Marketing

Channels
[Resolving GAP-3]

Session 7

Marketing Channels: Nature & Importance

o A set of independent organizations involved in the
process of making a product available for consumption
o Value Delivery Network
The network made up of the company, suppliers, distributors,
and ultimately customers who partner with each other to
improve the performance of the entire system.

o Channel choices link other decisions in marketing mix

Pricing, Marketing communications

o Strong distribution system can be a competitive

advantage
o Channel decisions involve long-term commitments to
other firms

Key Functions Performed by

Channel Members
o Information
o Promotion
o Contact
o Matching

o Negotiation
o Physical Distribution
o Financing
o Risk taking

How Channel Members Add Value

Ensure fewer contacts to move the product to final purchaser
Help match product assortment demand with supply.
Bridge major time, place, and possession gaps

Marketing Channels: Nature & Importance

o The number of intermediary levels indicates the length of a marketing channel
Direct Channels
Indirect Channels

Indirect Marketing

Producer
Wholesaler
o Producers lose more control
and face greater channelRetailer
complexity as additionalConsumer
channel levels
are added.

Indirect Marketing
Direct Marketing

Channel Behavior and Organization

A. Channel Conflict
When channel members disagree on roles/activities/ rewards.
Horizontal: occurs among firms at the same channel level
Vertical: occurs among firms at different channel levels

B.1. Vertical Marketing Systems

(vs. conventional distribution channel)

Corporate VMS (common ownership)

Contractual VMS
Manufacturer-sponsored retailer franchise system (Ford)
Manufacturer-sponsored wholesaler franchise system (Coca-cola)
Service-firm-sponsored retailer franchise system (KFC)
Administered VMS (GM-dominating power)

B.2. Horizontal Marketing Systems

Channel Behavior and Organization

B.3. Multi-channel Distribution Systems
Also called hybrid marketing channels
Occurs when a firm uses two or more marketing channels
Hybrid marketing has many advantages
Producer

Catalogs,
Telephone,
Internet

Consumer
Segment 1

Distributors

Retailers
Consumer
Segment 2

Dealers
Business
Segment 1

C. Changing Channel Organization

Disintermediation

Sales
force

Business
Segment 2

(contd.)

Channel Design Decisions

o Step 1: Analyzing Consumer Needs
Cost and feasibility of meeting needs must be considered
o Step 2: Setting Channel Objectives
Set channel objectives in terms of targeted customer service
o Step 3: Identifying Major Alternatives
Types of intermediaries
Company sales force, manufacturers agency, industrial distributors

Number of intermediaries
Intensive, selective, and exclusive distribution

Responsibilities of channel members

o Step 4: Evaluating Major Alternatives
Economic criteria
Control issues
Adaptive criteria

Channel Management Decisions

o Selecting Channel Members
Identify characteristics that distinguish the best channel
members

o Managing and Motivating Channel Members

Partner relationship management (PRM) is key

o Evaluating Channel Members

Performance should be checked against standards
Channel members should be rewarded/replaced as dictated
by performance

Wholesaling
All activities involved in selling goods/services to
those buying for resale or business use.
Wholesaling Marketing Decisions
oTarget market & positioning
Targeting may be made on the basis of size of customer,

type of retailer, need for service.

o Marketing mix decisions

Product and service assortment: inventory, line
Pricing: usual markup on COG is 20%
Promotion: largely disorganized and unplanned
Place: location, facilities

Retailing
Retailing
All activities involved in selling goods or services
directly to final consumers for their personal, nonbusiness use.

Retailer Marketing Decisions

oTarget marketing and positioning
oProduct assortment, service mix, stores atmosphere
oPlace (location) - Accessible
oPromotion - All promotional efforts
oPrice
High mark-up with low volume
Low mark-up with high volume

Bank Distribution Network

o In Banking Place means branch location and
Distribution
o Professor Kotler expressed this as any means
of increasing the availability and/or
convenience of a service that increases its
revenue from its use
o This is very important and much overlooked
area of a banks marketing mix

Bank Distribution Network (contd.)

Bank services can be distributed either
Directly or
Indirectly
Product

Bank Marketing Mix

Price

Place
Promotion
(Channels of Distribution)

Direct
(Bank Branch)

Indirect
Bank Credit Cards

Location & Coverage

Telebanking/mails

Creating Branch Image

In-shop Branches
In-touch Services

Bank Distribution Network (contd.)

o Bank Branches
Most important channel
as fixed in location, must be conveniently situated

o Bank Credit Cards

through cards banks offer credit services to its customers

overcomes inseparability
Increases use of bank services by existing customers
establishes contacts with a wider variety of customers

o Telebanking/ mailbanking
increases availability and convenience of bank services
expanses geographical area

o In-shop Branches
offer banking services in shops
customers may even get statements

o In-touch Financial Services

customers use home-computers, connect through network and bank with
banks in paying bills, knowing balances etc.

Bank Distribution Subcomponents

1.PEOPLE
Managing and making best use of own-people
(Internal Marketing)
Very important for delivering service than goods
Customers judge products partly in terms of the
providers (friendly, knowledgeable)
Branch managers must carefully
Process
Select
Train
Presentation
Place
Motivate front-line people
People
and others

Bank Distribution Subcomponents (contd.)

2. PRESENTATION
o making a branch user-friendly

interior - clean, tidy & neat

people- warm, friendly, ever ready to help
exterior- matching with the interior
overall branch environment
customer oriented & customer friendly
a place customer would love to walk

in & would be always ready

to recommend

Process

Place

Presentation

People

Bank Distribution Subcomponents

(contd.)

3. PROCESS
o Systems & procedures

making decisions on how the customers will get

their needs met
helping customers, not having barrier in rendering
prompt & good services
being not officious, longwinded and cumbersome
Process
letting not customers routed through
several contact points
Presentation
Place
not every time referring them to
the next higher authority at branch
People

How to Gain That

In most cases the branch manager inherits the
branch location from the previous, yet s/he has
considerable scope to convert it into an effective
tool and improve the marketing mix thus
achieving the marketing goal.
o Office Environment Management
o Stationary Management
o Furniture & Fixture Management
o Noise Management
o Others

Office Environment
o A neat,

tidy & clean branch is

essential for delivery of effective
customer service

o A good working environment has a

lot to do with job satisfaction
o Upkeep & maintenance is a regular
process

Office Environment (contd.)

o Branch Layout should be
Physically conductive for speedier movement of
vouchers/ documents and enough free space for
movement of sub-staff & customers. That:
enables closer supervision & problem solving
better work-coordination between & within departments
improves efficiency by
o better guidance to a staff
o lesser movements of registers/ledgers
o better filing of papers
o better view of officer in-charge of administration & branch

manager

Stationery Management
o requirement of at least one year should be
planned and indented much in advance from the
banks stationery cell

o evaluate the possible misuse & fix it

supervise closely
educate staff

o do not hold excess stationery

reduces available space and
blocks working funds

Furniture & Fixture Management

o Make annual plans in consonance with the
present & proposed layout
Customer should not be kept standing for want of a chair!

Noise Management
o Reduce the noise level by
1. a proper layout
2. sustained staff-education program (to speak low &
avoid shouting)

Direct Distribution Network

o More than 90% of the bank services are
distributed Directly through branches
o But branch management is often
ignored
o Two important stages are
1. Location of Bank Branches
2. Creating Branch Image

Location of Bank Branches

o Location decision is very important as it
involves considerable amount of
expenditure for long-term
o Different options are available and the
manager will decide according to the
ultimate goal
City-center position is unavoidable as most
businesses are around there

Location of Bank Branches (contd.)

o It could be in High Streets in clustering with
other banks branches

customer convenience
easy to be selected by potential customers

o Might be to serve a particular segment of

customers

University Campus area (students/teachers)

Factory area
Shopping Centers
Trade fair etc.

Creating Branch Image

o Uniform image for each branch for the
same bank makes
clear advertisement for the bank as a whole
psychological reassurance to the customer of
familiar home branch

o Architectural style of the building

(exteriors)
o Uniformity of appeal to all segments of
customers (interiors)

Creating Branch Image (contd.)

o Uniformity of interiors of each branch of
the same bank
o Internal layout
well-labeled counters
separate pay-off & withdrawal counters
etc.

o Internal people
uniform dresses for sub-staff & might be for
front-desk employees

Changing Trend in Bank Distribution

o Banks now are becoming one-stop
bank, or all-purpose bank
extending the range of services thus
becoming Supermarket of Financial
Services

o Thus creating image for such a vast

institution with such a diversified range of
products needs considerable focus.