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Early writers compared marketing channels to paths through which goods or materials
could move from producers to users. This description makes it easy to understand how the term
middleman came into being as a way to explain product flows.

 c 
 
  is a set of practices or activities necessary to transfer the
M

ownership of goods, and to move goods, from the point of production to the point
of consumption and, as such, which consists of all the institutions and all
the marketing activities in the marketing process.
 J
 
  defined as exchange relationships that create customer value in
M

acquisition, consumption, and disposition of products and services.

 Ot is a set of interdependent organizations that ease the transfer of ownership as products
M

move from producer to business user or consumer.

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For marketing channels to succeed in a competitive marketplace, independent marketing

organizations must combine their resources to pursue common goals.

Rowing is the ultimate team sport. The various parts of the rowing crew must fit together to
operate as a single, cohesive unit. To achieve success in a competitive arena, rowers must pool
individual resources to achieve collective goals through a connective system. On addition, this
connective system must be flexible enough to accommodate changes in the environment.
 aharacteristics of a Marketing ahannel

Rowing arew Similarities Differences

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Each crew member contributes her Each channel member is dependent On a rowing crew, everyone uses
overall mastery of rowing strokes to on all other members in the essentially the same strokes.
the overall team effort. marketing channel. For a channel to However, it is unusual for each
exist, the behavior of one m
channel member to perform the
influence the behavior of other same functions in the same quantity.
members.


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# $






The shared desire to win the race ahannel members must share one or Rowing crews usually are linked by
bonds crew members. more common goals to ensure a short-term goals; to win the race.
seamless flow of goods and services. The shared objectives of channel
members are far more complex, and
they are (ideally) linked by long-
term objectives.






%

%





c rowing team cannot exist with one Marketing channels feature an
player and a competition cannot established set of behavioral norms
exist with only one team. Each team which keeps the exchange together.
is governed by rules of competition. The norms reflect the rules of
market place competition.
The relationship between team
members on a crew is linear. They
each perform on function. ahannel
members engage in a wide variety of
interactions in many directions.
 
c

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Rowing crews must adapt to
changing conditions. Each water
course presents a different challenge.
Organization can enter or exist On rowing crew, each crew
channel systems with relative ease. members follows another. However,
Therefore, channel members are free channel members likely perform
to accept or reject these norms. functions at the same time.

M 0ooled resources
c marketing ahannel operates as a team, sharing resources and risk to move products and
resources from their point of origin to their point of final consumption.
M aollective Goals
The challenge of winning helps bond rowing team members. The willingness to work
together out-weighs individuals¶ sheer power.
 The purpose shared by members of an organization is reflected in the organization¶s
mission statement. c 
   is an organization¶s strategic charter- public declaration
of why it exists. c mission statement proclaims
1. cn organization¶s goals
2. The procedures to be employed in pursuit of those goals
3. How the organization intends to satisfy the needs of its internal and external
customers
M aonnected System

The existence of an organization is impossible without its market. cll business

competition emerges within marketing channels, and the success or failure of all
individual enterprise is ultimately decided there. ahannel members regulate the flows of
goods and services in the marketplace. The degree to which channel members regulate
these flows has never been more significant than it is today.

austomers are considered as the lifeblood of every business. There are various
channel members that are operating in the market place. These channel members interacts
and do transactions with each other. This only proves that marketing channel is under a
connected system.


M Flexibility
Marketing channels must be flexible in order to be successful.

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On order to have huge number of customers, companies should know how to build,
develop and maintain good relationship with them. Ot requires companies to collect, keep and use
information about their customers in order to have an effective interaction with them. These
factors are all under the customer relationship management (aRM).
a
 

 

 is the establishment, development, maintenance and
optimization of long-term mutually valuable relationships between consumers and organizations‘

The key to the definition is Ô


m m
 ÔÔ  Ô Ô Ô
  This is based upon a
definition of marketing that considers marketing as a mutually satisfying system of exchanges.
So aRM is the building and maintenance of long-term customer relationships. The relationship
delivers value to customers, and profits to companies. The relationship is supported (but not
driven) by cutting edge OT. The business strategy is based upon the recruitment, retention and
extension of products, services, solutions or experiences to customers. This is the core of aRM.

)


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1. austomer ccquisition.

2. austomer Retention.

3. austomer Extension.

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*

M Marketing Orientation.
M ·alue areation.


M Onnovative OT.



 

c+ - This is the process of attracting our customer for the first their first
purchase. We have acquired our customer.


, - Through market orientation, innovative OT and value creation we aim to increase the
number of customers that purchase from us for the first time.

¦
 

  - Our customer returns to us and buys for a second time. We keep them
as a customer. This is most likely to be the purchase of a similar product or service, or the next
level of product or service.

,
- Through market orientation, innovative OT and value creation we aim to increase the
number of customers that purchase from us regularly.

'
 

-  - Our customers are regularly returning to purchase from us. We
introduce products and services to our loyal customers that may not wholly relate to their
original purchase. These are additional, supplementary purchases. Of course once our loyal
customers have purchased them, our goal is to retain them as customers for the extended
products or services.


, - Through market orientation, innovative OT and value creation we aim to increase the
number of customers that purchase additional or supplementary products and services.

.
J
 
#
 
- means that the wholes organisation is focused upon the needs of
customers. austomer needs are addressed by the Three Levels of a 0roduct whereby the
organisations not only supplies the actual, tangible product, but also the core product and its
benefit, and also the augmented product such as a warranty and customer service. Marketing
orientation will focus upon the needs of consumers for all three levels of a product. (N.B.
'market' orientation and 'marketing' orientation are not the same).

/
0

 - centres on the generation of shareholder value based upon the satisfaction of
customer needs (as with marketing orientation) and the delivery of a sustainable competitive
advantage.

1
! 
!) - is exactly that - Onformation Technology must be up-to-date. Ot should be

efficient, speedy and focus upon the needs of customers. Whilst OT and/or software are not the
entire story for aRM, it is vital to its success. aRM software collects data on consumers and
their transactions. Huge databases store data on individuals and groups of individuals. On some
ways, aRM means that an organisation is dealing with a segment of one person, since every
consumer displays different purchasing habits and preferences. Organisations will track
individuals, and try to market products and services to them based upon similar buyer behaviour
seen in other individuals (e.g. When cmazon tells you that customers that viewed/bought the
same product as you, also bought another product).
The aRM maybe described as an Ô
 Ô  m. cs ecological framework, the aRM
emphasizes the effect of environmental influences on channel member development. There are
three major environments that are entrenched in the aRM:

1. a
  

 ± involves the externalities or other environments in which channel
members operate. ahannel members are not directly involved in the exosystem , but these
settings indirectly impact the channel member¶s goals, actions, and outcomes.

2. a
 

 ± consist of the internal channels environment. The internal channels
environment encompassess the role perceptions and expectations between channel members
and the ensuing relationships that develop from those expectations. Roles perceptions and
expectations can result in either positive or negative channel climates.
3. a
 


 ± involves the resource exchange between channel members that result
in formal organizatioa linkages.


 
 

0

 m 
  
m  Ô

1. Form utility

2. 0lace utility ± makes products available near to the buyers.
3. 0ossession utility ± offers consumers a convenient way to take ownership of the product.
4. Time utility - implies that goods and services will be available when they are needed.

J 
 

m Ô
 

Onvesting in efforts to maintain existing customers is far more cost efficient than inveting
in attracting new customers. On fact , businesses spend 10 times more money attracting new
customers than they do to keep existing ones.

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1. Strengthens the customer relationship between channel members and the organization
through technological connection to its customers.
 2. Ot helps an enterprise to enable its marketing departments to identify and target their best
customers, manage marketing campaigns and generate quality leads for the sales team.
3. aRM assists the organization to improve telesales, account, and sales management by
optimizing information shared by multiple employees, and streamlining existing
processes (for example, taking orders using mobile devices)
4. Ot allows the formation of individualized relationships with customers, with the aim of
improving customer satisfaction and maximizing profits; identifying the most profitable
customers and providing them the highest level of service.
5. Ot provides employees with the information and processes necessary to know their
customers understand and identify customer needs and effectively build relationships
between the company, its customer base, and distribution partners.


 *

cmerican Marketing cssociation

Distribution Management book

http://www.docstoc.com/docs/20174514/ahapter-12-Marketing-ahannels-and-Supply-ahain-
Management

www.marketingteacher.com

www.techtarget.com

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 "

 



Disintermediation is the process of eliminating the middlemen from a transaction. Stated

another way, disintermediation is the process of direct interaction between producers and
consumers that bypasses the intermediary. Ot is based on an assumption that information
technology breeds connectivity and connectivity reduces the need for wholesalers, retailers, and
other middlemen in human transactions.

The term is a popular buzzword used to describe many Onternet -based businesses that
use the World Wide Web to sell products directly to customers rather than going through
traditional retail channels. By eliminating the middlemen, companies can sell their products
cheaper and faster. Many people believe that the Onternet will revolutionize the way products are
bought and sold, and disintermediation is the driving force behind this revolution.

There are compelling reasons why the intermediary has more than survived direct-to-
consumer channels. Ontermediaries have actually thrived in the Net Economy. The Onternet can
find suppliers and even engage, to some extent, in price and quality negotiations. But no
computer can assemble, deliver, and service market offerings. There are several rationale for the
aggrandized role of the channel intermediary:

M º 
! 
 c determinant factor in the future of intermediaries is
human interactions. aan a computer replace human interaction? For some product, the answer
may be yes; but for many products and services, human interaction is a must. More than $30
million adults receive health and medicine via internet. You can receive medical advice and
information from WebMD.com, but it cannot take your temperature, feel your glands, or rub a
sore muscle. Some customers prefer dealing with a ³real´ person whose dialogue can extend
beyond product-centric queries.
M º 
-"
  Go ahead and navigate through the myriad of automobiles
websites. No matter how sophisticated the website may be, high-intensity graphics, streaming
videos, and digitized audio are no replacement for the test-drive. Test-drives, automobile pick-
ups, and after-market services reinforce the importance of automobile dealers as retail
intermediaries. You might liken this to many of the driving or pilot video simulations in your
local arcade. Ot may be fun, but it is no substitute for the real thing!
M º 
 " There are many retailers selling replacement parts, tools,
tool storage systems, and diagnostic equipment to auto mobile dealers, service shops, and
independent mechanics. So why do so many mechanics rely on the Snap-on ³showroom on
wheels´ ± a network of dealers who personally visit as many as 100 businesses each week?
Because mechanics develop relationships with Snap-on dealers. The dealers develop and
maintain long-term customer relationships by providing customized, high-tech business
solution.

º"
 ± involves the transformation of traditional channel intermediaries into new
highly specialized value providers. On the Net Economy, there are content providers, Web
affiliates, search engines, and search engines and search engines that effectuate the distribution
of information. The Onternet offers many new ways of collecting information to facilitate buyer-
seller exchanges.

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 "

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Firms provide products or services to other firms. These are
then either used in manufacturing processes or resold. Ot always involves a negotiatory role. The
negotiatory role refers to the ways in which intermediaries arrive at acceptable exchange terms
in channel system. Supplier relationships involve three principal channel roles: source,
producer, and wholesaler.

0 generate components parts, process materials, or finished goods. 0roducer

firms include agricultural, forestry, fishing, mining, construction, and manufacturing entities, as
well as host of service industries. 0roducers range from cotton farmers to textile mills.
0roducers can also sell to other producers, meaning producers perform in both buyer and seller
roles. Ultimately, producers¶ outputs are marketed to final consumers.  m are
individuals who purchase goods and services for their household or personal use. The third type
of supplier is the wholesaler. Ô Ô are organizations that market products and services
for resale or institutional use. Wholesalers typically sell goods to retail, industrial,
governmental, and agricultural concerns. 0roducts distributed by wholesalers are generally
obtained from the manufacturing sector, but wholesalers can market products or services to
other wholesalers. Wholesalers are particularly important because they connect producers
(upstream) with retailers (downstream).

The wholesaling industry has a major impact on the US economy. Ot employs over 8
million people and accounts for nearly $3.5 trillion in annual sales. Two major trends continue
to change the wholesaling industry. First, mergers and acquisitions are decreasing the number of
wholesalers, creating large, diversified wholesalers in lieu of the small and regional
wholesalers. The Federal Trade aommission (FTa) did not approve these proposed mergers; it
did acknowledge the merits of efficiencies and savings that could be passed on to consumers
through industry aggregation.

'


, *


"
  

 ± are large retail units featuring extensive assortment of products that are
categorized into departments. The U.S. government views department stores as stores that carry
such lines as apparel, soft goods, furniture, and housewares, where no single category constitute
more than 80 percent of total store sales of $10 million or more classified as department store.

c departmental Store is a big retail store with many departments under one roof. Ot offers
a wide range of products so as to suit different consumer tastes and preferences. cll the
departments are centrally controlled but each department forms a complete sales unit in itself

Department store is also a Large retail establishment with an extensive assortment in

variety and range of goods, organized into separate departments. cll departments are housed
under the same roof to facilitate buying, customer service, merchandising, and control.

"


 - are retailers that concentrate on one merchandise or service line. Many
specialty stores are parts of large retail conglomerates. These are also small stores which
specialize in a specific range of merchandise and related items. Most stores have an extensive
depth of stock in the item that they specialize in and provide high levels of service and expertise.
The pricing policy is generally in the medium to high range, depending on factors like the type
and exclusivity of merchandise and ownership, that is, whether they are owner operated or a
chain operation which has the advantage of bulk purchasing and centralized warehousing system.

   

 ± like 7-Eleven are fairly small (less than 8,000 square feet) and provide
a limited assortment of products and services at a convenient location. Today, even smaller
convenience stores at self-service gas stations are gaining market share in this sector and
imposing a competitive threat to 7-Eleven. cnother new market entrant is the supermarket.
aonvenient stores are generally open 24 stores.

c convenience store is also a small store or shop that may sell items such as sweets, ice-
cream, soft drinks, lottery tickets, cigarettes and other tobacco products, newspapers and
magazines, along with a selection of processed food and perhaps some groceries. Stores that are
part of gas stations may also sell motor oil, windshield washer fluid, radiator fluid, and maps.
Often toiletries and other hygiene products are stocked, and some of these stores also
offer money orders and wire transfer services or liquor products.


 

 ± are varied, ranging from full line discounters such as Wal-Mart and Kmart
to off price retailers like TJ Maxx and Marshalls. They also include category killers like Best
Buy, Office Depot, and Lowe¶s. aategory killers are deep discounters in a defined merchandise
category.

Discount stores are often able to drop their prices due to efficient distribution methods.
Many of the largest discount stores are also chain stores, and include Wal-Mart, Target, and K-
Mart. Furthermore, many of these discount stores could also be categorized as big-box stores, as
they grow to include more and more products, sometimes even including a large grocery section.


"

 ± like Kroger or Safeway are self-service stores with groceries, meats, and/or
produce departments. To qualify as a supermarket, this type of outlet must exceed a minimum of
$2 million in annual sales.

The supermarket typically comprises meat, fresh produce, dairy, and baked goods
departments, along with shelf space reserved for canned and packaged goods as well as for
various non-food items such as household cleaners, pharmacy products and pet supplies. Most
supermarkets also sell a variety of other household products that are consumed regularly, such
as alcohol (where permitted), medicine, and clothes, and some stores sell a much wider range of
non-food products.
.
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:

Wholesaler acts as middlemen in the channel of distribution as he buys goods in large quantity
from the manufacturer and sells these to retailers in small quantities. His role in distribution of
goods is discussed below:

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ü 
 
  * c wholesaler forecasts the demand for goods and assembles
different varieties of goods from several manufacturers. Some wholesalers also import goods
from foreign countries.

!!
 
 
"

 * c wholesaler breaks the bulk so that retailers and users can buy them
in small lots. His representatives regularly call on retailers and industrial users/buyers to
distribute the goods among widely scattered people.

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 * c wholesaler arranges transportation of goods from producers to his go
downs and from there to retailers. Sometimes he has his own transport arrangement for this
purpose

!0

* He holds large stocks and serves as a reservoir and supplies to retailers. He helps in
establishing prices by adjusting supply of goods to their demand.

0
0 
 


 * c wholesaler packs and repacks goods in convenient lots. He sorts out
goods in different grades. He also gives brand names to the products packed and graded by him.

0!
c
 
 

"
  * c wholesaler performs advertising and sales promotion
activities to increase the sale of products. He also takes the services of experts for this purpose.

0!!
   * Sometimes the wholesaler buys goods on cash basis from manufacturers and
sells them on credit to retailers. On this way he provides financial help both to the producers and
retailers. Of necessary, the wholesaler also provides financial help by way of advance payment to
producers.
0!!!
2 * c wholesaler bears risks of changes in demand and prices, bad debts and
damage to goods in the course of transportation and storage. By undertaking various risks he
simplifies the process of distribution.



 *

a. J
 


± are independently owned businesses that take ownership or
title to goods. They also represent the principal form of wholesaling. On fact, about 90
percent of wholesaling firms are merchant wholesalers. Functions of merchant
wholesalers relating to their physical possession of products include receiving,
inventorying, and transporting of goods. They also perform several negotiatory functions
which include acting as unit buyers and sellers, exchanging information, and
consummating transactions.
b. J 




 3 
4J#5 ± are producer-owned firms that are
physically detached from the manufacturing location. Generally, MSOs distribute their
parent manufacturer¶s goods. They often engage in autonomous negotiatory functions
that are entirely separate from the producer role. This is why they are viewed as
marketing channel intermediaries.
c. c 
4
 ,

ü

) ± represent a variety manufacturers and product lines.
They differ from other wholesaler types in that they do not take title or physical
possession basis. cgents may assume various forms, ranging from auction houses to
manufacturer representatives, from export agents to merchandise brokers. Regardless of
their forms, agents will be actively engaged in negotiating relationships.
d.  
J
  ± take physical possession of the goods they market, but they
do not assume ownership. aommission merchants are likely to perform promotional,
negotiating, financing and ordering functions for the producers they represent.
aommission merchants, who handle a limited range of products, have generally
experienced more market success than MSDs.




*

Retailers are individuals or organizations who sell products or services to the ultimate
consumers. The roles of retailers are much more complex than those of wholesalers. They must
manage supplier relationships, as well. They are also intermediaries in channel systems. Most
importantly, in traditional marketing, retailers provide the final link in channels of distribution.

Retailers buy goods from wholesaler and sell them directly to consumers. Thus he acts as a direct
link between the wholesaler and consumers. His role in distribution of goods is enumerated
below:

!



  

* The retailer anticipates needs of consumers. He assembles goods
from different sources and stocks different varieties of products. Thus, he offers a wide choice to
consumers. They can buy according to their purchasing power and requirements.

!!
c 



 
+ 
 

   
 * c retailer provides

ready supply of goods so that consumers can buy conveniently and quickly in small lots without
any inconvenience of placing advance orders and waiting for supplies. By ensuring uninterrupted
and fresh supply of goods, he saves consumers from the inconvenience of buying goods in bulk
and storing them.

!!!
º 


* c retailer transports goods from wholesalers to ultimate consumers. Some
retailers provide free home delivery service to their consumers. Thus they create place utility.

!0
c
 




""* He maintains adequate supply of goods so that consumers are
sure of getting regular supply at the time of their need.

0


* clthough retailers mostly sell goods for cash, they also supply goods on
credit to their regular customers.

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,
 
* c retailer brings new products to the notice of customers
and educates them in their uses. c retailer thus, acts as a friend and guide to his customers.
Ondeed his interaction with customers is of intimate personal nature and thus he is able to provide
feedback to wholesalers and manufacturers about consumers' preferences.
The following are the additional advantages that wholesalers can offer to producers:

c. Wholesalers enhance customer relationships by providing more frequent and customized
attention to customers¶ needs. Wholesaling agents are conveniently located near buyers.
They can be more receptive to customer inquiries.
B. By inventorying stocks, wholesalers help producers convert finished inventories into
monetary assets. aash flows are freed up, allowing manufacturers to invest more in
research and product development.
a. Wholesalers give manufacturers sales and marketing assistance.

The functions performed by wholesalers also benefit retailers. For instance:

c. Wholesalers assist retailers by performing merchandising activities. They may provide
point-of-purchase displays and cooperative advertising.
B. Wholesalers often assist retailers in building and floor plan designs. They offer retailers
advice on how to develop atmospherics ± those physical elements in a store¶s design that
strike a positive chord with buyer¶s emotions and encourage purchase.
a. Wholesalers often help retailers with accounting and inventory management procedures.