Channel Management

Product distribution (or place) is one of the
four elements of the marketing mix .
Distribution is the process of making a product
or service available for use or consumption by
a consumer or business user, using direct
means, or using indirect means with
intermediaries.
The other three parts of the marketing mix are
product , pricing and promotion.
Channels and intermediaries
Distribution of products takes place by means
of channels. Channels are sets of
interdependent organizations (called
intermediaries) involved in making the product
available for consumption.[1] Merchants are
intermediaries that buy and resell products.
Agents and brokers are intermediaries that act
on behalf of the producer but do not take title
to the products.
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Channel design
A firm can design any number of channels.
Channels are classified by the number of
intermediaries between producer and
consumer. [1] A level zero channel has no
intermediaries. This is typical of direct
marketing . A level one channel has a single
intermediary. This flow is typically from
manufacturer to retailer to consumer.
Types
Category
Definition
Intensive distribution
the producer's products are stocked in the
majority of outlets. [1] This strategy is
common for basic supplies, snack foods,
magazines and soft drink beverages.
Selective distribution
means that the producer relies on a few
intermediaries to carry their product. [1] This
strategy is commonly observed for more
specialised goods that are carried through
specialist dealers, for example, brands of
craft tools, or large appliances.
Exclusive distribution
means that the producer selects only very few
intermediaries. [1] Exclusive distribution is
often characterised by exclusive dealing where
the reseller carries only that producer's
products to the exclusion of all others. This
strategy is typical of luxury goods retailers
such as Gucci.
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Channel mix
In practice, many organizations use a mix of
different channels; in particular, they may
complement a direct sales-force, calling on the
larger accounts, with agents, covering the
smaller customers and prospects. In addition,
online retailing or e-commerce is leading to
disintermediation. Retailing via smartphone or
m-commerce is also a growing area.
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Managing channels
The firm's marketing department needs to
design the most suitable channels for the
firm's products, then select appropriate
channel members or intermediaries. The firm
needs to train staff of intermediaries and
motivate the intermediary to sell the firm's
products. The firm should monitor the
channel's performance over time and modify
the channel to enhance performance.
Channel motivation
To motivate intermediaries the firm can use
positive actions, such as offering higher
margins to the intermediary, special deals,
premiums and allowances for advertising or
display.[1] On the other hand, negative actions
may be necessary, such as threatening to cut
back on margin, or hold back delivery of
product.
Channel conflict
Channel conflict can arise when one
intermediary's actions prevent another
intermediary from achieving their objectives.
[1] Vertical channel conflict occurs between
the levels within a channel and horizontal
channel conflict occurs between intermediaries
at the same level within a channel.