Distribution & Channel Management

A marketing channel is the people, organizations, and 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. (B2B, B2C,
or
In business, a “channel” is the pathway through which goods flow from producers to consumers. It is
important to consider every point on the path in order to create a full picture of how goods are actually
made and sold.
or
Routes by which products get from the source to the end user
Channel marketing involves finding new partners to help transfer goods from producers to consumers.
Very few producers actually sell the goods they produce themselves, which are instead sold through an
intermediary. Consider the cereal once again. There is no cereal store; producers rely on grocery stores
to sell their products.
Who are Channel Members?
Experts involved in the process of getting products or services to the end-user.
Channel activities may be carried out by the marketer or the marketer may seek specialist organizations
to assist with certain functions. We can classify specialist organizations into two broad categories:
resellers and specialty service firms.
Resellers
These organizations, also known within some industries as intermediaries, distributors or dealers,
generally purchase or take ownership of products from the marketing company with the intention of
selling to others. If a marketer utilizes multiple resellers within its distribution channel strategy the
collection of resellers is termed a Reseller Network. These organizations can be classified into several
sub-categories including:
Retailers – Organizations that sell products directly to final consumers.
Wholesalers – Organizations that purchase products from suppliers, such as manufacturers or other
wholesalers, and in turn sell these to other resellers, such as retailers or other wholesalers.
Industrial Distributors – Firms that work mainly in the business-to-business market selling products
obtained from industrial suppliers.
Specialty Service Firms
These are organizations that provide additional services to help with the exchange of products but
generally do not purchase the product (i.e., do not take ownership of the product):
Agents and Brokers – Organizations that mainly work to bring suppliers and buyers together in
exchange for a fee.
Distribution Service Firms – Offer services aiding in the movement of products such as assistance with
transportation, storage, and order processing.
Others – This category includes firms that provide additional services to aid in the distribution process
such as insurance companies and firms offering transportation routing assistance.
Why Channels Exists
The firm's sales force and advertising decisions depend on how much training and motivation the
dealers need. Channel marketing intermediaries exist because they offer value in making goods and
services more available and accessible to the targeted markets.
Channel Flow?
The marketing functions performed by manufacturers, wholesalers, retailers, and

other channel members within the channel. Eight universal channel flows have been identified and
include physical possession, ownership, promotion, negotiation, financing, risking, ordering, and
payment.
Channel Strategy
A channel strategy is a vendor's plan for moving a product or a service through the chain of
commerce to the end customer. Product manufacturers and service providers face a number
of channel options. The simplest approach is the direct channel in which the vendor sells
directly to the customer.
Market segmentation
Market segmentation is the process of dividing a market of potential customers into groups, or
segments, based on different characteristics. The segments created are composed of consumers who
will respond similarly to marketing strategies and who share traits such as similar interests, needs, or
locations.
Segmentation Strategy/Basis
Approaches to subdivision of a market or population into segments with defined similar characteristics.
Five major segmentation strategies are
(1) Behavior segmentation, Purchasing, consumption or usage behavior. (e.g. Needs-based,

benefit-sought, usage occasion, purchase frequency, customer loyalty, buyer readiness).
(2) Benefit segmentation, Benefit segmentation can be used by mobile phone manufacturers to
divide their market into work-oriented customers, highly social customers, and customers
who consider mobile phones as a status symbol.
(3) Demographic segmentation, Quantifiable population characteristics. (e.g. age, gender,

income, education, socio-economic status, family size or situation).
(4) Geographic segmentation, Physical location or region (e.g. country, state, region, city, suburb,
postcode).
(5) Psychographic segmentation. Lifestyle, social or personality characteristics. (typically includes

basic demographic descriptors)
Business market
Consumer market
Type of Type of
Variables Variables
segmentation segmentation
Region, climate, Location, customer concentration,
Geographic population density, Geographic regional industrial growth rate, and
and population international macroeconomic
growth rate factors
Age, gender,
ethnicity,
nationality,
Demographic Customer type Size of the organization, its industry
education,
and position in the value chain
occupation,
religion, income,
and family status
Values, attitudes,
Psychographic opinions, interests, Buyer behavior Loyalty to suppliers, usage
activities, and patterns, and order size
lifestyles
Usage rate and
patterns, price
Behavioral
sensitivity, brand
loyalty, and pursuit
of benefits
Aligning Marketing & Channel segmentation & customer service level
How marketing strategies will coup with all channel segments in alignment to mutual goal set of an
organization dealing prioritizing customer service level and satisfaction.
Example: Imtiaz exclusive planning and delivery schedule, bin Hashim service modalities and USC Depot
stocks movement. Ask students to make notes as per their understanding.
Marketing Flow in Channels
 Product Flow (refers to the actual physical movement of products from manufacturer to
all parties)
 Negotiation flow (represents the interplay of buying and selling functions associated
with transfer of title)
 Ownership flow (shows the movement of the title of products as it is passed from the
manufacturer to final consumer)
 Information flow (all parties participates in the exchange of information, this can be in
either way up or down)
 Promotion flow (refers to the persuasive communication in form of advertisement,
personal selling, sales promotion and publicity)
Efficiency Template
A document or chart/table used by management of companies for scoring different levels of
channel members to evaluate efficiency.
Bullwhip Effect
The bullwhip effect is a distribution channel phenomenon in which forecasts yield supply chain
inefficiencies. It refers to increasing swings in inventory in response to shifts in customer
demand as one moves further up the supply chain.
Occurrence of Bullwhip
The bullwhip effect on the supply chain occurs when changes in consumer demand causes
the companies in a supply chain to order more goods to meet the new demand.
Example. 44 kg tin of honey for OMG burger in YPL
Zero Based Channel
1. Meets target market segment’s demand for service outputs while…

2. Minimizing the cost of performing the necessary flows for those service output demands
 It’s all about maximizing profitability by maximizing customer satisfaction…key…

“KNOW THY CUSTOMER WELL”
 How?
Define target markets, understand each target market’s buyer behavior and end-user demands,
meet those requirements with maximum utility and minimum cost (more efficiently than
competitors)
 GAP ANALYSIS? - look for points of leverage…means by which you can increase satisfaction with
a lower incremental cost
(this might mean reducing one satisfaction measure that is high cost in return for satisfying more
significant factors that are lower cost in total)

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A marketing channel is the people, organizations, and activities necessary to transfer the ownership of

Who are Channel Members?

Experts involved in the process of getting products or services to the end-user.

Retailers – Organizations that sell products directly to final consumers.

Specialty Service Firms

Why Channels Exists

The marketing functions performed by manufacturers, wholesalers, retailers, and

(1) Behavior segmentation, Purchasing, consumption or usage behavior. (e.g. Needs-based,

(3) Demographic segmentation, Quantifiable population characteristics. (e.g. age, gender,

(5) Psychographic segmentation. Lifestyle, social or personality characteristics. (typically includes

Aligning Marketing & Channel segmentation & customer service level

Marketing Flow in Channels

Example. 44 kg tin of honey for OMG burger in YPL

Zero Based Channel

1. Meets target market segment’s demand for service outputs while…

 It’s all about maximizing profitability by maximizing customer satisfaction…key…

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