Channel Management

Channel Management

A set of interdependent organizations involved in the process of making a product or services available for the use or consumption

1.Objective

To help you understand

the key factors that influence the channel choice, how a channel structure is developed

Relationship between the principle and the intermediary Types of channels

Implications on the length of the channel

What is Channel?

Channel is a mechanism which brings the product to the consumer at his doorstep.

Why Channels

When it becomes impossible for the manufacturer to directly deal with the consumers.

Minimize transportation costs; maintain service levels, reduction of stock holding etc. Required to distribute your products.

Lacks the financial resources to do direct marketing

Cannot have the infrastructure to make the product widely available and near the customer

Trading profits could be less than manufacturing profits

2.Channel functions

Gathers information on customers, competitors and other external market data

Develop and disseminate persuasive communication to stimulate purchases

Agreement on price and other terms so that transfer of ownership can be effected

Placing orders with manufacturers

Acquire funds to finance inventories and credit in the market

Assume responsibility of all risks of the trade

Successive storage and movement of products

Helps buyers in getting their payments through with the banks Oversee actual transfer of ownership

Other functions

3.Functions of a Distribution Channel

The main function of a distribution channel is to provide a link between production and consumption. Organisations that form any particular distribution channel perform many key functions:

Information Gathering and distributing market research and intelligence - important for marketing planning

Promotion Developing and spreading communications about offers

Contact Finding and communicating with prospective buyers

Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging

Negotiation Reaching agreement on price and other terms of the offer

Physical distribution Transporting and storing goods

Financing Acquiring and using funds to cover the costs of the distribution channel

Risk taking Assuming some commercial risks by operating the channel (e.g. holding stock)

All of the above functions need to be undertaken in any market. The question is - who performs them and how many levels there need to be in the distribution channel in order to make it cost effective.

Types of Marketing Channels

Business Goods

Services