This document provides an overview of marketing channels, including definitions, roles, elements of successful channels, functions and flows, and channel levels. It defines a marketing channel as the set of intermediaries involved in the transfer of goods from producer to consumer. The roles of channels include optimizing exchange relationships and generating value through form, place, time and ownership. Elements of successful channels include pooled resources, collective goals, a connected system, and flexibility. Channels perform functions like information flow, promotion, negotiation, ordering, financing, risk taking, and physical distribution. Channels have levels ranging from zero to multiple intermediaries at each level.

1. MARKETING CHANNEL
CHAPTER 1:
CONCEPT OF MARKETING CHANNEL

2. CLO 1
• Distinguish the types, sources and resolution
strategies of channel conflict and be able to relate
in the current marketing situation.

3. LEARNING OUTCOMES
• Define marketing channel
• Describe the roles of marketing channel
• Describe the elements of successful marketing
channels
• State the functions and flows of marketing channel
• Identify the channel levels

4. DEFINITION
• as exchange relationships that create customer
value in the acquisition, consumption, and
disposition of products and services ;
OR
• a set of practices or activities necessary to
transfer the ownership of goods, and to move
goods, from the point of production to the point
of consumption and, as such, which consists of
all the institutions and all the marketing activities
in the marketing process. A marketing channel is
a useful tool for management.

5. ROLES OF MARKETING CHANNEL
• An important function performed by intermediaries is their
role in optimizing the number of exchange relationships
needed to complete transactions.
• Channel intermediaries are individuals or organizations who
mediate exchange utility in relationships involving two or
more partners.
• Intermediaries generate form, place, time and/or ownership
values by bringing together buyers and sellers.
Intermediaries have always helped channels CRAM it: create
utility by contributing to:

6. CRAM
Contactual
Efficiency
• Contactual efficiency describes this movement toward a
point of equilibrium between the quantity and quality of
exchange relationships between channel members.
• Without channel intermediaries, each buyer would have to
interact directly with each seller.
Facilitating
Routinization
• Transaction processes are standardized to improve the flow
of goods and services through marketing channels
• Routinization itself delivers several advantages to all channel
participants.

7. CRAM
Simplifying
Assortment
• Organizations strive to ensure that all market offerings they
produce are eventually converted into goods and services
consumed by those in their target market
• smoothing function
• This function entails the conversion of raw materials to
increasingly more refined forms until the goods are acceptable
for use by the final consumer
Minimizing
Uncertainty
• The role that intermediaries play in reducing uncertainty is
perhaps their most overlooked function.
• Several types of uncertainty develop naturally in all market
settings; Need uncertainty, Market uncertainty, Transaction
Uncertainty

8. THE ELEMENTS OF SUCCESSFUL
MARKETING CHANNELS
Pooled
Resources
Collective Goals
Connected System
Flexibility

9. 1) Pooled Resources
• A marketing channel operates a team, sharing
resources and risks to move products and
resources from their point of origin to their point
of final consumption
• Ex: manufacturer may distribute their product
through distributors/wholesalers who then
distribute to retailers.
• Manufacturer retail outlet (convenience
store, departmental store, supermarket and etc)

10. 2) Collective Goals
• To success in marketing channel need team
effort, pooling the resources together and
willing to work together.
• A sense of shared purpose helps unite
organizations within market channels.
• The purpose shared by members of an
organization is reflected in the organisation’s
mission statements.

11. 3) Connected System
• Channel members facilitate the movement of
products from production point to
consumption point.
• If intermediaries do not exist or fail to perform
their functions, this will effect the whole
distribution system of moving product from
production to the final consumers. In this case
intermediaries connect the producers to the
final consumers.

12. 4) Flexibility
• In order to be successful, marketing channels
must be flexible systems.
• The organizations and persons involved in
channel flows must be sufficiently connected
to permit the system to operate as a whole,
but the bond they share must be loose
enough to allow for components to be
replaced or added.

13. FUNCTIONS AND FLOWS OF
MARKETING CHANNEL
Functions
&
Flows
Information
Promotion
Negotiation
Ordering
Financing
Risk taking
Physical
distribution
Title

14. FUNCTIONS AND FLOWS OF
MARKETING CHANNEL
• Marketing channels perform the task of moving
goods from producers to consumers. In doing so, the
channels close time, place and possession gaps that
separate goods and services from consumers.
• To achieve these outcomes, channels members must
perform several marketing functions. These
marketing functions are listed below in the order in
which they would normally arise in an automotive
distribution channel

15. a) Information
• The accumulation and distribution of information
about current and potential customers,
competitors and others in the marketing
environment.
• The information flow from the manufacturer to
consumers are two-directional. All parties
participate in the exchange of information and
the flow can be either forward or backward.

16. b) Promotion
• The construction and distribution of
persuasive and/or informative
communications designed to attract buyers.
• The promotion flow refers to the flow of
persuasive communication in the form of
advertising, personal selling, sales promotion
and publicity.

17. c) Negotiation
• The means by which final agreement on price
and other terms (financing, features, etc.) is
reached so that transfer of ownership and
possession can be completed.
• The negotiation flow represents the interplay
of the buying and selling function associated
with the transfer of title to the products. It
involved the flow in both directions and at all
levels of the channel.

18. d) Ordering
• The communication of an end-user’s intention
to purchase through the channel members to
producers.

19. e) Financing
• The procurement and allocation of funds
required to finance automotive
inventories at the channel’s differing
levels

20. f) Risk Taking
• The bearing of the risks associated with
carrying out the channel-related work

21. g) Physical Possession
• The successive stages by which the storage
and movement of physical products from the
raw materials to final customers occurs.

22. h) Title
• The actual transfer of automobile ownership
form one organization to another, or to the
final consumer

23. Flows in The Marketing Channel
Producers Wholesalers Retailer Consumer
Physical
Possession
Title
Promotion
Information
Negotiation
RiskTaking
Ordering
Financing

24. THE CHANNEL LEVELS
• In making channel design decisions, a
number of conventional channel systems
are available. These designs vary along three
dimensions:
• Number of levels present in the channel,
• Number of intermediaries operating at each level, and
• Types of intermediaries used at each level.

25. The Number Of Levels In
The Channel
a) Zero- level channel
Zero – level channel or direct marketing
channel exists when a producer sells
directly to the final user. In consumer
channels, door-to-door selling, mail-order
catalogues, telemarketing, or
manufacturer-owned retail outlets each
illustrate zero-levels channels.

26. The Number Of Levels In
The Channel
c) Two-level channels
Two-level channels feature two selling
intermediaries, such as a wholesaler and retailer.
d) Three-level channels
Three-level channels feature some combination of
three intermediaries, such as a wholesaler, agent
and retailer. Consumer channels rarely extend
beyond four levels.

27. The Number Of Levels In
The Channel
PRODUCER CONSUMER
Retailer
Wholesaler
Retailer
Retailer
Wholesaler Agent
Two level
Three level
One level
Zero level
CONSUMER CHANNEL DESIGN

28. MANUFACTURER INDUSTRIAL
USER
Manufacturer’s
representative
Manufacturer’s
sales force
The Number Of Levels In
The Channel
Industrial
distributors
INDUSTRIAL CHANNEL DESIGN

29. THE NUMBER OF INTERMEDIARIES AT
EACH LEVEL
Intensive distribution
• Intensive distribution refers to the aims to provide full
coverage of the market by using all available outlets.
For many products, total sales are directly linked to the
number of outlets used (e.g. cigarettes,soft drinks).
• Intensive distribution is usually required where
customers have a range of acceptable brands to choose
from. In other words, if one brand is not available, a
customer will simply choose another.

30. THE NUMBER OF INTERMEDIARIES AT
EACH LEVEL
Exclusive Distribution
• Exclusive distribution is an extreme form of
selective distribution in which only one
wholesaler, retailer or distributor is used in
a specific geographical area.
• Exclusive distribution places limits on the
number of intermediaries operating at any
given channel level.
• is used when producers want to retain
control over the quality of service levels

31. THE NUMBER OF INTERMEDIARIES AT
EACH LEVEL
Selective Distribution
• Involves a producer using a limited number of outlets in a
geographical area to sell products. An advantage of this
approach is that the producer can choose the most
appropriate or best-performing outlets and focus effort
(e.g. training) on them.
• Selective distribution works best when consumers are
prepared to "shop around" - in other words - they have a
preference for a particular brand or price and will search
out the outlets that supply. Example: products
Maybelline, Loreal, Christian Dior, SKII or others.

32. THE END
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