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Place (Marketing Channel)

 Most producers do not sell their goods directly


to the final users, between them stands a set of
intermediaries
These intermediaries constitute the marketing
channel (trade channel or distribution channel)
Channel plays a pivotal role in value delivery
 Time utility and place utility – enhancing the chance
of sale
 Supplies several products, in suitable assortments, as
required
 Breaks the bulk and caters to small-size needs of
consumers – quantity/form utility
 Takes care of the various flows involved in
distribution
 Connects the Consumers to the Firm
Marketing Channel Flows
What is a Marketing Channel?
A marketing channel system is the
particular set of interdependent
organizations involved in the process of
making a product or service available for
use or consumption.
Channel functions cannot be eliminated
 Channel viewed as ‘middlemen’ – parasites
 Channels are essential and valuable part of
a firm
 While channels can be eliminated the
channel functions and the costs thereof
cannot be eliminated and just gets
transferred to the firm
Channel advantages
 Minimises the number of contacts needed for reaching
consumers
 Provides salesmanship
 Helps in price mechanism
 Takes care of a part of physical distribution and financing
 Assists in merchandising
 Provides market intelligence
 Acts as change agents and generates demand
 A vital source of competitive advantage for the firm
Channels and Marketing Decisions

 A push strategy uses the manufacturer’s sales force, trade


promotion money, and other means to induce
intermediaries to carry, promote, and sell the product to
end users.
 A pull strategy uses advertising, promotion, and other
forms of communication to persuade consumers to
demand the product from intermediaries.
 Coca cola, Intel and Nike employ both push and pull
strategies
 Hybrid channels (HP uses sales force, telemarketing,
direct mailing, retailing and internet as channels)
 Channel integration
Buyer Expectations for
Channel Integration
 Ability to order a product
online and pick it up at a
convenient retail location
 Ability to return an online-
ordered product to a nearby
store
 Right to receive discounts
based on total online and
offline purchases
Categories of Buyers
Habitual shoppers

High value deal seekers

Variety-loving shoppers

High-involvement shoppers
Rural Distribution
Innovative Distribution Traditional Channels
Channels for Rural for Reaching Out to
Markets Rural Customers
 Hub and Spoke model  Haats
 Mobile shops and offices  Mandis
 Linkage with community  Melas
based organizations
(SHGs, NGOs, and
cooperatives)
The Value-Adds vs. Costs of
Different Channels
Channel levels
Channel levels
 Channel ‘Level’ and Channel ‘Member’
 A zero level channel (direct marketing channel) consists of a
manufacturer selling directly to a customer
 Door to door sales, mail order, telemarketing, internet sales, own
stores
 Examples – Otto Burlington (mail order), Tupper ware (home
parties), Eureka Forbes and aqua guard (door to door sales), Asian
sky shop (TV), Raymond having own stores
Raymond
presents
world-class
experience
through its
stores
e-Commerce Marketing Practices

 Pure-click
 Brick-and-click
Channel Levels
 A one level channel has one intermediary.
Example – Automobile dealers, petrol
pumps.
 A two level channel has two intermediaries,
example – FMCG’s and consumer durables.
HLL uses this strategy
 A three level channel or more – usually in
food distribution
Identifying Channel Alternatives
Types of
intermediaries
Number of
intermediaries
Terms and
responsibilities
Types of intermediaries
 Direct sales using sales force
 Direct sales with own outlets
 Direct mail
 Telemarketing
 Internet marketing
 Agents, distributors, dealers, retailers
 Franchisee
 Self help groups, NGO’s in rural sector

Each method has its own advantages and disadvantages


Number of Intermediaries
Exclusive

Selective

Intensive
Terms and responsibilities of distributors
 Price policy
 Conditions of sale
 Distributors territorial rights
 Mutual services and responsibilities
What is Channel Conflict?
 Channel conflict occurs when one
member’s actions prevent another channel
from achieving its goal.
 Types of channel conflict
 Vertical – Dell’s direct selling creates conflict
with the retailers
 Horizontal – Conflict between two
franchisees of Pizza hut
Causes of Channel Conflict
Goal incompatibility

Unclear roles and rights

Differences in perception

Intermediaries’ dependence
on the manufacturer
Marketing Debate
 Does it matter where you are sold?
Take a position:
1. Channel images do not really affect
the brand images of the products they
they sell that much.
or
2. Channel images must be consistent with
the brand image.
Marketing Discussion
 Think of your favorite retailers.
 How have they integrated their
channel system?
 How would you like their channels to
be integrated?
 Do you use multiple channels from
them? Why?

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