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Marketing Channels in the Supply Chain - Coggle Diagram
Marketing Channels in the Supply Chain
The Significance of Marketing Channels
The primary purpose of any channel of distribution is to bridge the gap between the producer of a product and its user
Functions of a Channel
The primary purpose of any channel of distribution is to bridge the gap between the producer of a product and the user of it
.
defined as the most efficient and effective manner in which to place a product into the hands of the customer.
The channel is composed of different institutions that facilitate the transaction and the physical exchange.
Institutions in channels fall into three categories:
• The producer of the product: a craftsman, manufacturer, farmer, or other extractive industry producer
• The user of the product:an individual, household, business buyer, institution, or government
• Certain middlemen at the wholesale and/or retail level
A channel performs three important functions
The functions are:
• Transactional functions: buying, selling, and risk assumption
• Facilitating functions: post-purchase service and maintenance, financing, information dissemination, and channel coordination or leadership
• Logistical functions: assembly, storage, sorting, and transportation
Characteristics of a Channel
First, although you can eliminate or substitute channel institutions, the functions that these institutions perform cannot be eliminated.
Second, all channel institutional members are part of many channel transactions at any given point in time. As a result, the complexity of all transactions may be quite overwhelming
Third, the fact that you are able to complete all these transactions to your satisfaction, as well as to the satisfaction of the other channel members, is due to the routinization benefits provided through the channel.
Fourth, there are instances when the best channel arrangement is direct, from the producer to the ultimate user. This is particularly true when available middlemen are incompetent or unavailable, or the producer feels he or she can perform the tasks better.
Finally, although the notion of a channel of distribution may sound unlikely for a service product (such as health care or air travel), service marketers also face the problem of delivering their product in the form and at the place and time demanded by the customer
Routinization
means that the right products are most always found in places where the consumer expects to find them (such as catalogues or stores), comparisons among products are possible, prices are marked, and methods of payment are available.
Types of Marketing Channels
There are basically 4 types of marketing channels:
Direct Selling
DIrect selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling.
Direct selling is different from direct marketing in that it is about individual sales agents reaching and dealing directly with clients.
Selling Through Intermediaries
A marketing channel where intermediaries such as wholesalers and retailers are utilized to make a product available to the customer is called an indirect channel.
The most indirect channel you can use (Producer/manufacturer –> agent –> wholesaler –> retailer –> consumer) is used when there are many small manufacturers.
Dual Distribution
Dual distribution describes a wide variety of marketing arrangements by which the manufacturer or wholesalers uses more than one channel simultaneously to reach the end user.
Using two or more channels to attract the same target
market can sometimes lead to channel conflict.
Reverse Channels
Each one flows from producer to intermediary (if there is one) to consumer.
Technology, however, has made another flow possible.
This one goes in the reverse direction and may go from consumer to intermediary to beneficiary.
Selecting Marketing Channels
Strategic selection of marketing channels can impact an organization’s brand, profitability, and overall scale of operations for a given line of products or services.
Channel Selection
Consumer Preferences
If consumers have a strong desire to find a given good in a given channel, organizations should strive to make that happen (as long as the opportunity costs down exceed the potential benefits). Another good example of consumer preferences would be digital storefronts.
Costs
Some channels will be more costly than others. Low cost goods function best at low cost retail outlets. Better yet, directly selling eliminates organizations between the user and the producer, and therefore can be even lower cost (albeit, shipping,storing and other logistics must be considered)
Brand
Organizations create strategic alliances to build channels for consumers, and these
alliances will reflect on the overall branding initiatives of both partners.
Localization
It is also useful to localize and enter new markets through effective marketing channel selections. A producer of household goods, for example, like laundry detergent could just as easily sell their goods in Europe as in the United States.
How to localize the brand to be recognized and understood by
foreign consumers.
Strategic channel selection can greatly improve an organization’s ability to accomplish this goal.
The Value of Channels
it’s
important to understand the underlying role of channels in marketing strategy.
Channels influence:
• The relationship between the producer and the buyers.
• The firm’s pricing strategy.
• The overall product strategy through branding, policies, and willingness to
stock.