MKTG10001 Lecture Notes - Lecture 16: Marketing Channel
3 Jun 2018
School
Department
Course
Professor
MKTG10001 Semester 1 – Channels of Distribution - Structure
Marketing channel
• Network of organisations (e.g. manufacturer, wholesalers, agents, retailers) that
create time, place & possession value for customers
• More dependent on other companies than the other 'P's' of marketing
Channel Characteristics
• Distribution channels most often described according to:
o Channel length - number of intermediaries between company and
customer
o Intensity of distribution at various levels
Length of Channel
• Number of intermediaries
• Agent e.g. selling to other countries, may need for communication, etc.
Intensity of Distribution
• Intensive distribution
o Stocking a product in as many outlets as possible
o Used for convenience goods, shopping products - customer wants within
arms' reach
• Exclusive distribution
o Few stores are granted exclusive rights to distribute products in specific
territories
o Prestige/specialty goods, infrequently purchased, require significant after-
sales service (training, repair)
• Selective distribution
o Sits somewhere between intensive & exclusive
o Uses more than one, but less than all of the intermediaries willing to carry
the particular product
o Heterogenous shopping products - goods customer seeks out e.g. phone,
invest time & effort, but not needed at arm's length
Channel Structure
• Determinants of channel structure include:
1. Distribution functions - the less work you want to do, the more channels
you will need
2. Economics of distribution function
3. Management's desire for distribution control
Functions of Distribution Channel
1. Research - find out about customer on company's behalf e.g. Google
analytics
2. Promotion - sales person's recommendation
3. Contact/develop business - open a new store in a new suburb
4. Negotiation e.g. car industry, give away price to sell product, negotiate
with customer
5. Physical distribution - product is in stock to be taken away by customer
6. Financing - flexible payment plans e.g. Afterpay
7. Risk taking - making a sale to a retailer doesn't matter if customer buys it
or not
8. Matching - channel matches customer desire to purchase quantities,
customers want one not in bulk
• Resolve discrepancies between consumers & producers
▪ Quantity (buffer maass produced goods)
▪ Assortment (allow producers to focus while providing customers
selection - assortment of products)
▪ Time (hold goods until ready)
▪ Place (connect producers & consumers)
Economics of Distribution Functions
o Specialisation/Division of labour
• Transaction efficiency
• Intermediaries aren't opportunistic, but provide value (as outlined from
before) for a company
• Only need to deal with intermediaries once, and they will deal with
customer
• Went from 24 transactions to 11 - less to get to customer, increase of
efficiency
• e.g. without intermediaries - delivery trucks, more delivery employees,
people to manage complaints, etc.
• Examples - 7-11, real estate agents
Document Summary
Mktg10001 semester 1 channels of distribution - structure. Marketing channel: network of organisations (e. g. manufacturer, wholesalers, agents, retailers) that create time, place & possession value for customers, more dependent on other companies than the other "p"s" of marketing. Channel characteristics: distribution channels most often described according to, channel length - number of intermediaries between company and customer. Length of channel: number of intermediaries, agent e. g. selling to other countries, may need for communication, etc. Channel structure: determinants of channel structure include, distribution functions - the less work you want to do, the more channels you will need, economics of distribution function, management"s desire for distribution control. Multi-channel: customers who engage in more than one channel is more valuable. Multi-channel shopping process: first-time customer may not be confident to purchase a phone online, so will probably go to a store, try a few, stores are used in different ways by different type of customers.
