Companies have to decide on the number of intermediaries to use at each channel level. Importance of Distribution Channels or Marketing Channels . Effective communication plays an important role in business to inform and influence behavior. Here, two or more companies join hands to exploit a marketing opportunity. A better term would be demand chain because it suggests a sense-and-respond view of the market. An example of a corporate vertical marketing system would be a company such as Apple, which has its own retail stores as well as designing and creating the products to be sold in those retail stores. The requirements of institutional buyers are very different from individual buyers. Many organizations, from the smallest SMEs to the largest sized firms have implemented or are in the process of implementing online marketing strategies. Retailers are found only in consumer goods channels. Some of the major reasons for conflict are: When there is a goal incompatibility issue between the manufacturer and the channel member, it can give rise to a channel conflict. 3. Abstract. c. Franchise Organisations – Franchisers might also link the successive stages in the manufacturing and distribution process. Thus, the producer can pay his full attention towards organizing the production function only smoothly to earn a high rate of return. For example, if the manufacturers prefer to have lower prices and larger volumes whereas the dealers want higher prices and medium volumes, it can lead to a conflict. Hence manufacturers send their sales personnel who can also clarify customers’ technical queries and freeze the product specifications. A marketing channel is a distribution method for which a company communicates with, or markets to, a potential customer. While, in the ‘pull’ strategy the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thereby, induce the intermediaries to order it. There are channels with different number of levels: a. Marketing is the key element in getting the returns on the financial investment on the product or service. A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. The sales are affected through the company sales force. There is no need for currency notes and coins in this method. Industrial market is made up of a smaller number of relatively large buyers compared to consumer market and the buyers are not scattered over a wide area rather they are concentrated. Also, there is a mutual benefit to both organisations, which they are otherwise not likely to achieve. Types 6. Each channel system has a different potential for creating sales and producing costs. This is a popular in case of consumer durables such as textiles, readymade garments, etc. (a) Manufacturers – Agents or Brokers – Retailer – Consumer – 2 Levels. (b) Selective distribution – Here the distributors can keep products of very few limited producers and generally of one category of products such as home appliances. Goods that have a high unit price and a high margin are delivered directly by the manufacturers. Customers are induced & motivated to buy these products by intermediaries. i. Mostly direct channel, i.e., zero level is used. In managing the intermediaries, the firm must also decide on the emphasis given to the ‘push’ versus ‘pull’ marketing strategy. Type of the product – Depending upon the nature of the product, the length of the channel needs to be decided. Hence, zero level or direct channel is more preferred. The strong customer base is important prerequisite to the success of any business. Each firm usually confronts a number of alternate ways to reach the market. 10 Most Important Functions of Marketing Channel 1) Information Provider:. In the case of a very small operator, e.g., someone making and selling pickles, the person concerned will distribute the product herself in order to avoid extra cost, and also do the job of the smart-talking saleswoman. d) Manufacturers – Wholesaler – Consumer: Here, retailers do not exist. 4. This is the most popular choice and is used by both small and big companies alike. Marketing channels are the ways that goods and services are made available for use by the consumers. Account Disable 12. A ‘push’ strategy uses the manufacturer’s sales force, trade promotional money, or other means to induce intermediaries to carry, promote, and sell the product to end-users. These are professionally managed and centrally programmed networks that are established to achieve operating economies and maximum market impact. A Vertical Marketing System (VMS) comprises of the manufacturer, wholesaler and retailer, all acting as a unified system as against the conventional marketing channel system in which each of the channel members are a separate entity.
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