marketing channels.

1. Marketing Channels
By:Jherialx

2. • Marketing Channels
-are human creations and they may be designed
and structured to serve the needs of the user
-a set of interdependent organizations and
individuals that facilitate the movement and transfer
of ownership of commodities from the producers to
the ultimate users.

3. Functions of the Marketing Channels
1. they circulate decisions and work;
2. they finance the process for moving goods
from the producers to the consumers;
3. they are active participants in the process;
4. they serve as a channel of communication
between the producers and the consumers;
5. they assist in the promotional aspects of
marketing; and
6. they minimize the number of transactions in
the system

4. 1.)Circulazation of Decisions
• The marketing channel provides the manufacturers
with much reduced number of people to contact
when transactions are made.

5. Manufacturer
A
Manufacturer
B
Manufacturer
C
User X
User Y
User Z
WITHOUT DISTRIBUTOR
Number of contacts= 9
Manufacturer
A
Manufacturer
B
Manufacturer
C
User X
User Y
User Z
Distributor
WITH DISTRIBUTOR
Number of contacts= 6

6. 2.) Financing
When manufacturers sell directly to consumers, they
may have to reckon with the financing of the ff:
1. sales calls to prospective customers;
2. purchase of selling equipment;
3. construction of display stores;
4. extension of credit to costumers; and
5. training of retail salesperson

7. 3.) Pricing
• The difficulty of pricing one’s product is aggravated
by lack of direct contact with consumers, especially if
they are scattered throughout a wide area of
concern. The distributor directly deals with the
consumers and can provide important information
regarding the setting of realistic factory price.

8. 4.) Channels of Communication
• The changing requirements of users are oftentimes
relayed to the distributor. Individual buyers, for
instance, may inform the retailer that they will be
buying next season only items with new designs. This
information will be relayed by the distributor to the
manufacturer. The distributor, in effect is acting as a
channel of communication.

9. 5.) Assistance in Promotional Activities
• When the distributor attempts to increase his sales
by promoting his products, he is actually
complementing the promotional activities of the
manufacturer. For example, a certain retailer gives
free items to buyers every time a particular brand of
soap is purchased from his store.

10. 6.) Minimization of Number of Transactions
• The distributor plays an important role in minimizing
the number of transactions within the system. As
shown in the previous figure, the number of
transactions is reduced from 9 to 6 when a
distributor is placed between the manufacturers and
the users. The significance of the reduction is
magnified as the number of manufacturers and the
users are increased.

11. Types of Marketing Channels
1.) Consumer channels
2.) Industrial channels

12. PRODUCER
CONSUMER
PRODUCER
RETAILER
CONSUMER
PRODUCER
WHOLESALER
RETAILER
PRODUCER
AGENT
WHOLESALER
RETAILERCONSUMER
CONSUMER
Channel A Channel B Channel C Channel D
Consumer Channels
-are those that are used in the distribution of consumer goods.
*Channel A- direct distribution channel
*Channel B- that type where one middleman interposes between the producer and
the consumer
*Channel C- the wholesaler and the retailer provide linkage between the producer
*Channel D- an agent apart from the wholesaler and the retailer provides linkage
between the producer and the consumer

13. CHANNEL
E
CHANNEL
F
CHANNEL
G
PRODUCER
INDUSTRIAL
USER
PRODUCER
INDUSTRIAL
DISTRIBUTOR
INDUSTRIAL
USER
PRODUCER
AGENT
INDUSTRIAL
USER
Industrial Channels
- Are those which are used in the
distribution of industrial goods.
3 TYPES:
1. The manufacturer selling directly to the industrial users.
2. The manufacturer assigning industrial distributors which sells directly
to industrial buyers.
3. The manufacturer dealing with agents who call on industrial users.

14. Selecting a Marketing Channel
• The selection of a marketing channel must not be taken
lightly. This is so because any mistake in making a choice could
mean considerable amounts of lost income.
The availability of various channels pose a challenge to the
marketer to make an intelligent decision on which channel is
best suited to his firm. In the selection of a marketing
channel, the company is faced with any of the following
situations:

15. 1.) it may have an option of choosing from among the various channels existing
ex. Companies which are financially sound have bigger facilities, and with
products already known in the market, may have an option to consider any of the
existing channels. Like Procter and Gamble and San Miguel Corporation.
2.) it may not have that option to choose
ex. The small entrepreneur who have just started operations and whose
products are not yet known are, oftentimes, not provided with the option to choose
from among the existing channels. He may even have a hard time convincing
distributors to carry his product. Like bar soap manufacturers whose products are not
carried by most distributors.

16. The Channel Selection Process
Assuming that the manufacturer has the option to choose
among the various channel option, he may have to adapt the
following steps:
1. identification of target customer;
2. determination of consumer buying habits regarding
the goods under consideration;
3. determination of the location of the potential
customers;
4. listing of channel alternatives; and
5. selection of channel members

17. Recognize need for channel
design decision
Set and coordinate
distribution objectives
Specify the distribution tasks
Develop alternative channel
structures
Evaluate the relevant
variables
Choose the best channel
structure
Select the channel members
Channel Design Decision
Model

18. Evaluating the Prospective Channel Member
The list of channel alternatives is really an
enumeration of distributors with possibilities of serving
the company as middlemen. The list must be trimmed
down to the exact number of middlemen requires. This
can be achieved through careful and objective evaluation
of the prospects.

19. A set of criteria that may be useful in evaluating a channel is as
follows:
1. Credit and financial condition of the distributor. A
review of the credit performance and the financial statements will
provide a clue as to the desirability of selecting the prospective
distributor.
2. Sales strength. This refers to the sales capacity of the prospective
distributor and is indicated by the quality, the actual number and the
technical competence of the salespeople.
3. Product lines. Determining the types of products carried by the
prospective distributor will reveal whether the sales objectives of the
firm can be expected.

20. 4. Reputation. This is a very important requirement in determining the
possibility of profitable relationship.
5. Market coverage. The market covered by the prospective
distributor must be the market coverage desired by the
manufacturer.
6. Sales performance. The prospective distributor must able to show
satisfactory sales performance. This is indicated by sales volume.
7. Management succession. A prospective distributor who has
qualified person to succeed him in case of a need for replacement is
a plus factor in evaluation.

21. 8. Management ability. When the quality of management of a
distributorship is poor, it is not worth considering the prospect.
9. Attitude. If the prospective distributor has the right attitude, the
possibility of long-term success in handling the manufacturer’s product is
possible. This is indicated by the distributors aggressiveness, enthusiasm,
and initiative.
10. Size. When the prospective distributor is into large-scale operations,
large sales volume for the manufacturer’s product is possible. Large firms
usually employ salespeople , have better equipment and offices,
personnel, and facilities.

22. Factors that Influence Channel Selection
1. the nature of the product. Determine which channel of
distribution is best suited. Highly expensive products like ships and
airplanes, for instance, require more direct dealing with users.
2. the nature of the market. It is also an important consideration.
Buyers of detergent soaps, for instance, are scattered throughout the
country, so the manufacturer will have to choose a channel that will
serve this particular market.
3. the size of the company. Also its organizational set-up is a
factor in selecting a channel. Large companies can afford to adapt
even a multi-channel approach in its distribution activities.

23. Distribution Strategies
• Decisions must be made by the firm on how broadly or narrowly its
products will be distributed. This will determine the number of
intermediaries that will be tapped.
INTENSIVE
DISTRIBUTION
SELECTIVE
DISTRIBUTION
EXCLUSIVE
DISTRIBUTION
-requires the firm to sell its products through every
available outlet in a market where a consumer might
reasonably try to find them.
Ex. Convenience goods like groceries, and cigarettes.
-selling through only those outlets which will give the product special
attention. it is used for purposes like avoiding making sales to middlemen
with: 1.) poor crediting; 2.) a reputation for making too many returns or
requesting too much service; and 4.) are not in a position to perform
satisfactory.
-the producer grants exclusive selling rights to a
middleman in a certain area. It is applicable to specialty
products or services like automobiles and expensive
watches.

24. STRATEGY NUMBER OF
OUTLETS
INTENSIVE
SELECTIVE
EXCLUSIVE
MANY
FEW
ONE
DISTRIBUTION STRATEGY and the NUMBER OF OUTLETS