MARKETING CHANNEL

Rosenbloom

Chapter 1
 MARKETING CHANNEL

HUL branch office network

Distributors

Distributors
Wholesalers

Retailers Retailers

Urban consumers’ Rural consumers

 MARKETING CHANNEL

Simple definition

Marketing channel is a means of getting the product/service from manufacturer

to the end customer

Textbook definition

Marketing channel is the internal & external ‘contactual organization’ that

management operates to achieve its distribution objectives
 PROMOTION FLOW
All forms of persuasive communication
Mass media advertising- trade promotion-personal selling- shop display

Manufacturer responsible for brand pull

Mass media advertising

Manufacturer Ad agency Distributor Retailer Consumer

 NEGOTIATION FLOW
Buying & selling activity

All buy & sell

@ Prices fixed by manufacturer

Manufacturer Distributor Retailer Consumer

 OWNERSHIP FLOW
Investing in stock

All hold stock

Before order comes

Manufacturer Distributor Retailer Consumer

Stock Stock Stock

 Ordering flow

Manufacturer Distributors Retailers consumers

Product flow- Storage & Transport activity

Mfg/CFA Transporters Distributors Retailers consumers

 CFA
Service provider- not stockist

Organizes transport

CFA Distributors
Warehouse

Collects money

Provides/manages warehouse
Organizes transport
Billing & collecting payment
Deposit money in company account
 Transport quantity/transaction
Is it the same @ every level of channel?

No-
It reduces as you move from back end to front end
 BULK BREAKING
(Transport quantity/transaction)

Manufacturer
CFA

Truck – 3000 cases

Distributor

Few cases

Retailer

Few pieces

Consumer
 INFORMATION FLOW
Exchange of information

Market conditions- promotion information

HUL Transporters Distributors Retailers consumers

 CHANNEL STRATEGY VS LOGISTICS

Concerned with all flows

Decisions taken first

Channel design &

Channel management

Concerned with product flow

Decisions taken subsequently

Warehousing
Transport
Inventory
 CHANNEL PARTICIPANTS

Member participants

Channel participants directly involved in buying &/ or selling.

Eg- producer- distributor- retailer- consumer

Non member participants

Channel participants involved in supply of the product

Eg- CFA- transporters

Non member participants

Channel participants that facilitate the performance of the channel members

Eg- Insurance firms- banks- Ad agencies- MR Firms- credit card firms.
 QUESTIONS

1. Is a credit card company a participant in a consumer product channel?

2. Is an ad agency a participant in a consumer product channel?
 CHANNELS

Vary from industry to industry

Within industry they are similar
 CONSUMER DURABLE CHANNEL
NIKE

Nike
CFAs

Distributors

Nike Multi brand

Shoe shops
Exclusive
Showrooms

Consumers

Q-Why 2 retail formats?

 IOC
Retailer channel

Pipeline Road Tankers

Refinery Storage Petrol pumps
tanks

Consumers

Q- Why no external distributors are found in this channel?

 KEY IDEA

Firm can eliminate channel partners-

But it cannot eliminate channel flows-
It has to transfer it to some other entity
 AMAZON
INVENTORY LED MODEL

Suppliers or Wholesalers

AMAZON
WAREHOUSES

Orders

WEB SITE Parcel carriers

CONSUMERS
 AMAZON
PLATFORM LED MODEL

Suppliers or Wholesalers

AMAZON
WAREHOUSES

Orders

Parcel carriers
WEB SITE

CONSUMERS
HOW CAN ONLINE RETAILERS SELL
@ LOW PRICES?

Bulk purchase- discounts

Lowest cost channel
 BUSINESS PRODUCTS
Tata steel

Branch office

Sales-force Warehouse

Industrial
distributors

Large buyers Small buyers

Territory
 SERVICE CHANNELS
LIC

Agents/brokers

Face to face channel

CONSUMERS

Q- What is the difference between company sales men & agents?

Q-What is the difference between agents & brokers?
CONSTRUCTION INDUSTRY

Builders

Brokers

-Search
-Introduce

Consumers
 QUESTION

Why do consumer product manufacturers use a distributor retailer channel?

Contactual efficiency
THEORY OF CONTACTUAL EFFICIENCY

Direct contact- 3 x 3 = 9

M M M

R R R

Indirect contact- 3+3= 6

M M M

R R R
THEORY OF CONTACTUAL EFFICIENCY

Use of additional level of intermediaries

-Reduce number of contacts

-Reduce contacting effort
-Avoid capital investment
-Lower contacting cost