Unit 3 - Place

Unit 3 - Place

• Meaning, The Role of Marketing Channels, Channel functions & flows, Channel
Levels,
• Channel Design Decisions - Analyzing customers’ desired service output levels,
establishing objectives & constraints, Identifying &
• Evaluating major channel alternatives.
• Channel Options - Introduction to Wholesaling, Retailing, Franchising, Direct
marketing,
• Introduction to Omni channel & hybrid channel options.
• Market Logistics Decisions - Order processing, Warehousing, Inventory, and
Logistics. (7 + 2)
 Introduction

• Most marketers do not sell their market offering (goods or services) directly to
the final users; between them stands a set of organizations (referred as
intermediaries) performing variety of functions.

• This intermediaries constitute a marketing channel also called as trade channel

or distribution channel.

• The channel chosen affect all other marketing decisions.

 Marketing Channels - Definition

• According to Philip Kotler, marketing channels are sets of interdependent

organizations participating in the process of making a product or service
available for use or consumption.

• They are the set of paths a product or service follows after production, ending in
purchase and consumption by the final user or consumer.

• Marketing channel is a system which ensures the distribution of the merchandise

from the producer to the consumers by passing it through multiple levels known
as middlemen. It is also known as channels of distribution. 
 Need and importance of marketing channel

• Time and Place Utility

• Convenience to customers
• Providing information to producer
• Promotional Activities
• Storing of goods
• Financing
• Contact - Network Building
• Negotiations
• Risk Taking
Need and importance of marketing channel
The Role of Marketing Channels
 Functions of marketing channel

• Collect information about potential and current customers, competitors, and others.

• Communications to stimulate buying.

• Reach agreements through negotiations on price and other terms so that transfer of ownership or
possession can be effected.

• Place orders with manufacturers or marketers.

• Offer and facilitate successive storage and movement of physical products.

• Facilitate buyers’ payment through banks and other financial institutions.

Channel functions & flows
Channel Levels - Consumer Marketing Channels
Channel Levels – Industrial Marketing Channel
Channel Design Decisions
 Channel Design Decisions

• Process of marketing Channel design

• To design a marketing channel system, marketers has to follow three

steps which are as follows: -

1. Analyze customer needs and wants,

2. Establish channel objectives and constraints,

3. Identify and evaluate major channel alternatives.

 1. Analyze customer needs and wants

• Consumers may opt for those channels which fits into their criterion like price, product
assortment.
• Marketer must be aware that different consumers have different needs during the buying
process.

• For Example – A consumer may browse a internet based catalog to understand various choices.

To compare these choices he or she would visit specialty store to seek information or to
compare various products. But customer may end up in purchasing the product from a
traditional retailer due to lowest prices offered.

• Channels produce five service outputs:

• Lot size
• Waiting and delivery time
• Spatial Convenience
• Product Variety
• Service Backup
2. Establish channel objectives and constraints

• Marketer should state their objective in terms of targeted service output levels.

• Minimize total channel cost.

• Provide desired level of output.

• Identifying market segments to serve & choosing best channel to each.

• Selecting channel as per characteristics of the product.

 3. Identify and evaluate major channel alternatives

• Companies can choose from wide range of channels for reaching customers - indirect
channels like sales forces to agents, distributors, dealers or indirect channels like direct
mail, telemarketing, and the Internet.

• Each channel has unique strength & weaknesses.

• A channel alternatives is described by three elements

• Types of intermediaries,
• Number of intermediaries needed (Exclusives, Selective, Intensive)
• Responsibility of each channel member (price policy, conditions of sale, distributor’s
territorial rights, mutual services and responsibilities).
 Channel Management Decisions

• Marketer has to perform various functions to manage channels on

continual basis

- Selecting Channel Members

- Training and Motivating Channel Members

- Evaluating Channel Members

- Modifying Channel Design and Arrangements

 Introduction to Wholesaling

• The act of purchasing goods for consumer and industry for further resale is
referred to as wholesaling.
• Wholesaler can store inventory of various assortment of product thus helping
cost for company and time for customers.
• Wholesaling includes all the activities in selling goods or services to those who
buy for resale or business use.
• It excludes manufacturers and farmers because they are engaged primarily in
production, and it excludes retailers.
• Wholesalers (also called distributors) differ from retailers in a number of ways.
 Retailing

• The act through which goods and services reach the end customer for individual or business
usage is known as retailing.
• The players involved in this act are known as retailers.
• They can reach the end customer through the internet or physical stores.
• Retail organizations are divided into three categories:
• store retailers,
• non-store retailers and
• Retail organization.
 Retailing
• Store retailing, the best example is the department.
• Store retailers are further divided on the service level with self service, self selection, limited
service and full service stores.

• Non-store retailing includes direct selling, direct marketing, automatic vending and buying
service.
• Internet retail giant Amzon.com is an example of direct marketing. Soft drink vending
machines are a form of automatic vending.

• Retail organizations are retailing stores under direct ownership of corporate.

• Customer satisfaction and brand management becomes easier through retail organizations.
• Corporate chain store Franchises like McDonald’s are good examples of retail organizations.
 Wholesalers Vs Retailers

• Wholesalers pay less attention • Retailers pay more attention

to promotion, atmosphere, and to promotion, atmosphere, and
location because they are location because they are
dealing with business dealing with final consumers.
customers. • Second, retail transactions are
• Second, wholesale transactions smaller
are usually larger • Retailers usually cover a
• Wholesalers usually cover a smaller trade area than
larger trade area than wholesalers.
retailers.
 Franchise selling

• Franchising is an agreement between franchisor (one who gives the rights) and the
franchisee (one who receives the rights for a fee).

• Franchising is the practice of leasing for a prescribed period of time the right to
use a firm's successful business model and brand.

• Assistance in organizing, training, merchandising and business, in return for a

consideration from the franchisee”
• There are two types of franchising,
A. Product/Trademark Franchising
B. Business Format Franchising
 A. Product/Trademark Franchising

• The franchisee enters into a contract wit the franchisor

(Suppliers/Manufacturer) to sell products under the established name of
the supplier.
• The franchisee operates independently and serves as an authorized
distributor of manufactures product.
• The franchisee is free to decide on store hours, selection of location and
store displays and arrangements.
• Examples- Idea, Airtel
 B. Business Format Franchising

• This involves a closer relationship between the franchisor and franchisee.

• The franchisee has access to franchisor’s business system or methods of

business operations.
•
• This includes, accounting system, Management training programmes of the
franchisor.

• McDonald’s is the best example of business-format franchising.

 Direct Marketing

• Direct marketing is a type of marketing campaign whose goal is to initiate a

personal relationship between the customer and the marketing organization.
• In a direct marketing campaign, the marketing organization communicates
directly with a pre-selected customer or segment of customers via one or more
marketing channels.
• Channel selection and development is the first task associated with direct
marketing.
• Marketing organizations must identify marketing channels where they can reach
prospective customers directly with information and offers about goods and
services.
 Direct Marketing

• The most popular channels include:

• Catalogue Distribution
• Telemarketing
• SMS and Mobile Marketing
• Digital Marketing Channels
 Omnichannel marketing

• Omnichannel marketing is the integration and cooperation of the various channels

organizations use to interact with consumers, with the goal of creating a consistent
brand experience.

• This includes physical (e.g. stores) and digital channels (e.g. websites).
• An omnichannel strategy may give consumers the chance to find and purchase online, in-
store, or a combination thereof - such as “buy online and pick up in-store”.

• Organizations across industries are leveraging omnichannel strategies, including

healthcare, retail, finance, technology, and more.
 Hybrid Channel distribution

• Many companies have a hybrid distribution model, utilizing both 3rd party and
direct channels to sell and fulfill their value proposition.
• With hybrid distribution, companies get the broad distribution of indirect
channels, while owning the customer experience and expanding margin
through their direct channels.
• Nike is a great example of a hybrid distribution model. Nike sells in tens of
thousands of 3rd party stores and retailers across the world. 
• Nike has a hybrid distribution model. Nike sells in tens of thousands of 3rd
party stores and retailers across the world. Nike also has direct channels,
including Nike.com, and more than 1000 flagship and outlet stores
Market Logistics Decisions
 Order Processing

• Order Processing – is the process of fulfilling the order of customers. The order
processing stages involve – picking, packaging and delivering the goods to a 
carrier.
• Then the carrier fulfils the process of handling the goods to the customers’
specified locations.
• It includes various processes and documentation involved in customer order
processing. It involves various Processes like order transmission, order entry,
customer credit check, inventory & production scheduling, order and receipt
shipment, receipt of the payment.
• Markers are increasingly shortening ordering cycle as longer order processing
leads to lower customer satisfaction.
 Warehousing

• Production cycles and consumption cycles are rarely match. Storage function
smoothens the production cycle.
• For storage function, warehousing infrastructure is needed.
• Marketer has to take various warehousing related decisions like number of
warehouses, location and whether to make or lease warehouses.
• Marketers are innovatively utilizing warehouses for gaining competitive
advantages in the market place.
• One such example is Wal Mart’s Cross Docking model. Wal-Mart undertakes
different value adding activities like assembling, packaging, constructing displays
inside its warehouses.
 Inventory Management

• Inventory ensures product availability.

• Importantly, cost increases as distribution system carries larger inventory. Various

cost elements associated with inventory are inventory carrying cost (storage
charges, cost of capital, tax insurance, depreciation, obsolescence), Order
processing cost (set up cost, running cost).

• Marketers are increasingly working towards controlling inventory cost. Various

integrated models like Toyota’s Just-in-time (JIT) production, vendor managed
inventory (VMI), collaborative planning, forecasting & replenishment (CPFR) are
evolved for inventory control.
 Transportation

• Marketer has to take transportation related decisions as there are wide selection
of transportation modes are available.
• These modes are diverse in terms of characteristics like speed, cost,
dependability, etc (refer table below). Depending on customer needs marketer has
to make optimum decision in terms of choice and use of transportation mode.
 Material handling

• Material handling – Physical distribution demands material

handling also as goods are loaded and unloaded from trucks or
ships.

• Handling is also needed in warehouses.

• Automated material handling is gaining popularity in most of

the industries.
 Customer service

• Customer service – Customer demands various pre sales as well

as post sales services and these are also part of physical
distribution or market logistics.
Thank You