Session 28 & 29      

Channel Decisions
Manufacturing use intermediaries for their
products to the users. Intermediaries
constitute marketing channel.
Functions:

Minimise the no. of contacts needed for

reaching consumers.
Break the bulk and cater to tiny requirements.

Provide Salesmanship.

Help in price mechanism.

Look after a part of physical distribution and

financing.
Assist in Merchandising

Provide Market Intelligence.

 Act as Change Agents and Generate Demand:
 Facilitate selling by being physically close to customers.
 Take care of the flows involved in distribution:
 The physical flow of products.
 Sub-distribution:
 Reselling
 Retransport
 Handling
 Accounting
 Stock holding:
 Providing warehouse space
 Storing the stocks
 Bearing risks
Assist in Merchandizing
Assist in introducing new products.

Assist in developing sales forecast.

Provide market intelligence and feedback.

Maintain records.

Take care of liaison requirements.



Types of Marketing Intermediaries:


 Sole-selling agent
 Marketer
 Carrying and Forwarding Agents (CFA’s)
 Redistribution stockist
 Stockist/Distributor/Wholesaler
 Semi-wholesaler
 Retailer/dealer
 Broker
 Franchisees
 Authorized representatives
 Commission agents
 Jobbers
Steps involved in Designing a Channel System


1.Formulating the channel objectives

2.Identifying the functions to be performed by the
channel.
3.Analysing the product and linking the channel
design to the product characteristics.
4.Evaluating the distribution environment, including
legal aspects.
5.Evaluating competitor’s channel design.
6.Evaluating company resources and matching the
channel design to the resources.
7.Generating alternative designs, evaluating them
and selecting the one that suits the firm best.
 Castrol india

 Channel Objective  Channel Design

 Provide locational  Go for vast network of

convenience to outlets.
customers; make the 
products available 
everywhere.



 Reliance textiles (vimal)

 Channel Objective  Channel Design

 Use channel to project the  Go for exclusive

exclusive image of showrooms in all cities.
Vimal fabrics.

 Archies gifts and greetings

 Channel Objective  Channel Design

 Make purchase of  Stock a wide range of

greetings cards/gifts an highly appealing
enjoyable experience. merchandise.
 Convert low involvement  Go for trendy interior
purchase into high design and peppy
involvement purchase. ambience.
Evaluating company resources and matching


the channel design to the resources.

 Firms with limited resources settle for conventional
channels
 Firms with larger resources have more options
Evaluating the alternatives and selecting the


one that suits the firm best.

 Economic evaluation, balancing cost, efficiency and risk:
 Conceptual evaluation, flexibility and controllability:



Types of Distribution Channels

Consumer Channels

1. Manufacturer to consumer:
2. Manufacturer to retailer to consumer
3. Manufacturer to wholesaler to retailer to
consumer
4. Manufacturer to agent to wholesaler to
retailer to consumers


 Industrial Channels
1. Manufacturer to Industrial consumer
2. Manufacturer to agent to Industrial
consumer
3. Manufacturer to distributor to Industrial
consumer
4. Manufacturer to agent to distributor to
retailer to consumers


 Service Channels
1. Service Provider to consumer or
Industrial consumer
2. Service Provider to agent to
consumer or Industrial Consumer
3. Service Provider via internet to
consumer or Industrial customer.


 Consumer Channels
Manufacturer to consumer:


 Direct Marketing includes Personal

Selling, Direct Mail, Telephone Selling,
Internet.
 Company contacts customers directly
through salespersons, mail, telephone
or internet and make sales.
 Examples : Tupperware, Aqua guard,
Eureka Forbes, TMC Cookware Limited,
Avon Cosmetics, Amazon.com


 Consumer Channels


 Manufacturer to retailer to consumer

 Supermarkets, Corporate Retailers
 Examples : Wal-Mart, Spencer’s, Big
bazaar
 Retailers exercise considerable power
over manufacturers because of their
enormous buying capabilities.


 Consumer Channels


 Manufacturer to wholesaler to retailer to

consumer
 Wholesalers buy in bulk from producers
and sell smaller quantities to
numerous retailers.
 Example: Local Fancy Stores


 Consumer Channels


 Manufacturer to agent to wholesaler to

retailer to consumer
 Companies use these channels when they
enter foreign markets.
 They delegate the task of selling their
product to an agent who does not take
title to the goods.
 Distribution channels for consumer
goods

Manufac ture r Co nsume r

Manufac ture r Re taile r Co nsume r

Manufac ture r Who le sale r Re taile r Co nsume r

Manufac ture r Age nt Who le sale r Re taile r Co nsume r



 Industrial Channels



1. Manufacturer to Industrial Customers
 Companies use these channels for expensive
products like heavy equipments and
machines.
 Needs to be close relationship between
manufacturer and the customer because the
product affects the operations of the buyer.
 Seller has to participate in activities like
installation, commissioning, quality control,
and maintenance jointly with the buyer.
 Seller is responsible for many aspects of the
operations of the product long after the
product is sold.


 Industrial Channels


 2. Manufacturer to agent to Industrial Customers

 Companies employ the services of an agent who may
sell a range of goods from several suppliers on
commission basis.
 Little control over the agent, who is unlikely t devote
the same amount of time and attention as
compared with the dedicated sales team.


 Industrial Channels


 3. Manufacturer to distributor to Industrial Customers

 Distributors enable customers to buy small quantities
locally.
 Distributors generates enquiries.


 Industrial Channels


 4. Manufacturer to agent to distributor to

Industrial Customers
 Manufacturer employs an agent rather
than a dedicated sales force to serve
distributors mainly due to cost
considerations.
 Distribution channels for industrial
goods

Manufac ture r Industrial Custo me r

Manufac ture r Age nt Industrial Custo me r

Manufac ture r Distributo r Industrial Custo me r

Manufac ture r Age nt Distributo r Industrial Custo me r



 Service Channels


 1. Service provider to consumer or industrial

customer
 Example : Health Care
 2. Service provider to agent to consumer or
industrial customer
 Agents are used when the service
provider is geographically distant from
customers and where it is not economical
for the provider to establish their sales
team.
 Example : Insurance Products, Travel Agents
