f\)frl

Marketing
Channels

• fi , ducts, even if their

. qualit y and price .cater t0
. The rm s pro
• l s of the target market,· must be. tnade
. availa
. ble at
the requ1 remen . thi
the place and time they are nee~ed. U~ti
1 s 1~ so, it _w111. be very
difficult for the marketer to achieve h1~ mark etmg obJectives. The
place and time requirement, however, is possible-if the appropriate
marketing channels are ~sed_. - • .•
This chapt er presents the mark~ ting chann el as a means to
help the marke ter realize his marke. ting goals.
.
• .

The Nature and Functions of Marketing (;hannels

Products are really mean t to be ~old to buyer s. This is possible
if the produ cts are able to reach the custo mers. The firm must
devise some means to bring the produ cts to the ~sto~ ers._ The gap •
betwe en the firm and its customers must be close d by a f~cilitating
tool called marketing chann~ls_. _.

- [MarketjQ~ Wemiclslare •huma n ~reations and they may be

desigJ!E;_d and structured to serve the needs of the user. . •. ,
.

. d as
charu:iel may be define a s.et o f m d end ent
• t er_e£
. tingd . d" .
A. marke
---- d
o~ aruzatio11s an . 1n 1v1duals that. facilitate the. ovem ent an
of owne rshi of. co . ..
ultim ate users. mmod1t1es.~r?mJthe produ cers to the
I I I •' '

~unc tions of the ~arke ting Ch~nnels • I • '"\ ., t ' I r

Marketing channels play an im • ' _w, '> ' •

of goods and services. Specificall Pt~rtant role m the mark eting
functions: . y, ey ,Pfrfo ,r~ the follow ing
>1. they routinize decisions a n d work~
>2. they finance . the process for • ' .
produ cers to the consumers· mo_vmg good s from the
>3.
I

. .
they are active participants . th e pricin
in g proce ss;
 they serv e as a ch
prod ucer s and th annel of communication between the
e consumers;
they assist in the promotio .
. .. nal aspects of marketing; and
) 6. they mnu miz e the num ber of transactions in the system.
,• . . . .
@Rout1ruzat1on of Dec isio n .

when transactions are mad e ;duc edn~ mbe r_of peop leto cont act
1 ufac ture r A will onI h . igure 28 is an illustration of how
.f
Customers X y and ~ e t? conta~t the distrhibut or instead
ide a muc easier way of
. . ' ' . . • . s will prov
s1ons m Ir than whe n., the manufacturer
a; -

have to deal with . se m

a van eiy of buyers.
Financi . Whe n man ufacturers sell direc. tly to• consumers
-Y,
h '
ey may ave to reck on with the financing of the follo win ~
1. sale s calls to pros pect ive customers;
2- purc hase of selli ng equipment;
3. cons truc tion of disp lay stores;
4. exte nsio n of cred it to customers; and
'
5. trair µng of reta il salespersons.
The man ufac ture r may not be in a fuaricial position to han dle
scale.
these activities, espe cial ly if it is und erta ken on a• nqti onw ide
ves
The _distributor perf orm s thes e functions which, in effect, relie
e man ufac ture r from fina ncin g such activities .. ,
Pricing. The diffi cult y of pric ing one'~·products is aggr avat
ed ,
c;~
•are
y lacl< ot1-airect oont"ct ~with consumers, especially if they
ctly
catt ered thro ugh out a wid e area of concern. The dist ribu tor dire
tion
eals with the con sum ers and can prov ide imp orta nt info rma
rega rdin g the sett ing of a realistic factory price.
, Channels of Communication. The chan ging requ irem ents of
buy ers,
user s are o enti mes re aye o e clistributor. Indi vidu al
nex t
for inst ance , may info rm the reta iler that they will be buy ing
will be
seas on only iteffiS with new desi gns. This info rma tion
or, in
rela yed by the dist ribu t~r to the man u~a c~re r. The distr ibut
.effect, is acti ng as a chan nel of commurucat1on.
Assistance in Promoti~na!_J\cti~ities. Whe n the dist ribu tor
1

actu ally
atfempts_ to mcreasehts Sa"les by prom otm gfits prod ucts , he is
 comple menting the promot ional activities of the manufacturer. F
example, a certain retailer gives free items to buyers every tim Or
l
particul ar brand of soap is purchas ed from his store. e

Manufacturer
User x
A

Manufacturer
Usery· -
8

Manufacturer
C Userz
WITHOUT DISTRIB
. UTOR
number of contacts = 9

Manufacturer •
A
User X

Manufacturer • L

. 8 Distdbutor User Y

, .

Manufacturer I

C WITH -DISTRIBUTOR
. User Z
number of contacts =·6 ... 1~;,.. i ·~ -:--··---......1
;'I,.

F.igure 28 ' · . ' • ••

The Role of the Distributor In Improving Economic Efficiency

~~inim ization of Numbe

. r of Transactions. The distribu tor
pI an 1 • m1z1ng e number of transac tions
within the system. As shown in Figure 28, the number of
 ansactions is reduced fr
een the manuf om 9 to 6 when a d.1st 1·b
etw . . acturers and th r utor is placed
d~ction is magnified as the n e Users. The significance of the
are mcreased. umber of manufacturers and users
One can only un·agme • the tr ffi
the end-users buy directly from cth •
mess that will be created if
manufacturer alone would b b. e m~ufacturers. The trip to the
on his leisure time. e a ig drain on the user's pocket and

Types of Ma~~eting Channels ,

• of two basic types:
Marketing charmels consl~t
1. consumer channels
2. industrial channels
Consumer Channels
Consumer channels are those that are used in the distribution
c~ns~er g~ds. As shown in Figure 29, cbannel·A is a direct
distrib~tion channel. ~s is_ an arrang~ment ·where the producer
sells his goods or services. directly to ~e. consumers. Examples of
these are the "puto" vendor (who is .also the producer), the TV
company (which directly sells its services to televiewers), and the
chicken farmer (who sells his products directly to the c~nsumers).
J _: ~.., ·- ... J " •

Channel .B is that type w}tere one middleman interp.oses

between the produc~r and ~e cons~mer. Recording companies
market their CDs and VCDs using this type of channel. These
comp.~es deal with music shops which directly sell their products
to consumers. •
Channel C is that type of ch~el where the wholesaler and the
retailer Provide linkage between the producer and the consumer.
Groceries, cigarettes, cement, and noodles are examples of products
that pass throµgh this type of channel. •• •
Channel o is that type of channel where an ageilt apart from the
wholesaler and the retailer provides linkage ~etween the produ~r
and the consumer. Examples of products wluch pass through thi~
type of channel are candies and canned goods.
 i

Channel A Channel B · Ch an ne lC Channein

Producer Producer Producer Producer

'
~, I
,, .
'
Consumer Retailer Wholesaler
,
Agent
,, I•

Consumer Retailer Wholesaler

,'
Consumer I Retailer

Consumer
Figure 29
Marketing Cha~~els for ~onsumer
Products
, .
., ••'

' ~- .- .
Channel E , . ChannelF
r~' •• • J ~,

I
Chanriel G
Producer
Producer ' 1., i•";; J_.,{J..;1 l.l l,.. Producer
'

,,
t .,.

,
' ..
I•
,,
. .. .
<

•
Indu
, strial G.l
I

User . Industrial • Agent

)

Distributor -
/ '

I ,
lnQUStrial
User lndu~trial 1
I
User
.. '

• '
Figure 30 \

Marketing Channels for lndustrlal

1
Products

• Indystrial Channels
' 4S -
Industrial channels are those wh
·f • ich are us ed in th e di str ib .
o m d ustr·1aI go~d s. As show n
types: in Fi·gure 30, they consist · of llt io n
th re
e
 1. The manufi n .
ex am e acturer Selli g dz .
rectly to th e zn du tr· l users. An
. P Is ine in a.nu acf-..--:
d Irectly s ell g to b '-urer of trucks an d sbuza .--
us co111Patue •
s like Ba 1· ses m Japan
TJ . IWag Transit.
'--:-1e manuJactu
2.
r assz gn·in o . d .
. d !!_ ustrzal d • • r s which sells
_f]_zrectlyfo zn
- Ustr • z- ~ 0~, zn ~ t~ z b u to
ls
c tu re ~ a ~ r s
m a n u fa O sells t • P e 1s the spare pa rt s
h
M an il a w o, in tu rn o industriafct· . tr 1b utors in Metro
, se ll to je ep n Is
3. The manu acturer d . ey operators.
•
us- . ersiti ea1zn w·th
ers • U llIV 1 a ents h
o call on in du st ia l
· ar e of te nt im es ca ll wd
seII b o o k s p u b li sehs ed b y Well kn e on by agents who
- own firms.
-
_Selecting a Market·•ngChannet (
~ ~ ~ o n o f a m ar k et ing ch anneI must not b ..
Thi is . . e taken lightly.
so b ec au se._an ch .
4"

s in m ak in
n si d er ab le a m . . y n u st ak •
e g a o1ce could mea n
co Owits o f lo st mcome.. Large compani
th :
ose w h ic h se ll fo to
u
.
i: ;~ :t :~ e : re
i::~t
~~ze the im p o rt a: :; ine the
selection a n d th ey at w III h~Ip them determ
t.
best ch an n el to ad ap -

f v ar io u s ch allenge to the
.

; T h e av ai la b il it y o d ~ e ls po se '.1- ch
n intelli en t el is best
m ar k et er to m a k e a In th g I . ecrs1on on whichngq,.achnn I th
su it ed to his firm • keti
e se ection o f a gmsiartuations: anne , e
y is fa ce d w it h an y o f th e followin
co m p an
O P. tio n o f ch oo si ng from ainong the
n
1. it ~ a y h av e ael s existing; o r
v ar io u s ch an n
n o t h av e th at o p ti o n to choose.
2. it m a y s
e fi na nc ia ll y so u n d have bigger facilitie
ar
C o m p an ie s w h ic h k n o w n in th e m arket, may have
al re ad y
an d · w it h p ro d u ct s f th e ex is ti ng · ch annels. These compa
nies
an y o
o p ti o n to co n si d er at e us er s. E xa m pl es are Procter arid
tl y to u lt im
m a y e v e n se ll d ir ec
u el C o rp o ra ti o n .
G am b le a n d S an M ig t st ar te d operations and
r wh o ha ve _j us
The sm al l en tr ep re n eu k n o w n are, often~~es, not provided
e n o t y et e
w h o se p ro d u c ts ar fr o m ~ o z: ig th ~ e~1shng channels. ~
ch o o se utors to carry his
w it h th e o p ti o n to co n v m cm g d1 st nb
h a rd ti m e whose products are
may even have a ap m an u fa ct u re rs
ar e b ar so
p ro d u ct . E x am p le s
distributors.
n o t ca rr ie d b y m o st
1A '7
 e Channel Select ion Proces~ .
Th
• g that th e ma nufac turer has the optio
• n to choo
h
Assumm .
from among the variou s c an
h nel optio ns he may ave to adapt ths~
.. , . .
•following steps: l Je"1di'tJ
identification of target custo mers; . . . •~
cl"'~\ +~
1 1
) • •
> 2
, 1na
determ
b
• ti·on of consu mer uy1t1.g
.
• h ab·t 1 s regarct·1ng th
e
• goods under con~id~rat1on; . .
>3. determination of the locati~n of the poten tial custdmers;
) 4_ listing Of chann el altern atives ; .
)5. evaluation of chann el·altern atives ; and .
>6. selection of chann el members.
The identification of target con·sumers will provi de much
information to the manu factur er in d~cid ing which chaoo eJ i s ~
If his target consu mers are farmers, for exampleJ then he will have •
to <;onsidef chann els that are locat€d. near t he. fa,r~s . '
1

Ultimate consu mers buy frorn retail ers whom they copsi der a~
catering to t~eir needs. •A fine ex~p le o~ prefe rence s ar~
demonstrated by the continuous/ pa.tronage o~ sari-s ari stores and
also the growi ng preference for· s~per~~rke~~·-· . ., . :.. :.J f ~si .t.
5 4-

Potential custo mers could pe s~atte red over a ~iq.e ~r~a or

they could be conce ntrate d in sp.~s~P~; }~f~t~~ :;j ~n any Jcase> their
location must be identified so a ~1.].ita~l~ chann el may be used to
reach them. • •
1 '

After comp leting the first thr~e stJps, a listin g of ·chann el

alternatives must b~ ·prepared. This will help a lot· in the final
selection of pest.m arketi ng chann el to use.
• \ I.

The evalu ation of the listed altern atives will be Il1ade next
followed by the fifial selection of the appro priate chann el. · '
Experts have devel oped ,certa in mode is for effective decis ion
making ~hich may be usefu l in .sel~ctii,:g the r'ight mark eting
chann el Figure 31 show s a slight ly differ ent mode l than the proce ss
stated above. , .
I

Evaluating the Prospective Channel Member · ·

I

. ?ie list of chann el altern atives is really an enum eratio n. of

st
di ributors with possibilities of servin g the comp any as middl ernen .
The list mus t be tri _
. d Th· inme
Is can b ct d own to th •
require . of midd leme n
evaluation of the pr e cts achieved the exact number I
aspe rough care£
A set of crite . 1_ - • u and objective
. r~ ;:t t" ;:tt •
l 'n • . a ,..,i..an 1 •
as follows: • may_ be usefu
. -~ . '"'vaIijatin e,
- ....... iJ

-"''f+f"9ne 1s
. 1. redi t . -
fina nc1 ~~ir un-~ ~::r ~~~• •
revie-w ~nd
O , t ~- _con 1t1on .0
state men ts wi~l cr_ed~t performance ta ed· i~tnb_ A
selec tin 'th provide a clue n t e financial
g e prospective distr ib as to the desirability of
2. ales strength Th. • utor.
ros • Is refers to th of the
P pee ive istributor a . . e. s!les capacityquali ty
the actu al num ber a d thnd is md1cated by Hie
sales peop le. · n e technical competence of th~

3. Product lines . Pete rmin in th

y t e pros pect ive distri g. e t . es of roducts carried
sales objectives of th fi butor will r~veal whether t e
.:::----=-.-~ e rm can .be_ expected.
4. eputat1on. thThis is . ':7~Y impo• . •
eter mm _a rtant requirement in •
.-----m_g::::__,__~ poss~~ihty of profitable relationship.
5. Mar ket coverage The· ma~ket covered by the • ective
• prosp
1struf
1 u or mus e the _:r;nark~t co~erage desired by the
man actu rer. •-, •
6. Sale s erformance The -prospect.ive distributor must
:l e a e to s ow sat~~~actory sales perfo
I
rmance. This is
indi cate d oY sales voh:ime. •._ . •
I
Z. Man agem ent succession) A prbsp~ctive distributor who
has a qual ified pers on to succeed him in case of a need for
repla cem ent is a plus f~~tor in evaluatibf\. '
8. anag eme nt a 1 1 . When the quality of management
o a IS rI u ors Ip IS poor, it is not wort h considering the
pros pect .
9.. )Att itud e] If the prospective distributor has the right
attit ude, the possibility of long-term success in handling
the man ufac turer 's prod uct is possible. T~is is indicated
by the distr ibuto rs aggressiveness, .enthusiasm, and
initiative.
10. Size . en the prospe(:tive distributor is into large-scale
pera tions , large r sales volume for the man ufac turer 's
prod ucts is possible. Large firms usually employ more

"1AQ
 salespeople, have better equipment and offices, perso
and facilities. • nn.~1,

Recognize need for

channel design
decision

Set and coordinate

distribution objective·s

-
Specify the
distribution tasks .I

:' .. . '. .

' i •

• ' Develop alternahve"' . . C ,,

• chann~I structures •• • "·' , '- - _. • •

,- t•"- ,.
1
I
.
--
'
.
• .~ " " , ,... "!"":,\._
/

Evaluate the relevant

variables

Choo~e the best

' J

channel structure

Figure 31 Select the channel

Channel Design Decision members
Model
 Fodors that lnfl
-- uencech
There are
several f
q~!Select'
- ion
channe . They are th actors th .-
.. 1 e followin . at influence th
'f 1. the natu g. e selection of a
'f' 2 th re of the product· •
. e nature of th ,
3. the natu e market; and
. re of thecompan
. . .The nature of the y.
distribution
d . . product
is bes t swted • h h
•• whi
Hi will• determine
c clike
ghly expens·_ive products
an auplanes, for instance,• require shi of
annel
The nature of th more direct dealing with ps
B f e market 1. 1 users.
;::~:;«::::ent soaps, for ::t:c: :portant. consideration.
will serve this p~mculanufacturer will have to :atteredchthrougnout
ar market. · oose a annel that

j
The size of the compan and it •
be a factor in selecting a
• • •
s organizational set-up will also
adapt even a multi-channel ;u1el. La~g~ companies can afford to
pproach m its distribution acti·vi.ti.es.
, · ·

--------~•~.
Distribution Strat~ies •
'

Decisfons mu'st be. made _by. the firm on hOw broadl

'

or
nar
~wly it:_s products will be distributed. This will det • y th
number of intermediaries that Will be fopped. ernune e
Distribution strategies consist of three types:
(v 1. inte~ive distribution
0 2. .selective distribution
G 3. exclusive distribution
. Intensive distribution ·s.a str1fgj that requires the~ to sell
its pro ucts throug every avail.ible outlet in a market where a
consumer rriight reasonably try to find them. Intensive d\stribution
is applicable to convenience goods like groceries, cigarettes, and
soft drinks. When the consumer feels a need for a convepience
good, it must be satisfied iJllillediately and the product that is
readily available has the advantage of getting sold.
Selective distribution is selling thr1~ only those outlets which •
will give the product special attention. This strategy decreases the
151
 ber of outlets who will carry the product. Selective distribuij
~:ed for purposes like avoiding making sales to middleme n w:
any of the characteristics as follows: •
1. poor credit rating;
I

2. a reputation for making too many returns or requesting

too much service;
3. place orders that are too ~mall td justify making calls or
service; and
-
4. ai;-e not in a p.osition to p~rfo~ satisfact~rily.
I

An exclusive distribution agreemen t is one where the producer

grants exclusive selling rights to a middleffian a certatit afea. -
In return, the middlema n is.require d to. carry all ~e prod~cer's
products. Exclusive distributi on is applicable to specialty_ pr9ducts
or services like automobiles and expensive watches. The agreement
is designed to help control prices and the servjc~ _offered in a
channel. • • •

S~ategy. Number of Outlets

, MANY
INTENSIVE

SELECTIVE FEW

EXCLUSIVE ·oNE

Figure 32
Distribution Strategy and the Number of Outlets
 I
I I
. , '

.,
·,

. _Mark~ting channels are the- cdndU.its used by the - to

dIStribute its products~ Channels make it easier·fot·the·firm to reach ,
their ~tended users at the time and-place they so desire. Apart from
the said feature, there are other function~ tl,_at.rn~y. be attributed to
marketing channels. • •
Marketing channel is either consumer or ·industrial. _
Channels must b~ select¢d .c~refully if ,th~. marketer is really
seri~us in achieving his o~j~ctives.
• There are various steps in the channel s'election process.
The factors that influence th~Selection of a chami.el consist of
the·nature of the product, the· nature· of the rri~rket, and the nature
of the company. '_1 _ ' • , ' ;
0

\.-('' ' _ , - -_ _ _ " _

Distribution strategies consist . o~ ~~ensive distrib~tion,

selective distribution., and exclusive distribution.