Explain different types of channels (Vertical, Conventional and Multiple) and channel strategies (Exclusive, Selective and Intensive).

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.

In Multiple marketing channel, the manufacturer utilises two or more marketing channels in the target market. This channel can be planned and implemented for various reasons. A manufacturer gains more market coverage through additional channel by targeting additional segments. For example, introduction of ecommerce serves a segment of consumers that are tech savvy and like home delivery and research of products on internet. It can also lower the costs. For example, a manufacturer can open a company store in the target market. Customers would prefer a company store rather than an intermediary because of reasons like brand image, etc. here the firm saves on the margins that it shares with the channel members. If the firm is a market leader, an additional channel often brings competition among the intermediaries who strive to promote and sell the products more enthusiastically. An additional channel like a sales force also helps getting directly in contact with the customer. This provides proper education, and service for complex products to the customer and a reliable feedback to the organisation.

Channel Strategies –
Organisations, depending on their marketing strategy, decide on the number of channel members. There are three channel strategies that organisations chose from – Exclusive distribution, Intensive distribution, and Selective distribution-
• Exclusive distribution – In exclusive distribution, a firm selects only one or few intermediaries for product distribution. This leads to a strong relationship between the manufacturer and the intermediary. This system demands high level of support between the manufacturer and distributer. They both become highly dependent on each other. Manufacturer requires the knowledge and distribution expertise of the intermediary. The intermediary is asked to promote the product, and they generally do this enthusiastically as they get the benefits of higher sales. The intermediary being the sole distributor benefits from the product’s success in the market. In case the manufacturer alters the contract or gives additional selling rights to other intermediary, the relationship between intermediary and the manufacturer hits a low. Intermediaries may block the sale of products at its outlet. Many TV series sign exclusive contracts with networks for exclusive premier on certain TV channels. Manufacturers of electronic items and automobiles also sign exclusive distribution contracts. In India, Motorola, gave exclusive rights to Amazon India to launch and sell its Moto G4 model of its mobile phone.

• Intensive distribution – In intensive distribution, a firm sells products through as many outlets as possible. The products which can be easily accessed by customers without much shopping effort are sold through intensive distribution. For example, newspapers, milk, soaps, etc. These products do not require much additional services from intermediaries apart from handling and assigning shelf space. A customer can walk into any retail store or supermarket or a shopping mall and choose or ask for the product needed. The consumers can get these products when and where they are needed. These for mostly the FMCG products. This strategy provides great brand exposure and consumer convenience is given high priority.

• Selective distribution – In selective distribution, the manufacturer opts to distribute products at select outlets and in select regions. This distribution lies between Selective distribution and Intensive distribution. Selective distribution gives more market coverage than Exclusive distribution and better control on the marketing channel than Intensive distribution. The intermediary may be required to add value in some way like outlet ambience, customer education before and after the sale of the product, etc. This channel strategy is also less costly as compared to Intensive distribution. For example, Cannon cameras can be found in many outlets but not all the models at all these outlets. The manufacturer sells its select models at select outlets appealing to different customers in the target markets.

For expensive products organisations usually go for exclusive distribution over selective and intensive distribution. This way the firm controls the prices as well as the brand image.