Channels of Marketing Dr. Anil Mishra [email_address] 9937635059 Asian School of Business Management
A marketing channel can be define as a group of exchange relationships, which create customer value in acquiring , consuming and disposing of product and services.
It is an organized network of agencies and institutions, which, in combination, perform all the activities required to link producers with users to accomplish the marketing task.
Role of Marketing Channels
To fill the gaps between the production and consumption process (time gap, space gap, quantity gap and variety gap).
One level Channel
Two level channel
Three level channel
Multi level channel
Analyzing Customer Expectation of Service output
Lot size Utility
Convenience utility : time utility (temporal convenience) and Space utility (Spatial convenience)
It involve the study of the impact of environmental forces such as economic, legal, political, social, technological and competitive ones on market.
Characteristics of channel in response to the changes
Horizontal marketing system
Process of sharing marketing resources amongst two or more unrelated businesses at the same level of operations to attain common benefits.
Horizontal integration of related businesses allows them to achieve economies of scale.
Disadvantage of this my be lack of coordination, conflict between members, decrease in flexibility etc.
Lamar Saving Bank arranged to locate its saving offices and automated teller machines in Safeway stores. Lamar gained quicker market entry at a low cost and Safeway was able to offer in store banking convenience to its customers.
McDonald’s now places “express” version of its restaurants in Wal-Mart stores. McDonald’s benefits from Wal-Mart’s considerable store traffic, while Wal-Mart keeps hungry shoppers from having to go elsewhere to eat.
Vertical marketing channel
Process where producers, wholesalers and retailers perform the marketing activities jointly.
Traditional channel system all these members negotiate aggressively with each other. but VMS is based on cooperation.
VMS reduce the conflict that arises between these members.
Various types of vertical marketing system
When a firm owns and operates businesses at other channel levels.
This system is used by firms that want to leverage high levels of control over their channel members.
To have higher performance monitoring capabilities
Ice- cream plant
Little known italian eyewear maker Luxottics sells its many famous eyewear brands-including Giorgio, Armani, and Ray- Ban- through this system
These are independently owned and operated. It possesses high degree of inter-organizational management.
One of the firms which has considerable authority will manage the channel activities by obtaining the cooperation of and control over the channel members.
Some firms due to their position in the market due to technical expertise or due to their market share, brand base or strong consumer demand wield extraordinary authority and command.
Procter & Gamble can command unusual cooperation from resellers.
Large retailers such as Wal-Mart and Barnes & Nobles can exert strong influence on the manufacturers that supply the products they sell.
Independent firms operating at different channel levels and coordinate their distribution processes on a contractual basis.
This contracts includes roles, obligation and activities that each channel member has to perform.
This leads to formal relationship between channel members.
Multi channel marketing system
Where a single firm uses two or more marketing channels to reach one or more market segments.
This system is also known as –Hybrid system.
IBM uses multiple channels to serve dozens of segments ranging from large corporate buyers to small business to home office buyers. In addition to selling through vaunted sales force, IBM also sells through a full network of distributors and value added sellers, which sells IBM systems. It also uses telemarketing to service the need of buyers. Also consumers can buy online from the company’s web site (www.ibm.com).
Channels and Conflicts
Vertical channel conflict: example if a company opens its own online store.
Horizontal channel conflict: example:Ford dealers in chicago complaint that the other dealers in city steal sales from them by pricing too low or by selling outside their territories.