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Marketing Channel Structure, Functiona and Components Week 4&5

The document discusses the structure and functions of marketing channels. It explains that a marketing channel is a set of interdependent organizations involved in making a product available to consumers. Channel members perform functions like stocking products, marketing brands, gathering intelligence, assuming risk, delivering products, and providing after-sales support. They can add value through specialization and by dividing labor. The document also discusses types of channels, including conventional, vertical, corporate, and contractual channels, as well as various channel members like wholesalers and their functions in distribution.

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Melanie Cruz Convento
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243 views

Marketing Channel Structure, Functiona and Components Week 4&5

The document discusses the structure and functions of marketing channels. It explains that a marketing channel is a set of interdependent organizations involved in making a product available to consumers. Channel members perform functions like stocking products, marketing brands, gathering intelligence, assuming risk, delivering products, and providing after-sales support. They can add value through specialization and by dividing labor. The document also discusses types of channels, including conventional, vertical, corporate, and contractual channels, as well as various channel members like wholesalers and their functions in distribution.

Uploaded by

Melanie Cruz Convento
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Marketing Channel Structure

and Functions
Week 4
Learning Objective
Explain the structure and functions of marketing
channels
Overview
 Business channel management - is the
process of designing a set of marketing
and distribution arrangements that fulfill
the requirements and preferences of
targeted market segments and customers,
creating value through direct sales force and
logistics systems, and constructing offerings for
channel members that build marketplace equity
What is a Marketing Channel?
 A marketing channel is a set of interdependent
organizations involved in the process of
making a product or service available for use
or consumption
Primary Functions of Channel Members
 to be a stockist of products
 • to represent brand in the market place
 • to gather marketing intelligence
 • to assume risk
 • to deliver product and offer post sales support
 • to add value to the sale
How Channel Members Add Value
Specialization and Division of Labour Principle-
Fender Guitars
PRODUCTION DISTRIBUTION

Tasks Tasks
 Thickening the wood  Buying
 Shaping body and neck  Selling
 Gluing and clamping parts  Transferring the title
 Sanding and assembly  Transportation
 Applying finish  Storage
 Installing electric components  Processing orders
 Attaching machine heads &  Providing information
strings  After sales customer service
 Adjusting action and pickup
Consumer Marketing Channels
Business Marketing Channels
Multi Channel Distribution System
Distribution System Selection
 Marketing Managers select the most feasible
marketing channels that effectively perform the
business processes and functions needed to
correct the targeted gaps in service outputs.
Carefully Select Channel Members
Specific channel capabilities the supplier seeks:
 Technical competence
 Sales force deployment
 Warehouse and delivery capabilities
 Financial stability
 Leadership
Build International Marketing Channels
Firms operating overseas should anticipate
 longer business processes and additional

functions in the marketing channels.


 • They must cover additional geography
 • Adhere to export and import regulations of

each country market as well as local culture


and distribution practices
Future Direction of Distribution

 • Proliferation of information
technology.

• Manufacturing operations that can


mass customize

Quick shipment distribution logistics.


Summary
 Regardless of structural form, distribution
channels in the future will be more
interactive with the customer.
 • The internet will continue to challenge

traditional channels.
 • International channels of distribution are

important
 • Channel Management is about being

adaptive to where the customer prefers to


buy.
COMPONENTS OF
MARKETING CHANNEL
WEEK 5
Introduction
The use of intermediaries or middlemen results
from their greater efficiency in making goods
available to meet its target customers.

Intermediaries play an important role in


matching the demand and supply by determining
the needs and wants of consumers.
Cont…
The manufacturers produce limited choices, but
consumers want complex variations of products.

Intermediaries purchase large quantities of


various manufacturer’s goods and separate them
into limited quantities preferred by consumers.
Conventional vs Vertical Marketing channel
 Conventional or horizontal marketing channels are the more familiar,
longstanding marketing arrangement. A channel consists of manufacturer,
distributor/wholesaler, and retailer. Each of these components is self-
contained and operates independently of the others. None of the members
of the channel have control over any other member.

 In vertical marketing channels, all levels of the channel are controlled by


one entity. This happens when a corporation acquires or holds the key
assets at all levels of the channel. It may also be done through contractual
agreement or cooperative structure. In the ideal situation, the different
companies that make up the channel cooperate and work together through
planning for the good of the channel as a whole.
Vertical Marketing System(VMS)
Comprises of the main distribution channel partners- the
producer, the wholesaler and the retailer who work together
as a unified group to serve the customer needs.

vertical channels reach all the way down to the grower or


materials supplier. Starbucks, in one of the best-known
examples of vertical marketing, controls through ownership
most of the coffee farms and all of the coffee roasters,
distributors, warehouses and retail outlets that result in the
final product – a cup of coffee – sold at its coffeehouses
worldwide.
Corporate channel
Some corporations develop their own vertical
marketing systems. They do this by undergoing
internal expansion and/or buying other firm
Contractual VMS
In a contractual channel system, the channel
members agree by contract to cooperate with
each other. Its most popular form is called
Franchise.
Functions of Distribution channel
1. Selling and promoting – the wholesaler’s sales
force help manufacturers reach many small
customers at a low cost.

2. Buying and assortment building – wholesalers


can select items and build assortments needed by
their customers
3. Bulk-breaking – wholesalers break large lots
into smaller quantities. Sales of smaller volumes
are easily realized.

4. Warehousing – wholesalers hold inventories

5. Transportation – w holesalers make quick


deliveries to buyers because they are closer to
them than the producers.
6. Financing – middlemen finance their
customers by giving credit and their supplier by
ordering early and paying bills on time.

7. Risk bearing – they absorb the risk by taking


title and bearing the cost of theft, spoilage or
obsolescence.
Types of wholesalers
1. Merchant wholesalers – are independently
owned businesses that take title to the products
they handle

2. Full service wholesalers – provide complete


service like carrying stocks, using salesforce,
offering credit, making deliveries, etc.
3. Limited Service Wholesalers – they offer
fewer services to their customers and suppliers

4. Brokers and agents – are individuals who


bring buyers and sellers together and assist them
in negotiating and closing sales.
Types of Limited- Service Wholesalers
1. Cash-and-Carry Wholesalers – they cater to
small retailers. It has a limited line of fast
moving goods, sells for cash and normally does
not deliver.

2. Truck Jobbers – They perform both selling


and delivery functions. In the Philippines, ice
delivery is a good example.
Elements of Physical Distribution
1. Order Processing - responsible for the timely,
accurate and efficient processing of customer
orders in the firm.

2. Warehousing – it fills the gap between


inventory availability and the time and place
requirements of the marketplace.
Elements of Physical Distribution
3. Materials handling and packaging – consists
of activities such as containerization, vehicle
loading, hazardous product handling, and
packaging.

4. Shipping and transportation – one of the most


costly parts of the business sometimes
accounting for over 50% or more of the cost of
goods.

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