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Managing Marketing Channel

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A channel of distribution comprises a set of

institutions which perform all of the activities utilised to move a product and its

title from production to consumption

Marketing Channel

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A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

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Growing Importance of Marketing Channels?Growing Importance of Marketing Channels?

1. The explosion of information technology and

E-commerce

2. A greater difficulty in gaining a sustainable competitive advantage

3. The growing power of distributors, especially retailers in marketing channels

4. The need to reduce distribution costs

1.1. 2. A greater difficulty in gaining a sustainable competitive

advantage 3. The growing power of distributors, especially retailers

in marketing channels 4. The need to reduce distribution costs

Yahoo! eBay

Amazon.com

The prediction:Disintermediation — reduction of number of intermediaries

The reality:Reintermediation—evolution of a new type of intermediary

The explosion of information technology and E-commerceThe explosion of information technology and E-commerce

1. The explosion of information technology and E- commerce2. 2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs

A greater difficulty in gaining a sustainable A greater difficulty in gaining a sustainable competitive advantagecompetitive advantage

Place (distribution), or Marketing

Channel Strategy Sustainable competitive advantage

Potential for gaining competitive advantage because place is more difficult for competitors

to copy

1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3.3. 4. The need to reduce distribution costs

The growing power of distributorsThe growing power of distributors

Power retailers as of consume marketsgatekeepers

Act as buying agents for customers rather than as selling agents for manufacturers

1. The explosion of information technology and E- commerce 2. A greater difficulty in gaining a sustainable competitive

advantage 3. The growing power of distributors 4.4.

The need to reduce distribution costs The need to reduce distribution costs

Marketing channels are the most recent target for

reducing distribution costs.

The focus is on channel structure and management.

Channel Structure

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The group of channel members to which a set of distribution tasks has been allocated.

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Marketing channels for Consumer Goods

Dominos’ Pizza General Motors Cadburys Kellogg's

Agent

Wholesaler

Consumer Consumer Consumer Consumer

Retailer RetailerRetailer

Wholesaler

Marketing channels for Industrial Goods

IBM / Airbus Caterpillar Stake Fastener Harkman Electric

AgentAgent

Industrial user

Industrial user

Industrial user

Industrial user

Industrial distributor

Industrial distributor

Factors in choosing the best distribution channel

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Nature of the productPerishable/fragile? Technical/complex? Customised? Type of product – e.g. convenience, shopping, specialityDesired image for the product – if intermediaries are to be

used, then it is essential that those chosen are suitable and relevant for the product.

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Marketing Channel FlowsMarketing Channel Flows

Product Flow

Promotion Flow

Information Flow

Ownership Flow

Negotiation Flow

Distribution Intensity

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Exclusive Distribution

Selective Distribution

Intensive Distribution

Integrated Distribution

Intensity of Channel Structure

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Channel intensity: the number of intermediaries at each level of the marketing channel.

All PossibleIntermediaries

Relatively FewIntermediaries

Just OneIntermediary

Intensive ExclusiveSelective

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