Channel Management

Ribhu VashishthaNU-MBA 2011-13

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A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption.

Also known as “Value Network”

What are marketing channels?

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What is channel management? The broad principles by which the

firm expects to achieve its distribution objectives for its target market(s)

Also known as “Channel Strategy”

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What is channel design?

Those decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels.

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Role of Intermediaries in a Value Network!

Intermediaries provide greater efficiency in making goods available to target markets.

Intermediaries provide1. Contacts2. Experience3. Specialization4. Scale of operation

Match supply and demand.

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Information-Gathering and distributing market research and intelligence.

Promotion-Developing and spreading communications about offers.

Contact-Finding and communicating with prospective buyers.

Matching-Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging.

Negotiation-Reaching agreement on price and other terms of the offer.

Physical distribution-Transporting and storing goods.

Financing-Acquiring and using funds to cover the costs of the distribution channel.

Risk taking-Assuming some commercial risks by operating the channel (e.g. holding stock).

Channel Functions

Information Promotion Contact Matching Negotiation Physical Distribution Financing Risk taking

Ribhu Vashishtha-Channel Management

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Channel Levels

Manufacturer

Wholesaler

Retailer

Consumer

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Types of Marketing Channels(Based on number of intermediaries)

0-level

1-level

2-level

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0-level

Manufacturer

Consumer

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1-level

Manufacturer

Consumer

Retailer

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2-level

Manufacturer

Retailer

Wholesaler

Consumer

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Channel Integration

Horizontal Marketing System

Vertical Marketing System

Hybrid Marketing System

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Vertical Marketing SystemVertical marketing systems

(VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system.

Manufacturer

Wholesaler

Retail

er

Consumer

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Horizontal Marketing System Horizontal marketing systems are when two

or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone.

HUL

PepsiCo

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Hybrid Marketing System Multichannel

Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segments.

Hybrid System

Personal Selling

Retail Stores

Internet Sales

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Channel Design Decisions

Intensive Distribution

• Colas, candies and toothpaste.

Extensive Distribution

• Luxury automobiles and prestige clothing.

Selective Distribution

• Television and home appliances.

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Channel Conflict

Channel conflict occurs when one channel member’s actions prevent another channel from achieving its goal.

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Causes of Channel Conflict

1. Goal Incompatibility

2. Unclear roles and rights

3. Differences in perception

4. Intermediary’s dependence on the manufacturer

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Channel Management Decisions

Formulating the channel strategy.

Designing the channel

structure.

Selecting the channel

members.

Motivating the channel

members.

Coordinating the channel strategy

with the marketing mix.

Evaluating channel member

performance.

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Pepsi Channel Management

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