One of the most important decisions dealing with a marketing manager is the marketing channel decision. Every other marketing decision is associated with the business organization’s channel decisions. Mostly, very little attention is given by business organizations to their distribution channels. This can be very destructive. Long-term commitments are included in distribution channels.
What is Marketing Channel
A group of interdependent business organizations that are engaged in the process of making a product or service available for consumption or use by the business user or consumer. In a simple marketing system, there are manufacturers and consumers who have something valuable to exchange. In the exchange process, these dealings are made along with the creation of product availability for consumers.
By utilizing networks of distribution channels, this availability is created. Every service or product must somehow be made available to billions of people, whether it is a watch, an automobile, office furniture, or a personal computer.
Products must also be made available to millions of businesses, industrial firms, other organizations worldwide, and government institutions. Through the creation of distribution channels, business organizations strive to achieve this objective.
There are three basic dimensions of channel structure. The first is the length of the channel, the second is the intensity at various levels, and the third is the kinds of intermediaries involved. Channel intensity ranges from exclusive to selective to intensive. Intensive refers to having several intermediaries. Selective indicates a smaller number of intermediaries. Exclusive means only one intermediary.
Why are Marketing Intermediaries Utilized?
Why is some of the selling job provided to intermediaries by manufacturers? By doing so, marketing intermediaries are given some control over to whom and how the products are to be sold. The use of intermediaries results from their efficiency in making goods available to target markets. Business organizations can accomplish more than they could on their own by using intermediaries, which have more experience, contacts, scale of operation, and specialization.
The function of marketing intermediaries is to transform the variety of products produced by manufacturers into the variety of products desired by consumers from an economic point of view. Manufacturers produce a narrow variety of products in large quantities, but consumers demand a wider variety of products in smaller quantities.
Intermediaries purchase large quantities from several manufacturers and divide them into smaller quantities and a wider variety desired by consumers within the distribution channel. In matching supply and demand, intermediaries play a significant role.
The concept of distribution channels is not confined to the distribution of physical products. The same problem is faced by providers of services and ideas in making their offerings available to target markets. Hotels, retail stores, banks, and other service providers give much attention to making their services easily available to target consumers in the private sector.
Service organizations and agencies establish “health care delivery systems” and “education distribution systems” to serve widely scattered populations in the public sector. Schools should be located near children who need education, and hospitals should be located to assist different patient populations. Polling stations should be located where people can easily vote, and fire stations are placed where they can respond quickly to emergencies.
Distribution Channel Functions
Goods and services are moved from manufacturers to consumers through distribution channels. These channels minimize the place, time, and possession gaps that separate goods and services from those who need them. The following are some basic functions performed by members of the marketing channel:
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Information:
Marketing research and intelligence information related to the marketing environment is gathered and distributed to support planning and exchange. -
Promotion:
Persuasive information about the product is developed and communicated. -
Contact:
Identifying and communicating with prospective buyers. -
Matching:
Activities such as producing, assembling, grading, and packaging to fit the offer to the buyer’s requirements. -
Negotiation:
Reaching agreements on price and other terms to transfer ownership or possession.
Other functions help complete transactions:
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Financing:
Acquiring and using funds to cover the costs of channel operations. -
Physical Distribution:
Transporting and storing goods. -
Risk Taking:
Assuming the risks involved in carrying out channel work.
The key question is not whether these functions should be performed—they must be—but rather who should perform them. If producers perform all functions, their costs increase, leading to higher product prices. If some functions are transferred to intermediaries, producers’ costs may decrease, but intermediaries charge for their services.
Therefore, functions should be assigned to channel members who can perform them most efficiently and effectively to deliver the desired variety of products to target consumers.
