Principles of marketing: Lecture 28

MGT301
Principles of Marketing
Lecture­28


Summary
of  
Lecture­27



Today’s Topics



Place….Distribution 
Channel….Marketing Channel


Marketing Channel
A set of interdependent organizations involved in the 
process of making a product or service available 
for use or consumption by the consumer or 
business user. 


Simple Marketing System
Communication
Product/Service
Producer/Seller

Money

Feedback

Consumer


How Intermediaries Minimize 
Transactions?


Manufacturer

Customer

Manufacturer

Customer

Manufacturer
Customer
Manufacturer
Customer
Manufacturer
20 Contacts


Manufacturer
Customer
Manufacturer

Manufacturer

Customer
Wholesaling
Intermediary

Customer

Manufacturer
Customer
Manufacturer
9 Contacts


Why are Marketing Intermediaries 
Used?




Greater efficiency in making goods available to 
target markets.



Offer the firm more than it can achieve on it’s 
own through the intermediaries:
– Contacts
– Experience
– Specialization

– Scale of operation



Match supply and demand.


How Channel Members Add Value?
Channel members add value by bridging the major 
time, place and possession gaps that separate 
goods and services from those who would use 
them.


Distribution Channel Functions
Risk
Risk Taking
Taking

Information
Information

Financing
Financing

Promotion
Promotion

Physical
Physical

Distribution
Distribution

Contact
Contact

Negotiation
Negotiation

Matching
Matching


Direct and Indirect Channels



 Direct Channel: when a producer and ultimate 
consumer deal directly with each other.
­e.g. electronic marketing channels



 Indirect Channel: when intermediaries are inserted 
between the producer and consumers and perform 
numerous channel functions.


M
M

Direct

Channel 1

M
M
Channel 2

M
M

C
C

R
R

C
C

R
R

C
C

R
R

C
C

In-Direct

W
W

Channel 3

M
M
Channel 4

W
W

JJ


Marketing Channels for Consumer 
Goods


Producer

Consumer

Producer

Retailer

Producer

Producer

Wholesaler

Agent/
Broker

Wholesaler

Retailer

Retailer

Consumer

Consumer

Consumer


Marketing Channels for Business Goods
Business
User

Producer

Producer

Agent/
Broker

Producer

Producer

Agent/
Broker

Business
User

Wholesaler

Business
User

Wholesaler

Business
User


Industrial
distributors

Manufacturer’s

representative
Manufacturer’s
sales branch

Consumer

Manufacturer

Industrial Marketing Channels




Channel Behavior & Conflict
The channel will be most effective when..


Each member is assigned tasks it can do best.



All members cooperate to attain overall channel goals 
and satisfy the target market.


When this doesn’t happen, conflict occurs..


Horizontal Conflict occurs among firms at the 
same level of the channel.



Vertical Conflict occurs between different 
levels of the same channel.

For the channel to perform well, conflict must be 
managed.