•Order can be made vide these distribution centres or its web site
(B) The channel system evolves as a function of local opportunities and conditions.
Let’s look into how Agriculture Marketing channel works:
Farmers producing agricultural produce are scattered in remote villages while
consumers are in semi-urban and urban areas. This produce has to reach consumers
for its final use and consumption.
There are different agencies and functionaries through which this produce passes and
reaches the consumer.
Factors affecting channels: There are several channels of distribution depending upon
type of produce or commodity. Each commodity group has slightly different channel. The
factors are :
•Perishable nature of produce .e.g. fruits, vegetables, flowers, milk, meat, etc.
•Bulk and weight–cotton, fodders are bulky but light in weight.
•Weak or strong marketing agency.
•Distance between producer and consumer. Whether local market or distant
.Types of Market Channels:
Some of the typical marketing channels for different product groups are given
Channels of rice:
•Producer–miller->consumer (village sale)
•Producer–miller->retailer–consumer (local sale)
Meaning: hybrid marketing channel network, a single firm may set up two or
more marketing channels in order to reach multiple marketing segments.
Today’s successful companies are also multiplying the number of “go-to-
market” or hybrid channels in any one-market area
•Companies that manage hybrid channels must make sure these channels
work well together and match each target customer’s preferred ways of doing
•Customers expect channel integration, characterized by the following features:
A)The ability to order a product online and pick it up at a convenient retail
B)The ability to return an online ordered product to a nearby store of the
The right to receive discounts based on total online and off-line
Let’s consider banking Industry:
•For different customer from high to low in the level of value added and
customization should be changed.
•In different range of products inclucding superannuation, telephone banking
and internet trading.
•Superannuation is a special kind of services that required a lot of
communication and information between bank's officer and customer
•Telephone banking it requires little interactions; hence little value is added form
•In internet banking where investors can easily seek for consultation from their
stock broker a distance away.
In changing environment customer becoming more informed about the product
and technology has made an innovation in automatic field.
According to NUNES and CESPEDES:-
High -value deal seekers
High involvement shoppers
High value deal seekers
Variety loving shoppers
A Value network is the system of partnerships and
alliances that a firm creates to source, augment,
and deliver its offerings.
A supply chain view of a firm sees markets as
destination points and amounts to a linear view of
the flow. The company should first think of the
target market, and then design the supply chain
backward from that point.
This view has been called demand chain planning.
A value network includes a firm’s suppliers, its suppliers’
suppliers, its immediate customers, and their end
A company needs to orchestrate these parties to enable it to
deliver superior value to the target market.
Demand chain planning yields several insights:
The company can estimate whether more money is made
upstream or downstream.
The company is more aware of disturbances anywhere in the
supply chain that might cause costs, prices, or supplies to
• Companies can go online with their business partners to
carry on faster and more accurate communications,
transactions, and payments to reduce costs, speed up
information, and increase accuracy.
• Marketers have traditionally focused on the side of the
value network that looks toward the customer. In the
future, they will increasingly participate in, influence their
companies’ upstream activities, and become network
Managing this value network has required companies
to make increasing investments in information
technology (IT) and software