Marketing Channel Structure

and Functions

Overview

Outline

• Overview

• Primary Function of Channel Members

• How Channel Member add Value

• Consumer Channels Vs Business Channels

• Multi Channel Distribution

• Distribution System Selection

• Carefully Select Channel Members

• Building International Distribution

• Future Direction of Distribution

• Summary

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 a set of interdependent

organisations 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 your product

• to represent your 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

Primary Questions

1. Which intermediary, or intermediary combination, is best suited for to take a new product or service to market?

2. How should the intermediary network be managed once it is up and running?

Production Distribution

Tasks

Thickening the woodShaping body and neckGluing and clamping partsSanding and assemblyApplying finishInstalling electric componentsAttaching machine heads & stringsAdjusting action and pickup

Tasks

BuyingSellingTransferring the titleTransportationStorageProcessing ordersProviding informationAfter sales customer service

Specialisation and Division of Labour Principle-Fender Guitars

Production Distribution

Production

tasks allocated

to workers

specializing

in performing

those

tasks

Result? Production Efficiency Result? Distribution Efficiency

Worker

Worker

Worker

Worker

Distribution

tasks allocated

to intermediaries

specializing

in performing

those

tasks

Manufacturer

Retailers

Consumers

Wholesalers

Agents

Specialisation and Division of Labour Principle- Fender Guitars

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.

• Hybrid Channels, Multiple Channels and

Shorter Channels or Direct Channels.

Figure 1 : Channel Selection: Traditional View

Manufacturer

Wholesaler Own sales force or reps Wholesaler

Dealer

Customer

� � �

Figure 2 : Hybrid Channel

Customer

Own sales

force

Outside

distributor

Inside or Outside

service specialists

Supplier

Demand

generationPhysical

distribution

After -sales

service

Figure 3 : The Free – Riding Problem

Distributor

Customer

Supplier A Supplier B

Demand generation

functions Demand fulfillment

functions

Full function

distributor

Figure 4 : Multiple Channels

No frills/Low cost channel

Seller

Full service/Full cost channel

Price

sensitive

customers

Customers who wear

different hats on different

purchase occasions

Service

sensitive

customers

Figure 5 : Multiple Channel Conflict

Full product line

X and Z

Seller

Limited product line

X

Mainly Z Customers Mainly X Customers

ΑΑΑΑ B

Figure 6 : The role of master distributors

Seller

Building Trade and

Do-it yourself (DIY) customers

Retail distributors

Bunnings Hardware

HouseDealer

Master distributor

Carefully Select Channel Members

• Specify channel capabilities the supplier seeks

in terms of:

� 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.

• Polarisaton of customers

(consolidation on one hand and

fragmentation on the other).

• Manufacturing operations that can

mass customise.

• 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.

You are welcome to contact Nigel Bairstow at B2B

Whiteboard your source of B2B Asia / Pacific

marketing advice

http://www.linkedin.com/pub/nigel-bairstow/6/41b/726

http://twitter.com/#!/b2bwhiteboard