Marketing Channels – Sets of interdependent organizations participating in the process of making a
product or service available for use or consumption
Intermediaries include – wholesalers and retailers, brokers, manufacturers representatives, sales agents
Marketing channel system – particular setoff marketing channels a firms employs, and decisions about it
are among the most critical management faces
Push Strategy – uses the manufacturer’s sales force, trade promotion money, or other means to induce
intermediaries to carry, promote, and sell the product to end users
Pull Strategy – the manufacturer uses advertising, promotion, and other forms of communication to
persuade consumers to demand the product from intermediaries, this inducing the intermediaries to
order it. Pull strategy is particularly appropriate when there is high brand loyalty and high involvement
in the category
Hybrid Channels and Multichannel Marketing
Hybrid Channels or multichannel marketing – occurs when a single firm uses two or more marketing
channels to reach customer segments.
In multichannel marketing, each channel targets different segment of buyers, or different need states
for one buyer, and delivers the right products in the right places in the right way at the least cost.
Channel integration allows:
1) Order a product online and pick it up at a convenient retail location
2) Return an online ordered product to a nearby store of the retailer
3) Receive discounts and promotional offers based on total online and offline purchases
The role of marketing channels
Channel Functions and Flows
Some of these functions (storage and movement, title and communications) constitute a forward flow of
activity from the company to the customer
A manufacturer selling a physical product and services might require three channels: a sales channel, a
delivery channel, and a service channel
Direct marketing channel – consists of a manufacturer selling directly to the final customer.
small-scale wholesalers, who sell to small retailers
Service Sector Channels MKT702
Marketing channels also keep changing “person marketing”. Besides through live and programmed
entertainment, entertainers, musicians, and other artists can reach prospective and existing fans online
Analyzing Customer Needs and Wants
1. Lot Size – The number of units the channel permits a typical customer to purchase on one
occasion. In buying cars for its fleet
2. Waiting and delivery time - The average time customer wait for receipt of goods. Customers
increasingly prefer faster delivery channels.
3. Spatial convenience – The degree to which the marketing channel makes it easy for customers
to purchase the product
4. Product Variety – The assortment provided by the marketing channel.
5. Service Backup – Add on services ( credit, delivery, installation, repairs)
Establishing Objectives and Constraints
Markets should state their channel objectives in terms of service output levels and associated cost
and support levels.
Channel objectives vary with product characteristics. Buy products, such as building materials,
require channels that minimize the shipping distance and the amount of handling.
Types of Intermediaries
Exclusive distribution – Severely limiting the number of intermediaries. It’s appropriate when the
producer wants to maintain control over the service level and outputs offered by the resellers, and it
often includes exclusive dealing arrangements
Selective distribution – relies on only some of the intermediaries willing to carry a particular
Intensive Distribution - Places the goods or services in as many outlets as possible.
Manufacturers are constantly tempted to move from exclusive or selective distribution to more
intensive distribution to increase coverage and sales
Terms and responsibilities of channel members
1) Price policy calls for the producer to establish a price list and schedule of discounts and
allowances that intermediaries see a equitable and sufficient
2) Conditions of sale refers to payment terms and producers guarantees. Most producers grant
cash discounts to distributors clearly payment. They might also offer a guarantee against
defective merchandise or price declines, creating an incentive to buy larger quantities. MKT702
3) Distributors territorial rights decline the distributors territories and the terms under which the
producer will enfranchise other distributors.
4) Mutual services and responsibilities must be carefully spelled out, especially in franchised and
exclusive agency channels.
5) Evaluating Major Channel Alternatives
Evaluating Major Channel
Control and adaptive criteria – using a sales agency can pose a control problem. Agents may
concentrate on the customers who buy the most, not necessarily those who buy the manufacturers
Channel management decisions- After a company has chosen a channel system, it must select,
train, motivate, and evaluate individual intermediaries for each channel.
Selecting channel members – To customers, the channels are the company. Consider the negative
impression customers would of McDonalds, Rogers, Petro-Canada, if one or more of their outlets or
dealers consistently appeared dirty, inefficient, or unpleasant.
Training and motivating channel members- A company needs to view its intermediaries the same
way it views its and users. It should determine their needs and wants and tailor its channel offering
to provide them with superior value
Channel Power – Producers vary greatly in their skill in managing distributers.
Channel Power – Is the ability to alter channel members behaviour so they can take action they
would not have taken otherwise. Manufactures can draw on the following types of power to elicity
1) Coercive Power – A manufacturer threatens to withdraw a resource or terminate a relationship
intermediaries fail to cooperate. This power can be effective, buts exercise produces resentment
and can lead the intermediaries to organize countervailing power.
2) Reward power. The manufacturer offers intermediaries an extra benefit for performing specific
acts or functions. Reward power typically produces better results than coercive power, but
intermediaries may come to expect a reward every time the manufacturer wants a certain
behaviour to occur
3) Legitimate Power – The manufacturer requests a behaviour that is warranted under the
contract. As long the intermediaries view the manufacturer as a legitimate leader, legitimate
4) Expert Power – The manufacturer ha special knowledge the intermediaries value. Once the
intermediary’s acquire this expertise, however, expert power weakens. The manufacturer must
continue to develop new expertise, however, expert power weakens.
5) Referent Power – The manufacturer is so highly respected that intermediaries are proud to be
associated with it. MKT702
More sophisticated companies try to forge a long-term partnership with distributors. The
manufacturer clearly communicates what it wants from its distributes in the way of market
coverage, inventory levels, marketing development, account solidation, technical advice and
services, and marketing information, and may introduce a compensation plan for adhering the
1) Demand side management or collaborative practices to stimulate consumer demand by
promoting joint marketing and sale activities
2) Supply side management or collaborative practices to optimize supply ( with a focus on joint
logistics and supply chain activities
3) Enablers and integrators, or collaborative information technology and process improvements
tools to support joint activities that reduce operational problems, allow greater standardization
and so on
Evaluating Channel Members
Producers must periodically evaluate intermediary’s performance against such standards an sales-
quota attainment, average inventory levels, customer delivery time, treatment or damaged and lost
goods, and cooperation a promotional and training problems. A producer will occasionally discover
its overpaying particular intermediaries for what they are actually doing. One manufacturer
compensates a distributor for holding inventories found that the inventories were actually held in a
public warehouse at its own expense.
Modifying Channel Design and Arrangements
A new firm typically starts as a local operation selling in a fairly circumscribed market, using a few