1. MARKETING CHANNELS OR DISTRIBUTION CHANNELS
Authorized Dealers for Auto Limited 2 Wheeler. Vidyanagar Hubli.

2. Marketing Channels
What is Marketing Channel?
 A set of interdependent organizations that help make a
product or service available for use or consumption by
consumer or business user.
 Also known as Distribution Channels.
 This Concept of Managing interdependent organizations is
known as “Supply Chain Management”( SCM)
 Marketing Channels are based on VDN i.e. Value Delivery
Network.
 which means:
 The network made up of company, suppliers, distributers
& ultimately customers who partner with each other to
improve the performance of the entire system in delivering
customer value.

3. Marketing Channels
According to AMA
(American Marketing Association)
 “Channel of Distribution is the Structure of Intra
Company Organization units and Extra Company
Agents and Dealers, Wholesale and Retails, through
which commodity, a product or Service is Marketed”.

4. Marketing Channels
Characteristics of MC
 Link between Producer and Consumer.
 Flow of Goods.
 Remuneration.
 Classification-Direct and Indirect.
 Activities- Financing, Credit Facility Etc.

5. Marketing Channels
Importance of MC
 Push Strategy:
 This Involves manufacturer using it sales force and trade
promotion money to induce intermediaries to carry,
promote and sell the product to end users.
 It is appropriate strategy where there is:
 Low Brand or Product Loyalty.

6. Marketing Channels
Importance of MC
 Pull Strategy:
 Manufacturer using advertising and promotion to persuade
consumers to ask intermediaries for the product. Thus
inducing intermediaries to order it.
 This Strategy is appropriate where there is high brand or
Product loyalty and high Involvement.
 Top marketing companies like:
Skillfully employ both push and pull strategies

7. Example of Push & Pull Strategy of

8. Marketing Channels
Channel Development and Levels
M-Manufacturer C-Consumer
M C
M C
M C M Distributor C
M C
M C
No of contacts with Distributor
No of contacts without a Distributor M+C=3+3=6
M*C= 3*3=9
Thus MC’s reduce the amount of work that must be done by both producers and
Consumers.

9. Marketing Channels
Channel Levels
 Channel Level:
 A layer of Intermediaries that performs some work in
bringing the product and ownership closer to the final
buyer. M C
ZERO Level
(Also Called One Level, Two Level,
Direct Marketing Three Level
Channel) (Also Called Indirect
Marketing Channel)

10. Channel Levels
 Zero Level( or Direct Marketing) Channel:
 A Manufacturer Selling Products directly to the consumer.
 One Level: with one selling intermediary.
 Two Level: contains two selling intermediaries. These
intermediaries could be retailers, distributors, a system
house, or combination of stockiest/wholesalers and
retailers, distributors and dealers.
 Three Level: three selling intermediaries such as
distributor, wholesaler, retailer etc
 Thus Many Levels are there.

11. Marketing Channels
Channel Levels.
Consumer Marketing Channels B2C Industrial Marketing Channels B2B
M M M M M M M M
wholesal Manufacturers Manufacturers
wholesaler er Representative Representative
Retailers retailer
Industrial
Distributors
retailer
Dealer
C C C C C C C C
Zero One Two Three Zero One Two Three
Level Level Level Level Level Level Level Level

12. Marketing Channels
Channel Design Decisions.
1) Analyzing Customers’ Desired Service Output Levels.
3) Establishing Objectives and Constraints.
5) Identifying Major Channel Alternatives.
7) Evaluating the Major Alternatives.

13. Marketing Channels
Analyzing Customers’ Desired Service Output Levels.
 In designing marketing channel, the marketer must understand the service
output levels desired by target customers. Channels produce five service
outputs.
s Lot Size: the no of units the channel permits a typical customer to purchase
on one occasion.
t Waiting and delivery time: the average time customers of that channel wait
for the receipt of goods.
o Spatial Convenience: the degree to which marketing channels make it easy
for customers to purchase the product.
Product Variety: the assortment breadth provided by the marketing channel
r Service Backup: the add on services(credit, delivery, installation, repairs)
provided by the channel.

14. Marketing Channels
Establishing Objectives and Constraints.
1. Perfect STP Planning.
2. Objectives Vary with Product Characteristics.
3. Cost Management Plays Very Important Role.
4. The objectives to be set upon the environment which the
company is operating.

15. Marketing Channels
Identifying Major Channel Alternatives.
 A Channel Alternative is described by three elements:
3. Types of business intermediaries available.
4. The no of intermediaries needed.
5. Terms and responsibilities of each channel member.

16. Marketing Channels
Types of Business Intermediaries available:
 The people and Organizations that assist in the flow of goods and services from producer to
customer are known as Marketing Intermediaries.
 The following are the common type of intermediaries:
 Agent or Broker: legal authority to goods/services on behalf of producer.
 Middleman: just anybody acting as mediator between Producer & Consumer
 Wholesaler: who deal bulk sales from the producers to organizations.
 Retailer: last link of the channel who deal directly with consumers.
 Distributor: distributor deal on their own account and push the products.
 Dealer: sell only to final consumers.
 Value Added Resellers(VAR’s): buy the basic product from producer and add value
to it or, depending on the nature of the product modify it and then resell it to final
customers.
 Merchants: Assume ownership of goods that they sell to customers or other
intermediaries.
 Facilitating (C&F) Agents: they are the people and organizations that assists the
flow of products and information to marketing channels and include banking
insurance functions. Transportation and Storage Agent. Covering the risk. Financial
Service.

17. Marketing Channels
The no of Intermediaries Needed.
 Selective : use of more than one but fewer than all, of the
intermediaries who are willing to carry the company’s
products.
Exclusive: giving a limited number of dealers the exclusive
right to distribute the company’s products in their
Territories.
Intensive Distribution:
Stocking the products as many as many outlets as possible.

18. Marketing Channels
Evaluating the Major Alternatives
 Each channel alternative needs to be evaluated against:
 Economic
 Control
 Adaptive Criteria.

19. Marketing Channels
Economic Criteria
 It includes: sales, cost, profitability of different channel
alternatives.
 Channel Advantage:
 When a company successfully switches to its customers to
lower cost channels, while assuming no loss of sales or
deterioration in service quality.

20. Marketing Channels
Control & Adaptive Criteria
 Sales agency is an independent firm seeking to maximize
its profits.
 Better approach is needed to adapt the product and to sell.
 Long term relationships.

21. Marketing Channels
Channel Management Decisions
 Marketing Channel Management(MCM):
 Selecting, managing and motivating individual channel
members and evaluating their performance over a time.
 Channel decision refers to various decisions related to
selection of right channel member for distribution of
goods as well as services from the manufacturer to the
ultimate consumer.
 It includes:
 Selecting The Channel Members.
 Managing Channel Members.
 Motivating the Channel Members
 Training & Evaluating the Channel Members

22. Marketing Channels
Selecting the Channel Members
 Factors involving in the selection of channels:
g Market Consideration: B2C or B2B, Number of potential
customers, size of order, buying habits of customers,
geographical concentration of the market.
c Product Consideration: unit value, product line, technical
nature, size and weight, life cycle, value.
Company considerations: volume of production, financial
resources, experienced and competent management, services
provided by channels, desire of control of the channels.
n Middlemen considerations: availability of desired middlemen,
financial ability, attitude, sales potential, cost, competition and
legal constraints.

23. Marketing Channels
Managing the Channel Members
 The following decisions are considered important while
making the decision:
 Marketing mix variables.
 Long term commitments.(PRM)
 Degree of channel control.
 Level of customer services.
 Price of the product/services.

24. Marketing Channels
Motivating the Channel Member.
 Relationship Marketing.
 The Concept of Marketing Which emphasis on building mutually satisfying
long term relationships with key parties in order to earn and retain their
business.
 PRM: Activities of the firm undertakes to build mutually satisfying long
term relations with key partners such as suppliers, distributors, ad agencies,
and marketing research suppliers.
 Benefits and cost offered to intermediaries:
 Reduction in the amount of capital employed by the distributor.
 Lower operating cost.
 Availability of specialists’ services.
 Reduction of overall risk.
 Customer finance schemes.
 Increased sales promotion.

25. Marketing Channels
Motivating the Channel Member.
 Cooperative Programs: Traditional Methods which
includes:
 Advertising allowances, training sales people, payment for
displays, free goods, commission on extra sales.
 DAC: Distribution Advisory Council:
 It helps in an overall improvement of channel
communication which in turn, helps manufacturer learn
more about the needs and problems of his channel
members.

26. Marketing Channels
Motivating the Channel Member.
 Channel Power:
 Ability to alter channel members’ behavior so that they take
actions they would not have taken otherwise.
 Coercive Power: manufacturers threaten to withdraw a
resource or terminate relationship if intermediaries fail to
cooperate.
 Reward Power: extra benefit for achievements.
 Legitimate power: requests a behavior that is warranted under
a contract.
 Expert Power: special knowledge about intermediaries value.
 Referent Power: highly respected to be associated with them.

27. Marketing Channels
Training & Evaluating the Channel Member
 Training:
 Training programs.
 Requires third party service engineers to complete set of
courses and take certification exams. Those who pass
formerly recognized as Microsoft Certified Professionals,
and they can use this designation to promote business.
 Evaluation:
 Performance Appraisal of each member periodically.

28. Marketing Channels
Channel Conflict & solutions.
 Channel Conflict: when one channel member’s action
prevent the channel from achieving goal.
 Reasons for Conflict:
 Product Range Mix
 Ordering Procedures
 Delivery schedules
 Trading terms and credit arrangements
 Packaging & handling
 Joint promotion
 Different perception of the market.

29. Marketing Channels
Types of Conflict
 Horizontal Conflict: conflict at the same level between
channel members
 Ex: retailers on issue of pricing.
 Vertical Conflict: conflict between different level with in
the same channel
 Ex: wholesaler & Manufacturer Conflict on issue of
delivery of goods.
 Multichannel Conflict: with two or more channels
established by the manufacturer to sell in the market
 Ex: retailer-distributor- manufacturer conflict related to
credit facility

30. Marketing Channels
Remedies or Solutions to Conflict
 Channel Coordination: bringing channel members
together to solve the issues.
 Proper Communication.
 Superordinate goals.

31. Marketing Channels
Examples of Marketing Channels
 VMS: Vertical Marketing System
 Producers, wholesalers, retailers acting in single system.
 It’s a failure approach
 Ex:
Horizontal Marketing System(HMS): two or more unrelated companies put
together resources or programs to exploit emerging market opportunity.
Ex:
Third Party Delivery(TPD): specialized agency providing logistics and distribution
services Ex: ACE providing door to door service for
Multi Channel Marketing System(MCMS OR MLM): company showrooms as well as
channel members:
Ex: