As the rise of digital purchasing continues, and the cost of shipping decreases, globalization will drive organizations more and more towards channel strategies that optimize online exposure. CC licensed content, Specific attribution, https://archive.org/details/ost-business-core-concepts-of-marketing, http://www.texample.net/tikz/examples/marketing-distribution-channel/, https://en.wikipedia.org/wiki/Distribution_(business), https://en.wikipedia.org/wiki/Marketing_channel, https://en.wikipedia.org/wiki/Digital_distribution, https://en.wikipedia.org/wiki/Marketing_mix, https://upload.wikimedia.org/wikipedia/en/c/c7/B2B_Marketing_Roles_v2.png, http://en.wiktionary.org/wiki/department_store, http://www.boundless.com//marketing/definition/marketing-channel, http://www.flickr.com/photos/59574125@N05/5487448787/sizes/n/in/photostream/. 4. What kind of channel members should be selected 5. The following areas encompass the major categories of channel objectives: After the distribution objectives are set, it is appropriate to determine the specific distribution tasks or functions to be performed in that channel system. Discuss the various factors that affect channel choice. Marketing Strategy: Key Concepts 4. Again, both models can work, but clarity in that is very, very important. Discount Houses – Discount houses are characterized by an emphasis on price as their main sales appeal. Channel choice is also greatly influenced by channel objectives. For example, automobiles. Tyres for replacement for cars on the road are sold mainly through retailers. Uploader Agreement. How do you design the firms marketing channels 4. Marketers in the present dynamic market should adopt the holistic perspective and ensure that marketing decisions in all these different areas are made to collectively maximize value. (a) Manufacturer – C&F Agent – Redistribution Stockist – Retailer – Consumer – 4 Levels. To motivate channel members to perform, the organisation must ensure that they help the intermediaries with the training of the personnel, supervision and encouragement. (a) Manufacturer – Dealer – Consumer – 1 Level, (b) Manufacturer – Franchisee – Consumer – 1 Level. Everything you need to know about marketing channels. Stern & El-Ansary define marketing channels as – “sets of independent organisations involved in the process of making a product or service available for use or consumption.”. Many environmental factors such as technology, economy conditions and government regulations affect the choice of distribution channels. i. All goods go through channels of distribution, and marketing depends on the way goods are distributed. Factors Influencing Design and Selection 9. f. Channels used in consumer and industrial products – The producer and the consumer are a part of every channel. A few are extremely large, having sales of $500,000 or more on a single day. The situation varies considerably from one line of goods to another. But, in such cases, problems such as the distribution staff forming unions, increase in the cost of maintaining infrastructure, and wage rise, might hamper the organization. Choice of a channel of distribution involves the selection of the best possible combination of middlemen or intermediaries. Drive is a basic instinct. The channel system of an organisation evolves in response to local opportunities and conditions. c. Manufacturers retail shop. ii. The general economic condition of a country also affects distribution. They keep changing with regards to their structures, functions, and their business arenas. For example, industrial supply houses trading fairly standardized industrial goods like lathe machine, grinding machines, electrical supplies, etc. Before a firm can design an effective channel marketing strategy, it needs to consider who it is trying to reach. The Fig. For example, when automobile manufacturers try to enforce policies on their dealers, it leads to a conflict. Channel selection should be such that the search time gets reduced. b) Manufacturers – Wholesalers – Retailers – Consumers: Here, two intermediaries exist. A channel’s horizontal dimension (width) is determined by the number of participants of any one type on the same level in the channel. Channel choice is also greatly influenced by channel objectives. It is particularly useful with convenience goods. (c) Intensive distribution – This consists of the manufacturer placing the goods or services in as many outlets as possible while the distributors are also handling many competitors’ products and brands. a) Manufacturers – Retailers – Customers: This option consists of only one intermediary. For level of sales below X1 (as shown in the figure above) provider’s sales agency will have economic advantage over their own sales force. The Fig. In addition channel decisions include relatively long-term commitments with other firms as well as a set of policies and procedures. It involves a careful study and consideration of many factors stated below. The organisation must periodically evaluate the performance of the channel members against set parameters like the attainment of sales targets, the average inventory levels maintained, the delivery time to customers, and co-operation in promotional and other business aspects. (c) Manufacturer – Manufacturers’ Agents – Consumers – 1 Level, (d) Manufacturer – Large retailer/consumer cooperatives – Consumer – 1 Level. Once a company has committed to a distribution model, it may be hard to change. And, who are our ultimate users and buyers? In contrast to a traditional channel that focuses mainly on the independence of channel members, a VMS focuses on their interdependence. Here, independent channel components integrate on contractual lines to attain economies of scale and maximize the market impact. Information – supplying information about markets to producers and information about products and suppliers to buyers. Consider a product of customer’s choice made by a manufacturer at the right price. This is developed in such a manner that the co-ordination of marketing activities is achieved by using the programs of one or few firms. b. (b) Manufacturers – Wholesaler – Retailer – Consumer – 2 Levels. Example- Biscuits and chocolates, soaps, shampoos, Parle-g etc. This can be adopted in case of consumer durables and consumer non-durables. Whether a firm be a one person operation or one that employs thousands of people and generates billions in sales, all are in business to serve the needs of markets. The wholesaler assists the producer by making products more accessible to buyers. Size of the market – For a market that is large, use of indirect channels proves to be more economical. This requires that a manufacturer contemplating distribution through particular types of retailers become intimately familiar with the precise location and performance characteristics of those being considered. f. Physical possession – The channel members also take the responsibility of storage of goods during the successive stages to the final consumers. Consequently, the literature offers many different defin A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. Just making enquiries about the product, getting it, etc. Picking the right marketing communication channel for your message will contribute significantly to the success of … The sign-board of a soft drink may be a cue for the person driven by thirst. The requirements of institutional buyers are very different from individual buyers. Cues to reach the goal may be situational (available at that point of time and place) or in memory (residing in memory). Recent advancements in the field of electronics is bringing a lot of changes in the way business is conducted. This is also known as a direct marketing channel. Here the indirect channel is more economical. Technology has disrupted some of the logic behind these channel decisions, as digital storefronts have grown to be highly influential, easily accessible to global markets, and substantially cheaper than retail space. The chosen channel will significantly affect and be affected by the rest of the marketing mix. Example- Eureka Forbes, Zenith computers. Functions 4. To achieve those broad goals, a sales channel managementstrategy should align the efforts of in-house and external teams. Wholesalers can provide warehousing, inventory control and order processing, transportation, information, and selling functions. An example of this type of conflict is if an organisation appoints two agents for the same territory. Depending upon the situation when choosing a product like Bul-worker, which furniture. 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