B203A – Q. Week 11 – Marketing – Chapter 11 – Chapter 12
Q1) Define the channel of distribution or the marketing channel, and then discuss with examples the roles of the distribution members.
A channel of distribution (sometimes called a marketing channel) is a group of individuals and organizations that direct the flow of products from producers to customers.
-Providing customer satisfaction should be the driving force behind all marketing channel activities.
Buyers’ needs and behavior are important concerns of channel members.
Channels of distribution make products available at the right time, in the right place and in the right quantity by providing such product-enhancing functions as transport and storage.
The challenges of channel management for marketers are to balance between optimizing customer satisfaction and making an adequate return on investment.
Marketing intermediary: A middleman who link producer to other middlemen or to those who ultimately use the products.
1- Merchants: Intermediaries who take title to products and resell them.
Examples: retailers and wholesalers.
2- Functional middlemen: Intermediaries who don ’t take title to products.
Example: Agents and brokers.
Q2) Explain in some detail with examples the channels for consumer products or services.
The various marketing channels can be classified generally as channels for consumer products and services, or channels for industrial, business-tobusiness products and services.
Figure 11.3 illustrates several channels used in the distribution of consumer products or services. Besides the channels listed, a manufacturer may use sales branches or sales offices.

Channel A describes the direct movement of goods from producer to consumers.
This channel is the simplest; it is not necessarily the cheapest or the most efficient method of distribution.
E-commerce – the use of the internet for marketing communications, selling and purchasing – has in recent years led to a growth in direct marketing for a variety of products and services.
Channel B which moves goods from producer to retailers and then to consumers, is often used by large retailers that can buy in quantity from a manufacturer (i.e. cars, clothes etc.).
Channel C a long-standing distribution channel, especially for consumer products, it takes goods from producer to wholesalers, then to retailers and finally to consumers.
This option is very practical for a producer who sells to hundred thousands of consumers through thousands of retailers (i.e. Coca Cola – tobacco).
Channel D through which goods pass from producer to agents to wholesalers to retailer, and only then to consumers.
It is frequently used for products intended from mass distribution, such as processed food.
Figure 11.3

Q3) Explain the benefits of a long distribution channel.
A long channel may be the most efficient distribution channel for certain consumer goods.
When several intermediaries are available to perform specialized functions, costs may be lower than if one channel member is responsible for all the functions in all territories.
Q4) Marketing channels create four types of utility. Discuss the statement.
Marketing channels create four types of utility:
1- Time utility is having products available when the customer wants them.
2- Place utility is created by making products available in locations where customers with to purchase the.
3- Possession utility is created by giving the customer access to the product to use or to store for future use. It can occur through ownership or through arrangement such as lease or rent.
5- Channel members sometimes create form utility by assembling, preparing or otherwise refining the product to suit individual customer needs.
Q5) Price is expressed differently in different exchanges. Discuss in some details with examples the various terms used to describe the price.
Price is expressed differently in different exchanges.
-Insurance companies charge a premium to holidaymakers requiring protection against the cost of illness or injury.
-A police officer who stops a motorist for speeding writes a ticket that requires a fine to be paid.
-In London, a congestion charge is levied on motorists travelling in central areas.
-An accountant charges a fee, and a fare is charged for travelling by plane, railway or taxi.
-A toll is sometimes charged for the use of motorway bridges.
-Rent is paid for the use of equipment or for a flat.
-An estate agent receives a commission on the sale of a property.
-A deposit is made to reserve merchandise.
-A tip helps pay waitresses for their services.
-Interest is charged for loans, and taxes are paid for government services.
The value of many products is called price.

Q6) Differentiate between price and non-price competition. Support your answer with a proper example.
A product offering can compete on either a price or non-price basis.
The choice will affect not only pricing decisions and activities but also those associated with other marketing mix decision variables.
1-Price Competition
- Price competition is a policy whereby a marketer emphasizes price as an issue, and matches or beats the prices of competitors.
To compete effectively on a price basis, a company should be the low-cost producer of the product.
- If all companies producing goods in an industry charge the same, the company with the lowest costs is the most profitable.
- Companies that stress low price as a key element in the marketing mix tend to produce standardized products.
- Sellers using this approach may be prepared and able to change prices frequently, particularly in response to competitors altering their prices.
- Price competition gives marketer flexibility.
- Prices can be altered to account for changes in the company’s costs or in demand for the product, or when competitors cut prices.
- A major drawback is that competitors may also have the flexibility to adjust their prices to match or beat another company’s price cuts. If so, a price war may result.
- If a user of price competition is forced to raise prices, competing companies may decide not to do the same.
- EDLP (everyday low pricing) is a form of price competition, funded by reducing promotions budgets so that retail prices can be cut while retailers'’ margins remain static.
2- Non-price Competition
- Non-price competition is a policy in which a seller elects not to focus on price but instead emphasize other factors such as distinctive product features, service, product quality, promotion, or packaging to distinguish the product from competing brands.
- Organizations that use non-price competition aim to increase unit sales in other ways.

- A company can use non-price competition to build customer loyalty towards its brand, if so the customer may not easily be lured away by competing offers. Indeed, such customers might become confused or irritated if price cuts are offered.
Non-price competition is workable under the right conditions. A company must be able to distinguish its brand.
- The brand’s distinguishing features should be difficult, it not impossible, for a competitor to copy.
- The organization must promote the distinguishing characteristics of the brand extensively in order to establish its superiority and to set it apart from competitors in the minds of buyers.
- A marketer attempting to compete on a non-price basis must still consider competitors’ prices.
Q7) Discuss in detail the various basis for pricing used at organizations. Support your answer with examples.
The three major dimensions on which prices can be based are cost, demand and competition.
1- Using cost based pricing, a company determines prices by adding a monetary amount or percentage to the cost of the product (mark-up/cost plus pricing).
2- Demand based pricing is based on the level of demand for a product and requires marketers to estimate the amounts of a product that buyers will demand at different prices, particularly if the company wish to use price differentiation for a specific product. High price when demand is strong and low price when demand is weak.
3- In the case of competition based pricing, costs and revenues are secondary to competitors’ prices. It may be combined to arrive at price levels necessary to generate a profit.
The increasingly popular marketing oriented pricing involves a company taking account of a wide range of factors including marketing strategy, competition, value to the customer, price-quality relationships, explicability, costs, product line pricing, negotiating margins, political factors and the effect on distributors/retailors.

Q8) Define the pricing strategy, and then explain its main types.
Support your answer with examples.
Pricing strategy is an approach to influencing and determining pricing decisions and designed to achieve pricing and marketing objectives.
Using differential pricing involves charging different prices for the same quality or quantity of product (i.e. negotiated pricing, secondary market discounting, periodic discounting and random discounting ).
Two strategies used in new product pricing are price skimming and penetration pricing.
Price skimming a company charges the highest price that buyers who most desire the product will pay.
Penetration pricing sets a price below the prices of competing brands in order to penetrate the market and produce a larger unit sales volume.
Product line pricing establishes and adjusts the prices of multiple products within a product line.
This strategy includes captive (limited) pricing, in which the marketer prices the basic product in a product line low but prices related items at a higher level; premium pricing, in which prices on higher-quality or more versatile products are set higher than those on other models in the product line.
Psychological pricing encourages purchases that are based on emotional rather than rational responses. Pricing a product in a moderate level and position it next to a more expensive model or brand.
Bundle pricing is packaging together two or more complementary products that are sold for a single price.
Promotional pricing is a pricing approach in which pricing is related to the short term promotion of a particular product.

INFO EXTRA) Functions of Marketing Channels:
1- Creating Utility
1- Time utility is having products available when the customer wants them.
2- Place utility is created by making products available in locations where customers with to purchase the.
3- Possession utility is created by giving the customer access to the product to use or to store for future use. It can occur through ownership or through arrangement such as lease or rent.
5- Channel members sometimes create form utility by assembling, preparing or otherwise refining the product to suit individual customer needs.
2- Facilitating Exchange Efficiencies
Marketing intermediaries can reduce the costs of exchanges by performing certain services or functions efficiently. (see figure 11.1 P. 327).
Intermediaries are specialists in facilitating exchanges. They provide valuable assistance because of their access to and control over important resources used in the proper functioning of marketing channels.
3- Alleviating Discrepancies
The functions performed within marketing channels help to overcome two major distribution problems:
Discrepancies in quantity (occurs when the quantity of products the company produce efficiently is more than the average customer wants).
Discrepancies in assortment (occurs when consumers want a broad assortment, but an individual manufacturer produces a narrow assortment).
Assortment is a combination of products put together to provide customer benefits.
Quantity and assortment discrepancies are resolved through the sorting activities of channel members.
Sorting activities are functions that allow channel members to divide roles and to separate tasks; they include sorting out, accumulation, allocation and assorting of products.
4- Standardizing Transactions
Marketing channels helps to standardize the transactions associated with numerous products.
In many purchase situations, the price is not negotiable; it is predetermined.
There may be some variation in units of measurements, package sizes, delivery schedules and location of the exchange, marketing channel members tend to limit customers; options with respect to these types of issue.

5- Providing Customer Service
Channel members participate in providing customer service.
Retailers of durable goods are expected to provide in-store advice and demonstrations, technical know-how, delivery, installation, repair services, parts and instruction or training, in order to provide end-user satisfaction.
In mature markets with relatively little product differentiation between rival brands (i.e. car exhausts) and in newly emerging markets with innovative products and inexperienced consumers, it is often the customer service provided through the distribution channel that provides marketers with an edge over their competitors.
Q Extra) Sorting Activities
Sorting out is the first step in developing an assortment, is separating conglomerates of heterogeneous products into relatively uniform, homogeneous groups based on product characteristics such as size, shape, weight or color.
Example: a grape crop, must be sorted into grapes suitable for making juice, those best for turning into wine, and to be sole by food retailers.
Accumulation is the development of a bank, or inventory, of homogeneous products with similar production or demand requirements.
Example: farmers who grow relatively small quantities of grapes, transport their sorted grapes to central collection points, where they are accumulated in large lots for movement into the next level of the channel.
Accumulation lets producers continually use up stocks and replenish them, thus minimize losses from interruptions in the supply of materials.
Allocation is the breaking down of large homogeneous inventories into smaller lots. This process which addresses discrepancies in quantity enables wholesalers to buy efficiently in lorry loads or railway car loads, and apportion products by cases to other members.
Example: a food wholesaler serves as a depot, allocating products according to market demand. The wholesaler may divide a single lorry load of Del Monte canned tomatoes among several retail food stores.
Assorting is the process of combining products into collections or assortments that buyers want to have available in one place.
Assorting eliminated discrepancies in assortment by grouping products in ways that satisfy buyers.
Example: the same food wholesaler that supplies supermarkets with Del
Monte tomato products may also buy canned goods from competing food processors so that the grocery store can choose from a wide assortment of canned fruits and vegetables.