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Channel Management Reading Summary

The document discusses channel management and distribution channels. There are direct and indirect channels, with indirect involving multiple intermediaries like wholesalers and distributors between the manufacturer and consumer. Channel functions include selling, inventory management, distribution, after-sales service and customizations. The choices around channel structure and terms can provide opportunities and constraints. Managing relationships between suppliers and resellers can be challenging due to conflicts over profits and competing brands. Suppliers can build trust and motivate resellers to stock their products. Using more intermediaries reduces supplier control but provides benefits like faster delivery and higher stock levels.

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62 views3 pages

Channel Management Reading Summary

The document discusses channel management and distribution channels. There are direct and indirect channels, with indirect involving multiple intermediaries like wholesalers and distributors between the manufacturer and consumer. Channel functions include selling, inventory management, distribution, after-sales service and customizations. The choices around channel structure and terms can provide opportunities and constraints. Managing relationships between suppliers and resellers can be challenging due to conflicts over profits and competing brands. Suppliers can build trust and motivate resellers to stock their products. Using more intermediaries reduces supplier control but provides benefits like faster delivery and higher stock levels.

Uploaded by

pratyakshmalvi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Reading Summary

“Channel Management”
Summary: Channel Management
Channels are the way from which a product reached to the customer or end-user.
There are two types of channels: Direct and Indirect.
Direct Channel: Product is directly sold to the end-users without the intervention of a third
party like wholesaler or distributor.
Indirect Channel: Product follows
Manufacturer  Wholesaler  Distributor  Retailer  Consumer
Most products are sold with a combination of direct and indirect channels of distribution.

Components and Choices.


Typical functions of a channel.
1. Selling or creating demand.
2. Managing inventory.
3. Inventory distribution.
4. After-sales service.
5. Product customizations or maintenance.
In a channel, specific components perform functions like:
- Salesforce task is to sell or create demand by persuading the decision-maker or
decision influencer, training distributors in the channel, keeping a check on inventory
levels, identifying or implementing required promotions and nourish personal
relationships with personnel in the channel.
- A distributor plays the role of cost-transfer in the chain.
- Agents work on the commission model and sell the products either to the distributors
or end-users. Agents, also known as manufactures’ rep (MR) is a variable cost
channel for a supplier and have no title or ownership to the limited products they
carry, which makes them riskier than distributors. Brokers function similar to MR, but
unlike agents, they represent multiple producers and function as a deal maker.
The choices like channel structure, reselling type, market coverage, and term & condition of
offers in channel management possess dynamic opportunities and constraints.

Channel Relations
Managing relations between suppliers and resellers often are affected by factors like a tug-of-
war for the larger share of profit and alliances with the competing manufacturers or brands
(resellers carry similar products of multiple brands), which in turn can hamper the marketing
strategies designed to maximize sales. A supplier can also act as a marketing partner with
their intermediaries by building trust and motivate to stock their products.

Control versus Financial Resources


As the number of intermediaries (resources for getting the supplier’s products to the
consumer market) involved increases, the less control a supplier can exercise over the
complex channel flow and loses control over the way the product is presented to the
customers. This increase in the intermediaries has some plus points like fast delivery, higher
stocking levels, transhipments, but with these, the supplier’s power to influence the price to
consumers also decreases.
To reduce the length & breadth of the channel and to gain control of the channel flow, a
supplier must take on many functions by itself. That, in turn, can cause a supplier to invest
more financial resources.
So, there is an inverse relationship between control and resources in the distribution channel
management. If a business unit has necessary financial resources, then performing the
channel functions by itself is possible, if desired by the marketing management.
The need for control over the channel is also highly dependent on the type of product and
business unit’s financial resources. If both the need for control and financial resources are
low, then opting for a multi-tier distribution channel is optimum.
Besides the resources and control required, there are some other factors also in play like,
cost-efficiency offered by intermediaries, intermediaries are required to supplement the
scares resources like warehousing, field selling, service & maintenance, and the extent of
quality control needed.

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