Marketing Channel Structure and Functions

Overviews the basic structures and function of distribution channels.

1. Marketing Channel Structure
and Functions
Overview

2. Outline
• Overview
• Primary Function of Channel Members
• How Channel Member add Value
• Consumer Channels VsBusiness Channels
• Multi Channel Distribution
• Distribution System Selection
• Carefully Select Channel Members
• Building International Distribution
• Future Direction of Distribution
• Summary

3. 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.

4. 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.

5. 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

6. How Channel Members Add Value

7. 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?

8. Production Distribution
Tasks
Thickening the wood
Shaping body and neck
Gluing and clamping parts
Sanding and assembly
Applying finish
Installing electric components
Attaching machine heads & strings
Adjusting action and pickup
Tasks
Buying
Selling
Transferring the title
Transportation
Storage
Processing orders
Providing information
After sales customer service
Specialisation and Division of Labour Principle-
Fender Guitars

9. 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
ConsumersWholesalers
Agents
Specialisation and Division of Labour
Principle-Fender Guitars

10. Consumer Marketing Channels

11. Business Marketing Channels

12. Multi Channel Distribution System

13. 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.

14. Figure 1 : Channel Selection: Traditional View
Manufacturer
Wholesaler
Own sales force or reps
Wholesaler
Dealer
Customer

15. Figure 2 : Hybrid Channel
Customer
Own sales
force
Outside
distributor
Inside or Outside
service specialists
Supplier
Demand
generation
Physical
distribution
After -sales
service

16. Figure 3 : The Free –Riding Problem
Distributor
Customer
Supplier A
Supplier B
Demand generation
functions
Demand fulfillment
functions
Full function
distributor

17. 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

18. Figure 5 : Multiple Channel Conflict
Full product line
X and Z
Seller
Limited product line
X
Mainly Z Customers
Mainly X Customers
ΑΑΑΑ
B

19. Figure 6 : The role of master distributors
Seller
Building Trade and
Do-it yourself (DIY) customers
Retail distributors
Bunnings Hardware
House
Dealer
Master distributor

20. 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

21. 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

22. Future Direction of Distribution …..
• Proliferation of information
technology.
• Polarisatonof customers
(consolidation on one hand and
fragmentation on the other).
• Manufacturing operations that can
mass customise.
• Quick shipment distribution logistics.

23. 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.

24. 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/72 6
http://twitter.com/#!/b2bwhiteboard