A marketing channel is a set of practices or activities necessary to transfer the ownership of goods from the point of production to the point of consumption. It is the way products and services get to the end-user, the consumer; and is also known as a distribution channel. A marketing channel is a useful tool for management, and is crucial to creating an effective and well-planned marketing strategy.
Another less known form of the marketing channel is the Dual Distribution channel. This channel is a less traditional form that allows the manufacturer or wholesaler to reach the end-user by using more than one distribution channel. The producer can simultaneously reach the consumer through a direct market, such as a website, or sell to another company or retailer that will reach the consumer through another channel, i.e., a store. An example of this type of channel would be franchising.
Roles of marketing channel in marketing strategies
- Links producers to buyers.
- Influences the firm's pricing strategy.
- Affecting product strategy through branding, policies, willingness to stock.
- Customizes profits, install, maintain, offer credit, etc.
Types of Marketing Channels
There are four main types of marketing channels.
Producer --> Customer
The producer sells the goods or provides the service directly to the consumer with no involvement with a middle man such as an intermediary, a wholesaler, a retailer, an agent, or a reseller. The consumer goes directly to the producer to buy the product without going through any other channel. This type of marketing is most beneficial to farmers who can set the prices of their products without having to go through the Canadian Federation of Agriculture.
Producer --> Retailer --> Consumer
Retailers, like Walmart and Target, buy the product from the manufacturer and sell them directly to the consumer. This channel works best for manufacturers that produce shopping goods like, clothes, shoes, furniture, tableware, and toys. Since consumers need more time with these items before they decide to purchase them, it is in the best interest of the manufacturer to sell them to another user before it gets into the hand of the consumers. It is also a good strategy to use another dealer to get the product to the end-user if the producer needs to get to the market more quickly by using an established network that already has brand loyalty.
Producer --> Wholesaler/Distributor --> Customer
Wholesalers, like Costco, buy the products from the manufacturer and sell them to the consumer. In this channel, consumers can buy products directly from the wholesaler in bulk. By buying the items in bulk from the wholesaler the prices of the product are reduced. This is because the wholesaler takes away extra costs, such as service costs or sales force costs, that customers usually pay when buying from retail; making the price much cheaper for the consumer. However, the wholesaler does not always sell directly to the consumer. Sometimes the wholesaler will go through a retailer before the product gets into the hands of the consumer. Each dealer (the manufacture, the wholesaler, and the retailer) will be looking to make a decent profit margin from the product. So each time the buyer purchases the merchandise from another source, the price of the product has to increase, in order to maximize the profit each person will receive. This raises the price of the product for the end-user.
Producer --> Agent/Broker --> Wholesaler or Retailer --> Customer
This distribution channel involves more than one intermediary before the product gets into the hands of the consumer. This middleman, known as the agent, assists with the negotiation between the manufacturer and the seller. Agents come into play when the producers need to get their product into the market as quickly as possible. This happens mostly when the item is perishable and has to get to the market fresh before it starts to rot. At times the agent will directly go to the retailer with the goods, or take an alternate route through the wholesaler who will go to a retailer and then finally to the consumer.
Brands involved in selling through marketing channels (also commonly known as distribution channels) have relationships with the channel partners (local resellers, retailers, field agents, etc.) that sell their products or services to the end customer. Brands that aim to maximize sales through channel partners provide them with advertising and promotional support that is pre-configured and often subsidized by the brand.
Coordinated Channel Marketing
Brands carry out online and offline advertising on behalf of channel partners to aid them in generating sales of their branded products. Those online and offline marketing initiatives can either be isolated or coordinated to inform one another.
An example of this is an apple orchard: Apple orchard > Transport > Processing factory > Packaging > Final product to be sold > Apple pie eaten
An alternative term is distribution channel or 'route-to-market'. It is a 'path' or 'pipeline' through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor). A marketing channel can be as short as being direct from the vendor to the consumer or may include several inter-connected (usually independent but mutually dependent) intermediaries such as wholesalers, distributors, agents, retailers. Each intermediary receives the item at one pricing point and moves it to the next higher pricing point until it reaches the final buyer.
Marketing Channels can be long term or short term.
Short term channels are influenced by market factors such as: business users, geographically concentrated, extensive technical knowledge and regular servicing required, and large orders. Short term product are influenced by factors such as: perishable, complex, and expensive. Short term producer factors include whether the manufacturer has adequate resources to perform channel functions, Broad product line, and channel control is important. Short term competitive factors include: manufacturing feels satisfied with marketing intermediaries' performance in promoting products.
Long term market factors include consumers, geographically dispersed, little technical knowledge and regular servicing is not required, and small orders. Product factors for long term marketing channels are: durable, standardized, and inexpensive. Producer factors are manufacturer lacks adequate resources to perform channel functions, limited product line, and channel control not important. The competitive factors are: manufacturer feels dissatisfied with marketing intermediaries' performance in promoting products
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