Distribution Channels

Prabu Doss.K

Marketing Channels

Independent Organizations involved in the

process of making products/services

available for use or consumption

Channel Development

• Small firms existing

intermediaries

• Large firms new markets,

different channels

• Successful firms Hybrid channelsHybrid channels

ICICI Bank, Higginbotham's

Role of Channels

ManufactureManufacturer 4r 4

ManufactureManufacturer 1r 1

ManufactureManufacturer 3r 3

ManufactureManufacturer 2r 2

Fab MallFab MallNilgirisNilgirisFood Food BazaarBazaar

Food Food WorldWorld

Role of ChannelsManufactur’ Manufactur’

11

Food BazaarFood Bazaar NilgirisNilgiris

Manufactur’ Manufactur’ 22

Fab MallFab Mall

WholesalerWholesaler

Manufactur’ Manufactur’ 44

Manufactur’ Manufactur’ 33

Food WorldFood World

Firm’s need to find a balance

PushOR

Pull

strategy

strategy

Functions of the Channels

– Producers lack financial resources necessary for

direct marketing

– Direct marketing is not feasible for many offerings

– Using channels frees money for investment in main

business

– Intermediaries are more efficient

Channel Functions…

– Forward flow functions:

• Develop / disseminate communication

• Store and move the physical products

• Oversee transfer of ownership

– Backward flow functions:

• Place orders with manufacturers

• Facilitate payment of bills

Channel Levels- Consumer Mkts

OnidaOnida

MetroMetro

Kirana Kirana storestore

ConsumerConsumer

Newspaper Newspaper MartMart

Local Local AgencyAgency

ConsumerConsumer

National National DistributorDistributor

Parker Parker PensPens

National National GeographicGeographic

AvonAvon

ConsumerConsumer

ViveksViveks

ConsumerConsumer

Channel Levels- Business Mkts

Manufactur’Manufactur’ Mark AndyMark Andy Mark AndyMark Andy Mark AndyMark Andy

Manufacturer’ Manufacturer’ sales branchsales branch

Manufacturer’ Manufacturer’ RepRep

CustomerCustomerCustomerCustomerCustomerCustomer CustomerCustomer

HeidelbergHeidelberg

Channel Design Decisions

Analyze Consumer needs

Establish Channel Objectives

Identify Alternatives

Evaluate Alternatives

Channels produce 5 service outputs

Lot size

Waiting and delivery time

Spatial Convenience

Product Variety

Service Backup

Establishing Channel Objectives & Constraints

Vary according to product characteristics

Strength and weakness of diff intermediaries

Design should adapt to larger environment

Identifying Channel Alternatives

• Types of intermediaries

• No of intermediaries needed

• Terms and Responsibilities

Exclu

sive/S

elect

ive/In

tensiv

e

Evaluating Channel Alternatives

Economic

Control & Adaptive

Channel Management Decisions

•Selecting Channel Members

•Training Channel Members

•Motivating Channel Members

•Evaluating Channel Members

•Modifying Channel Arrangements

Channel Integration

Multichannel Marketing System

Vertical Marketing System

• Producer, Wholesaler, Retailer act as a

unified system

– Corporate VMS production & distribution under single ownership

– Administered VMS production & distribution thru’ size/power

of one member

– Contractual VMS independent firms integrating their programs

on contractual basis

Horizontal Marketing System

Unrelated companies put

together their resources to

exploit emerging opportunity

Multichannel Marketing System

When a firm uses two or more

channels to reach customer

segments

Channel Conflict

….when one channel member’s

action prevent the channel

member from achieving its goal

Channel Conflict

Multichannel Conflict

Channel Conflicts

• Vertical Conflict- diff levels- same channels

• Horizontal Conflict- same level- within

channels, between members

• Multichannel Conflict- two or more

channels selling to same market

Causes of Conflicts….

• Goal incompatibility

• Unclear roles and rights

• Differences in perception

• Intermediaries dependence on

Manufacturers

Resolving Conflict

•Co-optation

•Diplomacy

•Mediation

•Arbitration

An exasperated mother, whose son was always getting

into mischief, finally asked him, 'How do you expect

to get into Heaven?' The boy thought it over and

said, 'Well, I'll run in and out and in and out and

keep slamming the door until St. Peter says, 'For

Heaven's sake, Jimmy, come in or stay out!'

We were celebrating the 100th anniversary of our

church, and several former pastors and the

bishop were in attendance.  At one point, our

Pastor had the children gather at the altar for a

talk about the importance of the day.  He began

by asking, "Does anyone know what the bishop

does?" There was silence. Finally, one little boy

answered gravely, "He's the one you can move

diagonally." 

On the first day of school, about mid-morning, the

kindergarten teacher said, "If anyone has to go to

the bathroom, hold up two fingers." A little voice

from the back of the room asked, "How will that

help?"