Marketing channels and intermediaries MARKETING CHANNEL MKT 362 MARKETING CHANNELS A marketing channel can be defined as a group of exchange relationships, which create customer value in acquiring, consuming and disposing of products and service s DISTRIBUTION CHANNELS Typical intermediaries involved in distribution include: Wholesaler: A merchant intermediary who sells chiefly to retailers, other merchants, or industrial, institutional, and commercial users mainly for resale or business use. The transactions are B2B (Business to Business). Wholesalers typically sell in large quantities. (Wholesalers, by definition, do not deal directly with the public). [9] Retailer: A merchant intermediary who sells direct to the public. There are many different types of retail outlet - from hypermarts and supermarkets to small, independent stores. The transactions in this case are B2C (Business to Customer ). DISTRIBUTION CHANNELS Agent: An intermediary who is authorized to act for a principal in order to facilitate exchange. Unlike merchant wholesalers and retailers, agents do not take title to goods, but simply put buyers and sellers together. Agents are typically paid via commissions by the principal. For example, travel agents are paid a commission of around 15% for each booking made with an airline or hotel operator. Jobber: A special type of wholesaler, typically one who operates on a small scale and sells only to retailers or institutions. For example, rack jobbers are small independent wholesalers who operate from a truck, supplying convenience stores with snack foods and drinks on a regular basis. THE FLOWS IN MARKETING CHANNELS 1. Product Flow The physical movement of products to all outlets of distribution Manufacturer Transportation Company Wholesalers Retailers Consumers THE FLOWS IN MARKETING CHANNELS 2. Negotiation Flow Negotiation of price of goods. This flow is a cost in terms of distribution. Manufacturer Wholesalers Retailers Consumer AND Consumer Retailers Wholesalers Manufacturer THE FLOWS IN MARKETING CHANNELS 3. Ownership Flow Wholesalers and Retailers take physical possession of goods. Could be a major risk as money is tied up in inventory. Manufacturer Wholesalers Retailers Consumer AND Consumer Retailers Wholesalers Manufacturer THE FLOWS IN MARKETING CHANNELS 4. Information Flow Relaying demand information, shipping and backorders Manufacturer Transportation Company Wholesalers Retailers consumer AND backwards and between every element and the manufacturer. THE FLOWS IN MARKETING CHANNELS 5. Promotion Flow • Above and below line promotion. A cost for channels. Manufacturer Advertising Agency Wholesalers Retailers Consumer And backwards CHANNEL CONFLICT Channel conflict can be explained as any dispute, difference or discord arising between two or more channel partners, where one partner’s activities or operations affect the business, sales, profitability, market share or similar goal accomplishment of the other channel partner. As we know that every manufacturing company needs to plan its distribution and marketing channel appropriately, to ensure market captivity and customer satisfaction along with growth and profitability. In the process of the constant supply of products in the market, several channel partners and intermediaries join the supply chain of the brand. Any clash and disturbance among these trading partners can be considered as a channel conflict. TYPES OF CHANNEL CONFLICT The channel conflict can be classified majorly into the following four categories depending upon its flow and the parties involved: VERTICAL LEVEL CONFLICT In the vertical level conflict, the channel partner belonging to a higher level enters into a dispute with the channel member of a lower level or vice - versa. For instance, channel conflict between dealers and retailers or wholesalers and retailers. HORIZONTAL LEVEL CONFLICT The conflict among the channel partners belonging to the same level, i.e., issues between two or more stockists or retailers of different territories, on the grounds of pricing or manufacturer’s biases, is termed as horizontal level conflict. INTER - TYPE CHANNEL CONFLICT These type of conflicts commonly arise in scrambled merchandising, where the large retailers go out of their way to enter a product line different from their usual product range, to challenge the small and concentrated retailers. MULTI - CHANNEL LEVEL CONFLICT When the manufacturer uses multiple channels for selling the products, it may face multi - channel level conflict where the channel partners involved in a particular distribution channel encounters an issue with the other channel. CONFLICT MAGNITUDE The level to which the conflict is considered critical or needs the attention of the channel leader, i.e., manufacturer, is known as its magnitude. The magnitude of conflict can be determined through the proper analysis of the change in market share and the company’s sales volume in a particular area or region. CAUSES OF CHANNEL CONFLICT CAUSES OF CHANNEL CONFLICT Role Ambiguity : The uncertain act of an intermediary in a multi - channel arrangement may lead to disturbance in the channel of distribution and cause conflict among the intermediaries. Incompatible Goals : When the manufacturer and the intermediaries do not share the same objectives, both work in different directions to meet their ends, this results in channel conflict.