What is a Marketing Channel?
• Marketing channel (a.k.a.
distribution channel) network of organizations
that create time, place,
and possession utilities
for consumers
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Channel Structure
Three Dimensions
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Channel Structure
Length of marketing channel
1 level
2 level
Manufacturer Manufacturer
3 level
4 level
Manufacturer Manufacturer
Agent
Retailer
Consumer
Consumer
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Wholesaler
Wholesaler
Retailer
Retailer
Consumer
Consumer
Channel Structure
Intensity at various levels
Exclusive
Distribution
Selective
Distribution
Intensive
Distribution
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Channel Structure
Intensity at various levels
Exclusive Distribution
Practiced when a manufacturer restricts product
distribution to a single retailer in a particular market
or just a relatively few retailers
Products that are expensive, infrequently purchased,
are sought after by consumers (i.e. specialty goods),
or which require considerable after-sale servicing are
the most likely candidates for exclusive distribution
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Channel Structure
Intensity at various levels
Selective Distribution
Selectively distributed bands are available in
multiple retail outlets in a particular market
Shopping products, or those that consumers seek
out, are sold through selective distribution
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Channel Structure
Intensity at various levels
Intensive Distribution
Used when convenience products are sold
through virtually every available retail outlet in
a particular market, e.g. soft drinks, candy,
gum, cigarettes
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Channel Structure
Types of intermediaries
Functional
Middlemen
Merchant
Middlemen
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Channel Structure
Types of intermediaries
Do not take title to products; they
simply facilitate the exchange
process by performing buying
and/or selling functions.
Functional
Middlemen
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Channel Structure
Types of intermediaries
Take title to products and
resell them.
Merchant
Middlemen
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Channel Structure
• Determinants of channel structure
include:
– Distribution tasks
– Economics of distribution tasks
– Management's desire for
distribution control
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Channel Structure
• Distribution tasks
– Familial Relationship-style
• Concentration
• Equalization
• Dispersion
– Selection process-style
• Accumulating
• Selecting
• Sorting
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Channel Structure
• Distribution tasks
– Resolve discrepancies between
consumers and producers
• Quantity - buffer mass produced
goods
• Assortment - allow producers to focus
while providing customers selection
• Time - hold goods until ready
• Place - connect producers and
consumers
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Channel Structure
• Economics of distribution
tasks
– Specialization or division of
labor
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Channel Structure
• Economics of distribution tasks
– Transaction efficiency
Mfg. A
Mfg. B
Mfg. C
Without
intermediaries
1
2
3
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4
5
6
7
8
Channel Structure
• Economics of distribution tasks
– Transaction efficiency
Mfg. A
Mfg. B
Mfg. C
With intermediaries
Intermediary
1
2
3
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4
5
6
7
8
Channel Structure
• Management’s desire for control
– The shorter the channel structure
the higher the control
– Needed when a manufacturer must
protect product image, etc.
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