Marketing Channel Systems

Introduction

The last two decades have changed the way business is getting conducted. Some businesses are still using traditional channel systems but advent of the Internet has revolutionized distribution channels. Companies are changing business models to leverage Internet advantage.

With open proliferation of information, customer expectations are reaching new heights. Companies need to figure out the right channel mix with multi channels’ strategies. From a manager stand point marketing channel is defined as any external agencies, which facilitate distribution of products and services.

The marketing channel is one of the key drivers for strategies around the marketing mix, i.e. product, price, place and promotion.

Channel Flow and Structure

The channel flow is a flow which relates different agencies involved in the distribution of goods and products.

The channel structure is referred to as the combination of different channel members in achieving organization’s marketing mix strategy.

Channel Participants

The marketing channel consists of various players like manufacturers, producers, wholesalers and retailers. Manufacturers and producers develop their own marketing channel to reach the end user. However, not all manufacturers have the expertise in managing channel participants. Therefore, they need wholesalers and retailers for distribution of goods.

There are three types of wholesalers; merchant wholesalers, agents and producer’s branch offices. Merchant wholesalers usually have good capacity of storing and managing goods. In contrast, agent works as middlemen for producers and end users. Retailers are responsible for selling goods and products to end users.

Importance of Channel Participants

The major role of channel participants is to make the distribution and selling of goods and products efficient. Intermediaries provide manufactures opportunities which for them financially would not be feasible. Intermediaries provide greater market exposure, market intelligence, economies of scale and operational knowledge.

Managing Channel Conflict

Conflict among channel partners adversely affects the distribution of goods and products. It is important for the channel managers to understand the nature of conflict and come with solution, which strengthens the distribution network.

However, all issues in the channel cannot be considered as a conflict. The channel manager needs to assess the frequency of disagreement, level of disagreement and importance of issue.

The top reasons for an emergence of conflict among channel partners are as follows:

1. The first reason is the different business objectives of channel partners (producers, wholesalers and retailers).

2. The other reason is a narrow vision of each channel partner, i.e. they do not view channel on whole but only at their level.

Conflict between the channel partners can be resolved by improving communication among themselves and also with producer. Another way of solving conflict is by directing all channels to a single objective of creating customer delight.

Multi Channel Marketing System

Multi channel marketing system has become a prominent way through which goods and products are delivered to end users. The multi channel system enables the companies to deliver goods and products to end users as per their preference. The delivery of goods can be through store, website, mail order, etc.

Franchise

Another innovation in the marketing channel system is the franchise. Franchise enables brand recognition, standardization of operation structure, access to learning curve and less financial investment.

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