PBL Task 3

Place/Distribution 

• levels of marketing channels

Definition: Channel Levels (http://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/2585-channel-levels.html)

Channel level refers to the intermediary in marketing distribution channel between the producer/manufacturer and the end consumer. Every channel level plays a role in making the good available to the end consumer. The number of channel levels between the producer and consumer could be 0,1,2,3 or more.

There are basically four types of marketing channels:

• Direct selling; Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.
  Modern direct selling includes sales made through the party plan, one-on-one demonstrations, personal contact arrangements as well as internet sales.
• Selling through intermediaries; A marketing channel where intermediaries such as wholesalers and retailers are utilized to make a product available to the customer is called an indirect channel.
• Dual distribution; Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or wholesalers uses more than one channel simultaneously to reach the end user. They may sell directly to the end users as well as sell to other companies for resale. Using two or more channels to attract the same target market can sometimes lead to channel conflict.
  An example of dual distribution is business format franchising, where the franchisors, license the operation of some of its units to franchisees while simultaneously owning and operating some units themselves.
• Reverse channels.

Source: Boundless. “Types of Marketing Channels.” Boundless Marketing. Boundless, 26 May. 2016. Retrieved 18 Sep. 2016 from https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/marketing-channels-11/marketing-channels-in-the-supply-chain-76/types-of-marketing-channels-387-4051/

• Functions of marketing channels

::: The Role of Marketing Channels

Channel Functions and Flowsa marketing channel performs the work of moving goods from producers to consumers.Some functions constitute a forward flow of activity from the company to the customer;other functions constitute a backward flow from customer to the company. Amanufacturer selling a physical product and services might require three channels: a saleschannel, and a service channel.

Channel levels

a zero level channel consist of a manufacturer selling directly to the final customer.Major examples are door to door sale, mail order.A one-level channel contains one selling intermediary; a two-level channel contains twoselling intermediaries. These intermediates could be retailers, distributors.As the no. of levels increase the level of difficulty of information sharing andcoordination also increase. Channels normally describe a forward movement of productsfrom source to user.

Service Sector Channels

marketing channels are not limited to the distribution of physical goods. Producer of service and ideas also face problem of making their output available and accessible totarget population.

::: Channel-Design Decisions

analyzing customer’s desired service output levels1. Lot size2. Waiting and Delivery time3. Special convenience4. Product variety5. Service backup

Establishing objectives and constraints

Channel objectives should be stated in terms of targeted service output level. Channelobjectives vary with product characteristics. Bulky product such as building materialsrequires channels that minimize the shipping distance and the amount of handling.

Identifying major channel alternatives

Companies can choose from a wide variety of channels for reaching customers from salesforces to agents, distributors, dealers and direct mail. Channel alternative described by 3elements: the types of available business intermediaries, the no. of intermediaries neededand the terms and responsibilities of each channel member.

Types of intermediaries:

A firm needs to identify the types of intermediaries available

to carry on in channel work. No. of intermediaries: 3 stages are available: exclusive distribution, selective distributionand intensive distribution. Exclusive distribution means severally limiting a no. of intermediaries. Selective distribution involves the use of more than a few but less than allof the intermediaries who are willing to carry a particular of product. Intensivedistribution consists of the manufacturer placing the goods or services in as many outletsas possible.

Terms and responsibilities of channel members:

Price policy calls for the producer to establish a price list and schedule of discounts andallowance that intermediaries see as an equitable and sufficient.Condition of sale refers to payment terms and producer guarantee.Mutual service and responsibilities must be carefully spelled out, especially in franchiseand exclusive agency channels.

::: Channel management decisions1. Selecting channel members

Companies need to select their channel members carefully as they represent the companyto the customer. To facilitate channel members selection, produces should determinewhat characteristics distinguish the better intermediaries, for e.g. the no. of years in business, the growth and profit record and financial strength.

2. Training channel members

Companies need to plan and implement careful training programs for their intermediaries.

3. Motivating channel members

• Coercive power • Reward power • Legitimate power • Expert power • Referent power 

4. Evaluating channel members5. Modifying channel arrangements: Channel Integration and SystemsVertical marketing system

A VMS by contrast, comprises the producer, wholesaler and retailer. Acting as a unifiedsystem.

Corporate vs.

Administered vms: It coordinates successive stages of production and distribution

through the size and power of one of the member.Contractual vms: 1. Wholesaler-sponsored voluntary chains2. Retailer cooperatives3. Franchise organizations

Horizontal marketing systems

In which two or more unrelated companies put together resources on program to exploitan emerging marketing opportunity.Multichannel marketing systemsIt occurs when single firm uses two or more marketing channels to reach one or morecustomer segments.• Planning channel architecture

::: Conflict, cooperation, and competitionTypes of conflict and competition

Vertical channel conflict means a conflict between different levels within the samechannel.Horizontal channel conflict involves a conflict between members at the same level withinthe channel.Multi-channel conflict exists when the manufacturer has established two or more channelthat sell to the same market.

Causes of channel conflict

• Goal incompatibility• Difference in perception• Dependence

Managing channel conflict

Co-optation is an effort by one organization to win the support of leaders of another organization by including them in advisory council.Arbitration occurs when the two parties agree to present their arguments to one or morearbitrators and accept the arbitration decision.

Legal and ethical issues in channel relations

Many producers likes to develop exclusive channels for their products. Exclusive dealingoften include exclusive territory agreement. The producer may agree not to sell to other dealers in a given area. Producers are free to select their dealers, but their right toterminate dealers is somewhat restricted

Designing the Marketing Channel 6-2 Chapter Outline What is Channel Design? Key Term and Definition 

 Channel design: Those decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels. Channel design is presented as a decision faced by the marketer, and it includes either setting up channels from scratch or modifying existing channels. This is sometimes referred to as reengineering the channel and in practice is more common than setting up channels from scratch. The term design implies that the marketer is consciously and actively allocating the distribution tasks to develop an efficient channel, and the term selection means the actual selection of channel members.