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