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Module 3 - Channel Levels

This document discusses channel levels, marketing channel systems, and the importance of distribution. It defines zero, one, and two level channels based on the number of intermediaries between producer and consumer. It also describes vertical, horizontal, and multi-channel systems. Vertical systems integrate production and distribution under single or shared ownership. Horizontal systems involve unrelated companies pooling resources. Multi-channel systems use different channels to reach various market segments. Finally, it notes that distribution affects sales, profits, and customer satisfaction, making it a crucial part of effective marketing.

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41 views

Module 3 - Channel Levels

This document discusses channel levels, marketing channel systems, and the importance of distribution. It defines zero, one, and two level channels based on the number of intermediaries between producer and consumer. It also describes vertical, horizontal, and multi-channel systems. Vertical systems integrate production and distribution under single or shared ownership. Horizontal systems involve unrelated companies pooling resources. Multi-channel systems use different channels to reach various market segments. Finally, it notes that distribution affects sales, profits, and customer satisfaction, making it a crucial part of effective marketing.

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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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CHANNEL LEVELS

COMPILED BY: HAROLD MAGALLANES


1. Channel Levels
2. Marketing Channel System
3. IMPORTANCE OF DISTRIBUTION
Channel Levels
If the product or service is provided to the end user
ZERO LEVEL directly by the company ( Service Channels )

ONE LEVEL Consist of one intermediaries

TWO LEVEL Consist of two intermediaries


Flow of transaction
PRODUCER

WHOLESALER

RETAILER RETAILER

CONSUMER
MARKETING CHANNEL SYSTEM

• VERTICAL MARKETING SYSTEM


• HORIZONTAL MARKETING SYSTEM
• MULTI CHANNEL SYSTEM
VERTICAL MARKETING SYSTEM
 Various parties like producers, wholesalers and retailers act
as a unified system to avoid conflicts
 Improves operating efficiency and marketing
effectiveness

3 TYPES OF VERTICAL MARKETING SYSTEM


1. Corporate
2. Administered
3. Contractual
CORPORATE VMS
 Combines successive stages of production and
distribution under single ownership
 One member of the distribution channels owns the
other members.

EXAMPLE:
Supplier of food items could be also their own
supplying firms - Jollibee
ADMINISTERED VMS

 Co – ordinates distribution activities


 Gain market power by dominating a
channel

EXAMPLE
Coca-Cola, PEPSI Co., Gillette
CONTRACTUAL VMS
 Independent producers, wholesalers and retailers
operate on a contract
 Could take the forms of:
• Wholesaler sponsored voluntary chains
• Retailer co-operatives
• Manufacturer sponsored retail or wholesale franchise
• Franchise organizations
• Service firm sponsored retail franchise
ADVANTAGES OF VMS

1. Company can control all of the


elements of producing and selling a
product.
2. Anticipate problem
3. Increase efficiency
HORIZONTAL MARKETING SYSTEM

 Twoor more unrelated companies join


together to pool resources and exploit an
emerging market opportunity
• In – store banking in hotels, big stores
• Retail outlets in petrol bunks
 Vertical marketing system refers to a
marketing system that aims to attract
and reach businesses operating in
the same industry and seeks to
appeal to a specific demographic.

 On the other hand, horizontal


marketing system refers to a
marketing system whereby a business
which is at the same level join
together to gain economies of scale
and seeks to appeal to a wide
demographic that is not specific.
MULTI – CHANNEL DISTRIBUTION

Company uses different channels to


reach same or different market
segments
Most FMCG companies have separate
networks for retail markets and
institution
BENEFITS OF MULTI-CHANNEL

Allows more target market segments to


be reached
Customers increasingly expect products
to be available via more than one
channel
Enables higher revenues
EXPECTATION FROM CHANNEL
 Variety and Assortment at one location
 Bulk Breaking
 Close to customer location
 Speed of delivery
 Additional Service
 Support
 Installation
 After Sales
 Financial
EVALUATING THE MAJOR
CHANNEL ALTERNATIVES

Economic Criteria
Control Criteria
Adaptive Criteria
1. Economic Criteria
➢ The first step is to determine whether a company
sales force or a sales agency will produce more sales.
➢ The next step is to estimate the costs of selling
different volumes through each channel.
➢ The final step is comparing sales & costs.

NOTE: Each channel will produce a different level of


sales & costs.
2. Control Criteria
The agents may concentrate on other
customers’ products or they may lack
the skills to handle our products
3. Adaptive Criteria
 The
channel members must make some degree of
commitment to each other for a Specified period of time.
NOTE: Without distribution even the best product or service
fails.
According to Jean-Jacques Lambin, marketer has two roles:
(1) To organize exchange through distribution and
(2) To organize communication.
IMPORTANCE OF DISTRIBUTION
1. Firstly, it affects sales - if it’s not available it can’t be sold. Most customers
won’t wait.

2. Secondly, distribution affects profits and competitiveness. This affects


cost competitiveness as well as profits since margins are squeezed by
distribution costs.

3. Thirdly, delivery is seen as part of the product influencing customer


satisfaction. Distribution and its associated customer service play a big
part in relationship marketing.
END OF THE PRESENTATION
THANK YOU FOR LISTENING
AND GOD BLESS

ANY QUESTION OR
CONCERN?

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