The marketing channels

“Necessity is
the mother of
Invention”

Friday, February 14, 2014 Dr. Ashutosh Kumar

1

“God couldn’t be everywhere:
therefore- He created
mothers”
Similarly manufacturers
couldn’t be omnipresent;
human needs created
Distribution


2


3

THE MARKETING
CHANNELS
Friday, February 14, 2014

Dr. Ashutosh Kumar

4

DIGICOMP + RCV

DISTRIBUTORS

DEALERS SUB DEALERS

TYPE OF BUSINESS
•Consumer Electronics
•Cable Hard ware
•Home appliances
•Super Market
•FMCG
•Telephony

RCV

KEY DEALERS

DIRECT SELLING
CALL CENTER
DEMO VAN

CONSUMERS

YOUR
ROLE

BTL
DEMONSTRATIONS

5

The Marketing Channels
•

Marketing channel is a set of
institution that transfer the
ownership of and move goods from
the point of production to the point
of consumption

•

Independent organizations are
called marketing intermediaries.


6

Q: Why Are Marketing Intermediaries
Used?
Producer Typically produces goods:
• At limited locations
• In large quantities
• With limited variety
• Over the year
Consumer consumes goods:
•All over the country at their own location
•In limited quantity per consumer
•With large variety/ assortment
•Whenever they need

7

PUSH Effect


8

PULL Effect


9

The push & the pull selections
Producer
promotes
aggressively

Channels
Promotes
aggressively

Retailer
Promotes
aggressively

Consumer

Push Strategy
Producer
Promotes
aggressively to

Channels

Retailer

Consumer

Pull Strategy

A Push strategy involves the manufacturer for using the sales force and trade
promotion activities to induce intermediaries to carry, promote and thus sell the
product to the end users
A Pull strategy involves the manufacturer using advertising and promotion to
persuade consumers to ask intermediaries for the product, thus inducing the
intermediaries to order it.


10

Transportation Modes
Rail
Rail

Cost-effective for shipping bulk products.
Cost-effective for shipping bulk products.

Water
Water

Low cost for shipping bulky, low-value,
Low cost for shipping bulky, low-value,
non perishable goods, slowest form.
non perishable goods, slowest form.

Truck
Truck

Most important carrier for consumer
Most important carrier for consumer
goods, flexible.
goods, flexible.

Air
Air

High cost, ideal when speed is needed or
High cost, ideal when speed is needed or
distant markets have to be reached
distant markets have to be reached

Pipeline
Pipeline

Carry petroleum based products,
Carry petroleum based products,
very low cost, requires little energy.
very low cost, requires little energy.

Internet
Internet

Web sites have products available, used
Web sites have products available, used
especially for services.
especially for services.
11

Role of Marketing Channels
To fill the gaps between the
production and consumption
process.


12

The Role of Marketing Channels in
Marketing Strategy


Channels provide the means by which the firm
moves the goods and services it produces to
ultimate users


Facilitate the exchange process by cutting the
number of contacts necessary



Adjust for discrepancies in the market’s
assortment of goods and services via sorting



Standardize exchange transactions


13

Think Efficiency and Effectiveness


14

Add a Distributor


15

How intermediaries improve exchange efficiencies


16

Channel Intermediaries
Retailer
Retailer

A channel intermediary that
A channel intermediary that
sells mainly to customers.
sells mainly to customers.

Merchant
Merchant
Wholesaler
Wholesaler

An institution that buys goods
An institution that buys goods
from manufacturers, takes title
from manufacturers, takes title
to goods, stores them,
to goods, stores them,
and resells and ships them.
and resells and ships them.

Agents and
Agents and
Brokers
Brokers

Wholesaling intermediaries who
Wholesaling intermediaries who
facilitate the sale of a product by
facilitate the sale of a product by
representing channel member.
representing channel member.


17

Channel Intermediaries
Retailers
Retailers

Take Title to Goods
Take Title to Goods

Merchant
Merchant
Wholesalers
Wholesalers

Take Title to Goods
Take Title to Goods

Agents
Agents
and
and
Brokers
Brokers

Do NOT Take Title to Goods
Do NOT Take Title to Goods


18

Channel functions & Flow
• Marketing Channels performs work of moving goods
from producers to consumers.
• For this, they perform some key functions.
• They are:


19

Physical Possession (PP)

P

Ownership

(Own)

R

Negotiation

(N)

O

Promotion

(Pr)

D

Financing

(F)

U

Risk Taking

(R)

C
E

Ordering
Payment

R

Information

(Ord)
(P)

W
H
O
L
E
S
E
L
L
E
R

C
O
N
S
U
M
E
R

R
E
T
A
I
L
E
R

(I)

Fig: 1.1 Marketing Flows in the marketing Channel


20

Direct Vs. Indirect Channels


Direct channel- a marketing channel that
does not use intermediaries to distribute
the product.




Why sell directly?

Indirect channel – a marketing channel
where intermediaries are used to help
distribute the product.


Why sell indirectly?


21

Channel levels
Zero Level Channel (Direct Marketing Channel):
Example: Dell.
One Level Channel:
Example: Automobile.
Two Level Channel:
Example: White Goods/ Consumer Durables.
Three Level Channel:
Example: FMCG.


22



Dual Distribution: Network that moves products to a
firm’s target market through more than one marketing
channel



Reverse Channels: Channels designed to return goods
to their producers


Example: Soft-drink Bottles/ Old Newspapers.


23

Channels for Consumer Products
Direct
Channel

Retailer
Channel

Wholesaler
Channel

Agent/Broker
Channel

Producer

Producer

Producer

Producer
Agents or
Brokers

Wholesalers
Retailers
Consumers

Wholesalers

Retailers

Retailers

Consumers

Consumers

Consumers


24

Channels for
Business-to-Business Products
Agent/Broker
Industrial
Channel

Direct
Channel

Direct
Channel

Industrial
Distributor

Agent/Broker
Channel

Producer

Producer

Producer

Producer

Producer

Agents or
Brokers

Agents or
Brokers
Industrial
Distributor

Industrial
Distributor
Industrial
User

Govt.
Buyer

Industrial
User


Industrial
User
25

Industrial
User

Channel Design Decisions
To design a marketing channel, procedure to be
followed is:
Analysing Customers Needs
Establishing Channel Objectives
Identifying Channel Alternatives
Evaluating Channel Options

26

(A) Analyzing Customer Needs:
-Firstly, we try to understand:

“What”
“Where”

Target Customer Buy ?

“Why”
“When”
“How”


27

What are the service outputs


Waiting time



Breaking the bulk



Spatial convenience



Product assortment



Service back-up


28

Example of a service output delivered
template
Service dimension

Service output delivered

1.

Bulk-Breaking

Units are delivered in ones

2.

Spatial convenience

There is at least one outlet for almost every
3 km radius

3.

Waiting time

Not more than 2 days for any model

4.

Assortment

Other consumer goods items including that
of other competitors are available at all the
Outlets.

5.

Installation support

Available

6.

After sales support

Free for first two years, but available on
payment afterwards. Also available at every
city from where the product was bought.

7.

Consumer financing

Available


29

(B) Establishing Channel Objectives:
•Channel objectives need to be stated in terms of
targeted service output levels.
•Channel objectives vary with product characteristic.
Product could be:

Perishable (bread, butter, newspaper etc)

Bulky (building materials)

Requiring Installation/maintenance
services (Computer, AC)

High Unit Value (generators & turbines)


30

• Channel design should take into account
strengths and weakness of different types of
intermediaries.
• Also, competitive channels should be
understood & analysed.


31

(C ) Identifying Channel
Alternatives:
Channel alternatives are described by:
•
•
•

Types of Intermediaries Available.
Number of Intermediaries Needed.
Terms/ Responsibilities of each
Channel Members.


32



Types of Intermediaries




Number of Intermediaries






Company Sales Force, Manufacturer’s Agents, and
Industrial Distributors

Intensive distribution
Exclusive distribution
Selective distribution

Terms & Responsibilities of Channel Members





Price Policy
Conditions of sale
Distributor’s territorial rights
Mutual services and responsibilities


33



Types of Intermediaries


Company Sales Force, Manufacturer’s Agents, and
Industrial Distributors

Example: sale of food grains to rural market.
1. Mobile vans for direct distribution
2. Periodic markets (haats)
3. Agricultural markets (mandis)
HUL’s Operation shakti, involves self-help groups
(SHGs) of women to distribute its products in rural
areas.




ITC’s e-Choupal.


34



Number of Intermediaries













What is it?
When is it used?

What is it?
When is it used?




What is it?
When is it used?


35


*
*


36

Exclusive Distribution:
• Involves limiting the number of intermediaries
• Used when company desires more control over
services provided by intermediaries
• Intermediaries may agree not to carry
competitive brands (Exclusive Dealing)


37

Exclusive Distribution:
• Example: Textile mills like Mafatlal group, Delhi
cloth and General Mills & Bombay Dyeing
•Tata Engineering & Locomotive Co. Ltd (TELCO)
and Ashok Leyland
•Pioma Industries, Ahmedabad, manufacturer of
Rasna soft drink


38


*
*

*
*

*

*


39

Selective Distribution:
• Involves use of more than a few, but less than all
intermediaries who are willing to carry a particular
product
• This enables producer to have just right amount of
outlets to cover territory
• In turn helps producer to control services to
customer better coverage. Coverage cost is lower
for company.
• Example: Stihl company dealing with power
equipment

40


****
** * *
*** * * **
** * * *
** ** * * *
** * **** *
*
** **** ***** *
** **** * **
**
*
**
* * ** *
*
*

41

Intensive Distribution:
• Manufacturer places goods in as many outlets as
possible
•Marketers of convenience products like cigarettes,
chewing gum, salt, biscuits, bread, soaps, detergents
& soft drinks want intensive distribution
•Example: Titan Watches, Asian Paints, HUL etc.


42

Intensive Distribution:
• Asian Paints distribution network consists of 21
sales offices, 3 agencies and 6000 dealers
•HUL network consists of 4000 redistribution stockists
and 3,00,000 dealers spread over the entire country


43

Intensity of Distribution


44

Terms & Responsibilities of Channel
Intermediaries
Producer must clearly indicate rights/ duties of
each channel member. Each channel member’s
profitability is to be ascertained & they should
be treated with respect.
Elements of terms could be:
•Price policy:
•Conditions of sale:
•Distributor’s territorial rights:
•Mutual services & responsibilities:

45

(D) Evaluating Channel
Alternatives:
Channel alternatives evaluated against:
•
•
•

Economic Criteria.
Control Criteria.
Adaptive Criteria.


46

Evaluating Channel
Alternatives:
Lets take an examples: A Jodhpur based
branded furniture manufacturer wants to sell
furniture in the Southern markets. The
manufacturer has to decide between two
alternatives:
First Channel alternative is:-

•Hiring Ten new sales representatives who will operate from
offices in Bangalore, Chennai, and Hyderabad. They would
receive a base salary plus commissions. Also, the company
will have to meet the expenses of setting up the office-cumresidence for these employees

47

Evaluating Channel
Alternatives:
Second Channel alternative is:•Using a Bangalore based industrial distributor
dealing in furniture with offices in Chennai and
Hyderabad. The distributor has 30 sales
representatives, who would receive commissions
based on their respective sales.

???

48

DISCUSSION


49

The marketing channels

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a The marketing channels

Similar a The marketing channels (20)

Más de Anshuman Singh

Más de Anshuman Singh (15)

The marketing channels

Notas del editor