Marketing channels

Question 1

What is a marketing channel?

Answer 1

A set of interdependent organizations that help to make a product or service available for use or consumption by the consumer or business user

Question 2

Define the concept of marketing logistics

Answer 2

• Planning, implementing and controlling the physical flow of goods, services and related information from points of origin to points of consumption to meet customer requirements at a profit.
• Logistics involves the entire supply chain management – outbound, inbound and reverse logistics.
• Provide a targeted level of customer service at the least cost.
• Major logistics functions:
• Warehousing
• Inventory management
• Transportation
• Integrated logistics management: Logistics concept that emphasises teamwork – inside the company and between channel members.
• Third-party logistics (3PL) providers: An independent logistics provider that perform as any or all of the functions required in getting its client’s product to market.

Question 3

Name and explain the three types of distribution, which can be used for marketing logistics

Answer 3

1. Direct-to-consumer sales: The first channel is a model where the producer sells its product directly to the end consumer. Amazon, which uses its own platform to sell Kindles to its customers, is an example of a direct model. This is the shortest distribution channel possible, cutting out both the wholesaler and the retailer.
2. Retailers: The second channel cuts out the wholesaler—where the producer sells directly to a retailer who sells the product to the end consumer. This means the second channel contains only one intermediary. Dell, for example, is large enough to sell its products directly to reputable retailers such as Best Buy.
3. Wholesalers: Is the longest because it includes all four: producer, wholesaler, retailer, and consumer. The wine and adult beverage industry is a perfect example of this long distribution channel. In this industry—thanks to laws born out of prohibition—a winery cannot sell directly to a retailer. It operates in the three-tier system, meaning the law requires the winery to first sell its product to a wholesaler who then sells to a retailer. The retailer then sells the product to the end consumer.

Question 4

Channel members activities, examples of functions

Answer 4

• Physical distribution
• Financing,
• Risk-taking
• Information gathering and distributing,
• Promotion of market offerings,
• Contacting prospective buyers,
• Matching market offerings to buyers’ needs,
• Negotiating price and other terms

Question 5

Explain channel design

Answer 5

• Channel design decisions require analysis of customer needs, channel objectives, and evaluation of channel alternatives. Integration requires determining responsibility of channel member responsibilities.
• Multichannel marketing channels: setting up two or more marketing channels to reach more customer segments.
• Intensive distribution: stocking the product in as many outlets as possible.
• Exclusive distribution: Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.
• Selective distribution: The use of more than one, but fewer than all of the intermediaries who are willing to carry the company’s products.

Question 6

Explain omni channel

Answer 6

A marketing channel’s approach that integrates the
buyer experiences from various marketing channels
into a consistent whole

Question 7

Designing international marketing channels

Answer 7

• Exporting: direct, indirect
• Joint venturing: licensing, contract manufacturing, management contracting, joint ownership
• Direct investment: assembly facilities, manufacturing facilities

Question 8

Marketing channel management

Answer 8

• Selecting, managing and motivating channel members, and
evaluating their performance over time.
• Market forces and attractiveness of the producer and the
marketing channels.
• Performance checked against standards, eg. sales quotas, delivery time, treatment of damaged goods, customer service.
• Sensitivity
• Legal considerations: Exclusive and selective distribution arrangements are subject to substantial regulation.

Question 9

Explain retailing

Answer 9

The last step in the marketing channel that includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use.

Major store retailer types:
• Speciality stores – Narrow product line with deep assortment
• Department stores – Several product lines
• Supermarkets – Grocery and household products, low-cost, low-margin, high-
volume.
• Convenience stores - Small stores near residential areas, long hours, limited line
of products. Higher prices.
• Discount stores – Standard merchandise, lower prices with lower margins and
higher volumes
• Off-price retailers – Merchandise bought at less-than-regular wholesale prices and sold at less than retail.
• Mystery shopper: Acts as a normal customer and measures service quality.

Question 10

Explain wholesaling

Answer 10

All activities involved in selling goods and services to those buying for resale or 
business use. 
Wholesalers add value by performing one or more of following channel functions:
• Selling and promoting
• Buying and assortment building
• Bulk breaking
• Warehousing
• Transportation
• Financing
• Risk bearing
• Market information
• Management services and advice