Marketing as defined is a system of profitably creating, delivering and communicating superior value to satisfy customers needs, wants and demands better than the competition. To achieve this goal, establishing market linkages from the manufacturers to the end users is essential if not important. I am Richard Pascual of the Ateneo Graduate School of Business in Health, here to talk about Design and management of marketing channels.
First I would like to define some important terms. What is a Marketing channel? It is an interdependent organization participating in the process of making a product or service available for use or consumption. It is a set of pathways, a product or a service that follows after production, culminating in purchase and use by the end user., or to define it in a simpler way, it is the utilisation of intermediaries performing a variety of functions
While a value network is a system of partnership and alliances that a firm creates to source, augment and deliver its offerings. Guided by the principle of value delivery network and value delivery system.
Marketing channels are intermediaries that work to move goods from the producers to the consumers. These are merchants, the wholesalers and retailers, Agents, the brokers, manufacturers representatives, and sales agents, and the facilitators, the transport companies, warehouse banks and advertising agencies. Intermediaries offer producers greater efficiency in making goods available to target markets. Through their contacts, experience, specialisation and scale of operations, intermediaries usually offer the firm more that it can achieve on its own.
Why are channels important? One of the function of a channel is to gather information about potential and current customers, competitors, and the factors and forces in the marketing environment.
Another function is to develop persuasive communication to stimulate purchase of products or goods.
Its function is also to effect to reach agreement on prices, and terms for the transfer of ownership or possession of goods.
Placing order for goods with the manufacturers
Acquiring funds to finance the inventory
Each channel assume risks for carrying out channel functions
Provision of storage and movement of physical products
Provision for buyersโ payment of bills through banks
Oversee actual transfer of ownership of goods
And conversion of potential buyers into profitable customers
Critical to the company is managing channel members. Choice of intermediaries must include its background, no. of years in the business, growth and profit record strengths and service reputation. In return the company should implement training, market research and programs to motivate and improve the intermediaries performance. Producers must periodically evaluate intermediaries as against standards in sales quota, inventory levels, customer delivery time and cooperation in promotional and training programs. In competitive markets, the optimal channel structure will inevitably change over time. Change could mean adding or dropping channel members or developing a totally new way to sell goods.
In Designing a marketing channel system, marketers analyse customers needs and wants. Consumers may choose the channels they prefer based on the price, product assortment, and convenience.
Marketers should state their channel objectives in terms of service output levels and associated cost and support levels. In order to compete channel members should arrange their functional tasks to minimise cost but still provide desired levels of service. Planners can identify several market segments based on desired service and choose the best channels for them.
Each channels, from sales force to agents, distributors, dealers or internet have their own strengths and weaknesses. Sales forces can handle complex products and transactions, but they are expensive. The internet is inexpensive but may not be as effective with complex products. Distributors can create sales but the company loses contacts with customers.
A marketing channel is the particular set of strategy a firm employs, and decisions about it are among the most critical ones that management faces. the channels that are chosen affect all other marketing decisions and in managing its intermediaries, the firm must decide how much effort to devote to push or pull marketing. A push strategy uses the manufacturers sales force, trade promotion money, to induce intermediaries to carry, to promote, and sell products to the end user. This is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store or the product is an impulse item. In a pull strategy the manufacturer uses advertising, promotion, and other forms of communications to persuade consumers to demand the product from intermediaries to order it. Pull strategy is particularly appropriate when there is high brand loyalty and high involvement in the category , when consumers are able to perceive differences in brands and when they choose brands before they go to the store
For channel levels the manufacturers and consumers are part of every channel. There is a direct selling of goods and services in zero level channel. Example are door to door sales, mail order, telemarketing and manufacturer owned stores. One level channel contains one selling intermediary, such as a retailer. A two level channel contains two intermediaries, typically a wholesaler and a retailer
To illustrate an application of a marketing channel, drugs in the market for use of sick patients may flow in this manner. Marketing agents, retailers, wholesalers and distributors act as intermediaries from manufacturers, make drugs readily available to the physicians, deliver to local local procurement offices and stock retail pharmacies. Private doctors prescribe the necessary medications which may be bought in pharmacies and then given directly to the patients or given through the hospital where patients are confined.
In summary, I began to define a marketing channel and a value network, what are its functions, and why channels are important in marketing
Marketing channel is an interdependent organization participating in the process of making a product or service available for use or consumption. These channels perform the work of moving goods from the producers to the consumers, efficiently at the lowest cost.
Channels are important in gathering marketing information, developing persuasive communication, avenue to reach agreement on terms and prices, placing orders from manufacturers, acquisition of funds for the inventory.
Channels assume the responsibility of storage and product movement, assume risk in the business, effect transfer of ownership, payment of bills through banks and converting buyers into profitable partners
