Marketing channels from the soul of the marketing function. Consider a product of customer’s choice made by a manufacturer at the right price. Now when a customer wants to buy the product, he will have to locate a manufacturer who may be in a different region. Just making enquiries about the product, getting it, etc. will take immense effort from the customer. It has been noted that most of the products in the market fail if they are not made available to the target customer at the right time and at the right place. The roles, functions and benefits of marketing channels are listed below-

1) When the product information is available (promotion), the customer is bound to make enquires with different retailers, ecommerce sites, wholesalers, etc. It becomes important for the manufacturers to ensure the product is easily available to the customers. Else a competitor will take advantage of this opportunity and introduce the product with different intermediaries for the customer.

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The producer and the end consumer are the starting and end point of the marketing channel. The presence of number of intermediaries depends on the marketing objectives of the organisation. Selecting the right channel is a critical task as it can be the reason for failure or success of the product. We will look at the Levels of marketing as shown in the figure above.

Manufacturer – Consumer channel, there is absence of intermediaries. Here the manufacturer opts to sell directly to the customer. Hence, this level is also known as Direct-marketing channel. The internet, television (cable networks) give great opportunity to manufacturers to reach their prospective customers. Manufacturers understand the power of retailers as the final link to the customers. To reduce this influence of retailers, organisations follow this channel. This channel structure is also economically viable as the manufacturer doesn’t needs to give sales or profit margins to intermediaries. Some examples of this channel are: mail order, door-to-door selling, internet selling, Television commercials (infomercials), telemarketing, and manufacturer store outlets.

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Intermediaries, also known as middlemen and re-sellers, are organisations that perform the different functions in the marketing channel to connect the manufacturer to the buyer. These can be organisations as well as individual business men.

There are two types of middlemen, one those who take title to the products (merchant middlemen), and others who just facilitate the sale and purchase of product without taking title of them (agent middlemen). The first category are known as merchant middlemen which are known as wholesalers and retailers. The agent middlemen are the agents and brokers who negotiate purchase or sales, or both and do not take ownership of the product. Example of agent middlemen are agents, brokers, commission agent, forwarding and clearing agents.

I. Merchant Middlemen –
1) Wholesalers –

These are the organisations that buy and resell products to other resellers like retailers, other merchants or to industrial buyers, and not in significant amount to end users. They take title to the products they trade in. They buy the products in large quantities and break down the bulk basis the requirement for distribution to retailers, etc. They provide range of services to buyers as well as manufacturers like transportation, buying on credit, etc.

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Types of channels-
In Conventional marketing channel, members work independently with each other under agreement and no member has control over other member. It comprises on autonomous/ independent manufacturer, wholesaler and retailer. Each member is concerned about increasing the profits of its business and not the profit of the entire channel. For example, the manufacturer will perform the function of Product development, branding, pricing, promoting and selling. The wholesaler performs its function of buying, stocking, promoting, displaying, selling, delivering, finance, etc. The decision making resides in each firm and there is lack of proper planning to achieve the objectives of the entire channel.

Vertical marketing channel has the manufacturer, wholesaler and retailer working as one system. They formally agree to cooperate with each other. The responsibility of functioning of each channel member in owned by one member. This arrangement is done through contractual agreement. The member which has authority over all the member can be the manufacturer, wholesaler or the retailer. They work in cohesion, and conflicts between channel members don’t exist. This type of channel came into existence to avoid disagreements and conflicts among channel member. As independent members try to force their influence to meet their objectives, there is always a possibility of conflict and powerful channel member influencing the other. Once the channel operates as a one system and managed by one member, there is much clarity and coordination among channel members to achieve the channel objectives.

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A careful and systematic study needs to be done for selecting a marketing/ distribution channel. It not only affects the marketing strategy and organisational goals but also the strategies of the intermediaries in the channel. Place factor of the marketing mix that involves the distribution system requires effort and time of the management and involves costs for making changes to it. Therefore it becomes essential that a right channel if chosen to avoid any later changes. Below are the factors that influence the choice of the channel –

Product – The first factor to be considered is the product category. A FMCG product will require different distribution than an automobile. Similarly the channel of distribution for making an industrial product like a “Rotary Encoder” will be shorter as compared to a consumer product like Shampoo. Some consumer goods need immediate availability for the risk of shorter life like perishable goods from a bakery, etc. Similarly a fragile product will need careful handling by the intermediaries and hence, a shorter channel is selected. A technical product will need selling from knowledgeable sellers providing demos, etc. Complexity of product and level of sales service also decide the selection of the intermediary.

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A marketing channel not designed effectively fails to make an excellent product successful. The firms usually follow the below steps for designing a marketing channel-

Analysis –
A channel design starts with analysing the market requirements. Basis the customer, product category, and marketing environment, the organisation has to follow the matching channel strategy – Exclusive distribution, Intensive distribution and Selective distribution. The availability of the intermediary also influences the selection of the channel member. The intermediary that the organisation wishes to sell through should be available in the target market. In their absence, the organisation will have to opt for an intermediary that is available to them. Or the organisation will have to invest to open their own stores, opt for direct selling, etc. Sometimes the intermediary is unwilling to distribute the organisations products. In such cases the firm should be ready to involve channel alternatives.

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Each member in a channel is an organisation itself with its own marketing objectives. Each of these firms strive to achieve its objectives like increase in revenues, be a market leader, etc. The channel members should be viewed as customers by the manufacturer. This way the manufacturer understands the needs and challenges faced by the intermediaries and accordingly take steps that in the best interest of the manufacturer as well as the intermediaries.

For smooth functioning of operations, clear policies and procedures should be agreed upon and formally signed. If the policies and procedures are not clearly shared and formally agreed to, the possibility of conflicts is high among channel members.

Motivating channel members –An organisation should sell the product to intermediaries as a customer considering their needs and wants. This helps a manufacturer achieve its objectives. It should cooperate and help the intermediaries in every possible way with training programs, market surveys, etc. to improve their performance.

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Supply chain involves all the organisations involved in making a product available to the customer. It includes raw material providers, transporters (logistics), manufacturers, and intermediaries. The functions that provide support services like consultants, lawyers, quality control also form part of the supply chain.

Sourcing and procurement are that functions of the supply chain management which are concerned with the supply of materials to the manufacturers. Under sourcing, an organisation evaluates and hires individual businesses for the meeting its supply needs. It is part of the supply chain management that deals with the selection of suppliers and management. The organisations do the necessary evaluation of the supplier basis requirements (quality, price, time of delivery, period of supply, etc.) and sign written contracts for the delivery of goods.

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Price is the only Marketing Mix variable that generates revenue. All the other variables viz. Product, Place, and Promotion incur costs. For any kind of transaction, an offering has a price for its value. Price goes by many names – rent, rate, fee, tuition, toll, fare, royalty, honorarium, etc. Price is the most flexible or easily changeable element of the marketing mix elements. A marketer can change the price without much investment in time as compared to making changes to the Product features, Promotion strategies, or distribution channels.

Price can be defined as quantifying (into Dollars, Pounds, Rupees, etc.) the perceived value of an offering to the buyer at a particular time.

Pricing includes setting of objectives, determining price flexibility, outlining strategies, finalising price, and controlling it depending on the challenges. Organisations have to rely on the managerial skills in the implementation and control of pricing strategies. Its success relies heavily on how the managerial staff monitors the response of customers and competitors.

In developing countries, price is the major factor that drives sales. Pricing and price-wars among competitors is the biggest problem that an organisation faces. There are different ways in which organisations approach the final pricing decision. These decisions depend on competitors, costs, demand, perceived value, long term return on investment or short term return on investment, etc.

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Pricing objectives refer to the targets to be achieved via pricing strategies in the marketing plan. These should be clearly outlined in quantitative terms so as to be understood by all the members involved in pricing decisions.

The pricing objectives can be divided as Short term objectives and Long term objectives-

1) Short term pricing objectives-
The short term objectives for pricing policies are as below-
• Attracting new customers, middlemen, etc.
• Generate interest in the product
• Discourage competition
• Sales or profit growth
• Rapidly establish market position
• Meeting competition
• Maintain market share
• Promote new products
• Recover costs of a product in decline stage
• Secure key accounts

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