Most of the producers do not sell their goods directly to the final user, between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel.

A marketing channel system is the particular set of marketing channels a firm employs and decisions about it are among the most critical ones management faces.

A 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.

Push strategy is appropriate where there is low brand loyalty.

In pull strategy the manufacturers uses advertising and other forms of communication to persuade customers to demand the product from the intermediaries.

A system of relationships existing among businesses that participate in the process of buying and selling products and services. The ultimate goal is to serve the end customer.

Factors which impact the selection of a marketing channel include: Market factors Product factors Organizational factors Competitive factors

Hybrid Channel systems develop when organizations begin to use a number of channels to sell their products.

A marketing channel performs the work of moving goods from producers to consumers.

A manufacturer selling a product requires three channels Sales Channel Delivery Channel Service Channel.

Gathering information about potential and current customers, competitors and other actors and forces in the marketing environment.

Develop and disseminate persuasive communications to stimulate purchasing. Place orders with manufactures Acquire the funds to finance inventories at different levels in the marketing

channel. Assume risks connected with carrying out channel work. Provide for the successive storage and movement of physical products. Provide for buyers payment of their bills through banks and other financial

institutions. Oversee actual transfer of ownership from one organization or person to

another.

1. Analyzing Customers Desired Service output levels Lot Size – The number of units the channel permits a typical customer

to purchase on one occasion. Waiting and Delivery Time Spatial Convenience – Bata has made it easier for customers to access

them through a substantial expansion of their distribution outlets. Product Variety Service Backup – The add on services provided to consumers.

2. Establishing Objectives and Constraints

3. Identifying and Evaluating Major Channel Alternatives Types of Intermediaries Number of Intermediaries

▪ Intensive Distribution – A channel strategy that seeks to make products available in as many appropriate places as possible.

▪ Selective Distribution – A channel strategy that limits availability of products to a few carefully selected outlets in a given market.

▪ Exclusive Distribution – An extreme case of selective distribution in which only one outlet in a market territory is allowed to carry a product or product line.

Terms and Responsibilities of Channel Members▪ Price Policy

▪ Conditions of Sale

▪ Distributors territorial Rights

▪ Mutual Services and Responsibilities

Selecting Channel Members

Training and Motivating Channel Members

Evaluating Channel Members

Modifying Channel Design and Arrangements

Vertical Marketing System

Horizontal Marketing System

Integrated Multichannel Marketing Systems

Vertical marketing system (VMS): Planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain. Forward Integration – Farmer sells his/her crops at the local market rather

than to a distribution center. Backward Integration – A bakery business bought a wheat farm in order to

reduce the risk associated with the dependency on flour. Administered Vertical Marketing System – – Leadership is assumed by one

dominant system member. Proctor& gamble is able to command high levels of cooperation from their resellers in connection with displays, shelf space, promotions and pricing.

Corporate Vertical Marketing System – Coordination and conflict management are attained by common ownership. Sherwin – Williams not only makes paint but also owns and operates 3,000 retail outlets.

Contractual Marketing System: VMS that coordinates channel activities through formal agreements among channel members like: Wholesaler-Sponsored Voluntary Chains Retail Cooperatives Franchises

The New Competition in Retailing Many independent retailers that have not joined VMS’s have developed

specialty stores that serve special market segments.

Horizontal marketing System – In this system, two or more unrelated companies put their resources together to exploit an emerging market situation. Hindustan Unilever Limited entering a strategic tie up with Pepsi Co

India for bottling and distribution of Lipton ready to drink beverages.

Integrating Multichannel Marketing Systems Multichannel marketing occurs when a single firm uses two or more

marketing channels to reach one or more customer segments. Disney sells its DVD’s through five main channels - movie rental

stores, retail stores, online retail stores, Disney’s own online retail stores, Disney catalog and other catalog sellers.

Channel Conflict is generated when one channel member’s action prevent another channel from achieving its goal.

Channel Coordination occurs when channel members are brought together to advance the goals of the channel.

Horizontal Conflict Most often, horizontal conflict causes sparks between different types of

marketing intermediaries that handle similar products Sometimes results from disagreements among channel members at the

same level.

Vertical Conflict Channel members at different levels find many reasons for disputes Example: when retailers develop private brands to compete with

producers’ brands or when producers establish their own retail outlets or WWW Sites.

Multichannel conflicts exist when the manufacturer has established two or more channels that sell to the same market.

Goal Incompatibility

Unclear Roles and Rights

Differences in Perception

Intermediaries Dependence on Manufacturer

E – Business describes the use of electronic means and platforms to conduct a company’s business.

E – Commerce means that the company or site offers to transact or facilitate the selling of products and services online

E – Purchasing means companies decide to purchase goods, services and information from various online suppliers.

E – Marketing describes company efforts to inform buyers, communicate, promote and sell its products and services over the internet.

Pure – Click Companies are those that have launched a website without any previous existence as a firm. Eg; Search Engines.

Brick – and – Click Companies are existing companies that have added on online site for information or E – Commerce.

Mobile Commerce, also known as M-Commerce is the ability to conduct commerce using a mobile device, such as a mobile phone, a Personal Digital Assistant (PDA), a Smartphone, or other emerging mobile equipment such as Dashtop Mobile Devices.

Mobile Commerce has been defined as follows:"Mobile Commerce is any transaction, involving the transfer of ownership or rights to use goods and services, which is initiated and/or completed by using mobile access to computer-mediated networks with the help of an electronic device.”