Marketing Channels (Unit 3)

 

DISTRIBUTION CHANNELS

Distribution Channel is a set of independent organization, used in the process of making a product or service available for use or consumption by the consumer or individual user.

WHY MIDDLEMEN ARE USED

Producers lack financial resources
Producers get more return on investment if they invest in main business
Greater efficiency, experience, specialization and scale of operation.
Reduces amount of work both for producers and consumers.
Producers make narrow assessments of products in large quantities while middlemen break them down to smaller quantities and broader assortments.
Economy of operations.

FUNCTIONS PERFORMED BY DISTRIBUTION FUNCTIONS
Information, promotion, contact, matching, negotiations, transportation, storing, financing, risk taking.

CHANNEL DESIGN DECISION DEPENDS ON

1. Analysing customer needs.
2. Setting Channel objectives & Constraints
3. Identifying the major channel alternatives.
4. Evaluating the alternatives.

Analyzing customer needs

1. Customers Needs Depend on
Lot size
How customers will buy mail, phone etc.
Waiting Time-  immediate on can wait.
Product variety specialization or breadth of assortment.
Service backup delivery, credit, repair, installation.

2.Channel Objectives & Constraints
Product characteristics perishable/non perishable, bulk/light
company characteristics - financial situation, strategy
Middleman characteristics- ability to handle promotion, storage, credit, customers.
Competitors Channels -
Environmental Factors - Economic condition, legal constraints.

3.Identifying Major Alternatives
Types of intermediaries
Own sales Force
Agencies that handle related products
No. of marketing intermediaries
Intensive Distribution
Exclusive Distribution
Selective Distribution

4. Evaluating the Major Alternatives
Economic criteria
Control criteria
Adaptive criteria

Channel Management Decisions

It requires decision on selecting, motivating & evaluating the middlemen.

1  Selection depends on:
Year in business
Other lines carried
Growth & profit record
Profitability
Cooperativeness
Reputation
Size & Quality of sales force
Customers Location

2  Motivating:
Company must not only sell through them but sell to them.

Positive motivations are.
Higher margins
Special deals
Premium
Co-operative advertising
Allowances
Display Allowances
Sales Contests

Negative Motivations are
Reduce Margins
Slow down delivery and relationship
End relationship
Building professionally managed VMS

3  Evaluating:
Evaluation can be on the basis of
Sales quotes,
Average inventory levels
Treatment of damaged goods
Cooperation in promotion & training.