2. Reference Books
• Marketing Channels (7th Edition), Anne Coughlan (Author), Erin
Anderson (Author), Louis W. Stern (Author), Adel El-Ansary
• Marketing Channel Management: People, Products, Programs, and
Markets, Russell W. McCauley, (Latest Edition)
• Marketing 4.0 by Kotler
• HBR Articles
3. Prologue
• Companies that come together to bring products and services from
their point of origin to their point of consumption
• Marketing channels , the company’s route to the market (RTM), are
the downstream part of value chain
• It is marketing channel through which producers gain access to the
market
4. Chapter #1 Marketing Channels
Structure and Functions
Learning Objective
• What a marketing channel is
• Why manufacturers choose intermediaries between themselves and
end-users
• What marketing flows define the work of the channel
• Who the members of marketing channels are and the flows in which
they can specialize
• The elements of a framework for marketing channel design and
implementation
5. What is marketing Channel
• Routes to market to sell every product and services.
RTM is a gate-keeper between manufacturers and
end-users.
• Is an important asset to overall company’s strategy
• Have a strong impact on end-users, brand image and
perceived risks
• Point of differentiation among competitors
• Continuous monitoring and evaluation of RTM
6. Marketing Channel- Introduction
A set of interdependent organizations involved in the process of making
a product of service available for consumption or use
8. Why do marketing channels exist
• Why not manufacturer directly involves in selling ?
• Two forces – factors Demand side and supply side
9. Demand side factors
• Facilitation of search: for both consumer and producer. Target
markets / availability
• Adjustment of mix discrepancy
Independent mediators (Distributor), preforms sorting function which
are
1) Sorting : separation of heterogeneous products
2) Accumulation: inventory build up
3) Allocation: channel wise (with principles involvement)
4) Variety Assortment (Ready to sell from Distribution to end user)
10. Supply Side factors
• Routinization of transaction
• Use of transaction record, continuous replenishment program both at
intermediate and end user level
• Focus on secondary sales
• Reduction in number of contacts
• (Imagine if no intermediary)
11. Exhibit-Tea Selling in Taiwan
• The key roles of tea middle men
• Started in Mid 18th century when Tea tress were imported from China
• 1920- About 20,000 tea farmers- 280 tea middle mean sold to the 60
tea refineries
• 1923- Introduced tea auction house to remove intermediary
• No of Contacts 60*280*n (SKU)+20,000
13. Selling Through One Wholesaler
Manufacturers
Wholesaler
Retailers
14 Contact
Lines
FIGURE 1.1: CONTACT COSTS TO REACH THE MARKET
WITH AND WITHOUT INTERMEDIARIES
14. FIGURE 1-1: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT
INTERMEDIARIES
Selling Directly
Manufacturers
Retailers
40 Contact Lines
Selling Through One Wholesaler
Manufacturers
Wholesaler
Retailers 14 Contact Lines
Selling Through Two Wholesalers
Manufacturers
Wholesalers
Retailers
28 Contact Lines
15. What is the work of Marketing Channels
• Flows: instead of processes, used this term to show flow of work
between intermediaries
• An important flow that permeates all the value added activities of the
channel- the flow of information
• Information can and does flow between every possible pair of
channel members in both routine and specialized ways
17. Who belongs to a marketing channel
• Key members are manufacturer (Principal), Intermediaries
(Distribution set up) and end users (Point of consumption).
• One protagonist in the channel is called Channel captain.
• Intermediaries include Wholesale Intermediary / Merchant
wholesaler or distributors
18. Framework for Channel Analysis
• The channel manager needs to focus on two critical processes
1) Designing the right channel
2) Implementing the design
Outcome is called channel coordination
The goal of a channel manager is to achieve Channel coordination, a
state where all members of channel synergize to a common goal
19. FIGURE 1-3: FRAMEWORK FOR CHANNEL DESIGN AND IMPLEMENTATION
INSIGHTS FOR SPECIFIC CHANNEL INSTITUTIONS:
Retailing, Wholesaling and Logistics, Franchising
Channel Design Process:
SEGMENTATION:
Recognize and respond to target customers’
service output demands
Decisions About
Efficient Channel Response:
CHANNEL STRUCTURE:
What kinds of intermediaries are in my
channel?
Who are they?
How many of them?
SPLITTING THE WORKLOAD:
With what responsibilities?
DEGREE OF COMMITMENT:
Distribution alliance?
Vertical integration/ownership?
GAP ANALYSIS:
What do I have to change?
Channel Management Process:
CHANNEL CONFLICT:
Identify actual and potential
sources
MANAGE/DEFUSE CONFLICT:
Use power sources strategically,
subject to legal constraints
GOAL:
Channel Coordination
CHANNEL POWER:
Identify sources for all
channel members
20. Channel Design- Segmentation
• For channel manager, segmentation is best defined on the basis of
demands for the output of the marketing channels
• The value added activities are called as SERVICE OUTPUTS and
include:-
• Bulk breaking
• Spatial Convenience ( No of Distr Pts)
• Waiting and delivery time
• Assortment and variety
• Customer services and product/market/usage information
21.
22. Channel Design- Channel Structure Decisions
• To decide who are the members of channel:-
1. Whether to take independent distributor , direct sales or
sales reps
2. Second is to decide the exact identity of channel member-
Brand / Local
3. Third is to decide how many of each type of channel
member to include- Channel Intensity decision ; Intensive /
Selective / Exclusive
23. Channel Design
• Splitting the workload- Identity and Intensity should be decided
keeping in mind the goal of minimizing channel flow costs
• Degree of commitment- Transactional versus distribution alliances
• The Gap Analysis – On demand side / Supply Side
24. Channel Implementation
• Channel Power
• Identifying Channel Conflicts- Mainly goal conflict (multi-distribution)
, Domain Conflict (Responsibilities) and Perceptual Conflict
(Difference in the perception of market place)
• The Goal of channel coordination
25.
26. Zero-based Channel
• A zero-based channel design is one that
(a) meets the target market segment's demands for service outputs
(b) at minimum cost of performing the necessary channel flows that
produce those service outputs."
