What Are Marketing Channels?
Marketing channels are a system that enables the distribution of goods from the producer to the consumer through multiple levels known as intermediaries. It is also known as the distribution channel. Every product is different, and so are the distribution channels.
The marketing channel is “an organizational system of a series of interdependent institutions and organizations dealing with the delivery of things of value, such as ideas, products, and services, from birth, extraction or production points to their end-use points.”
A marketing channel consists of the people, organizations, and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. Marketing channels that provide the flow of products from the producer to the consumer are also known as distribution channels. For example, according to one such definition, the marketing channel is the path followed in the flow of products from production points to end-use points.
Marketing channels help organizations expand their reach and revenue. However, each marketing channel will offer a different combination of scope and performance, so these can be used in combination.
Marketing; It is a set of activities that includes the creation, presentation, and change of a valuable product/service or idea in order to meet the needs and demands of society. According to this definition, marketing activities include not only the promotion or sales of the product but also product development, promotion, pricing, and distribution.
Distribution, as the last stage of marketing, is a vital process for all previous processes to be successful. Efficient and fast distribution is vital for many products. For example, there is a risk of deterioration of the products to be consumed daily during the distribution phase. If seasonal products are not delivered to the store shelves at the right time, there is no chance of selling. Products damaged during the distribution phase will not be preferred by customers. Many more such examples allow us to easily see the true meaning and importance of the distribution process.
Marketing channels include traditional distribution models involving manufacturers, wholesalers, and retailers or their own marketing units. For example, the Avon company avoids wholesalers and retailers by using its own warehouses and its own sales staff to sell to consumers. Examples of marketing channels include:
- Directly to distributors
- Sales team
- Value-added reseller
- Retail agency
- Manufacturer representative
- Direct Internet
- Direct catalogue
In practice, companies often use a mix of marketing channels, such as internet sales and teams in the field.
Each marketing channel includes at least one person or organization serving as an intermediary. Each of these intermediaries performs a function, provides a value and expects some economic return. Values provided by these brokers include:
- Collecting and sharing marketing information about customers and competitors
- Improving marketing communications
- Bargain price and other trading terms
- Storage and transportation of products
- Transforming ownership titles from one person or organization to another
- Taking on the financial risks of the channel such as bad debt
Types of Marketing Channels
The realization of the sale to the customer can take place in different ways, through a retail store, a website, a mail-order or e-mail, a product is presented to the customer, and a price is offered to the customer, the consumer who is satisfied with the product and the price, cash, credit card or other digital payment methods can buy.
There are basically four types of marketing channels:
a) Direct selling
b) Selling through intermediaries
c) Dual distribution
d) Reverse channels
a) Direct selling (Direct selling)
Direct selling is a sales transaction made by visiting the customer’s home or office address. The demand for such sales is decreasing day by day due to reasons such as the development of the internet and digital sales channels and the increasing security concerns in cities. Direct selling is different from direct marketing in that it is about individual sales representatives who reach and deal with customers directly, whereas direct marketing is about business organizations seeking relationships with their customers without going through an agent/consultant or retail outlet.
b) Sales with intermediaries
It is a form of sales in which intermediaries such as wholesalers and retailers are used to offer a product to a customer. The channels used in this type of marketing activity are called indirect channels.
The most indirect channel you can use can be listed as follows:
(Manufacturer / producer -> representative -> wholesaler -> retailer -> consumer).
This method is used when there are a large number of small manufacturers, and a large number of small retailers and a representative are needed to help coordinate a large supply of the product.
c) Dual Distribution
Binary distribution describes a wide variety of marketing arrangements in which manufacturers or wholesalers use multiple channels simultaneously to reach the end-user. The manufacturer may sell directly to end-users or to other companies for resale. Using two or more channels to diversify the same target market can sometimes lead to channel conflict.
An example of dual distribution is seen in the business format where franchisors own and operate some units simultaneously while licensing the operation of some units to franchisees. In other words, while the franchisee operates some branches himself, some branches are operated by franchisers with the classical franchise method.
d) Reverse Channels
If you’ve read the other three channels, you may have noticed that they have one thing in common: streaming. Each flows from the manufacturer to the intermediaries and finally to the consumer. However, technology made it possible to use another streaming channel. This is a reverse flow chart from the consumer to the intermediary and finally to the manufacturer. This sales channel is preferred if it is possible to earn money from the resale or recycling of a product.
Marketing Channel Selection
Marketing channel selection is one of the most critical ways an organization can do it, and it affects all other forms of the marketing mix. Once a company decides on a distribution model, it can be challenging to change. Channel selection is based on a variety of factors related to the company’s product and the way it is used; such as the size, perishability, and whether the product should be demonstrated prior to purchase. Customer requests and preferences also determine the marketing channel. For example, companies that sell rare or high-value products may limit the number of distribution points. In contrast, cheap product manufacturers – such as potato chips – will need many distribution points to make a profit.
Marketing channels are made up of different types of institutions that facilitate transactions and physical shopping.
There are three main entities involved in a distribution channel:
a) Producer Company: This could include a manufacturer in any industry, a craftsman, a farmer, or any other type of producer.
b) User Requesting Product: This may include an individual person, a business, an institution, a government agency, or a household.
c) Brokerage Companies: This could be someone or a group of people at the retail or wholesale level.
Functions of the Distribution Channel
A distribution channel performs three primary and essential functions:
a) Transaction functions. This includes buying and selling as well as taking a product risk.
b) Logistic functions. This refers to the assembly, storage, grading, and shipping of a product.
c) Facilitating functions. This includes services offered after purchases are made, financing, dissemination of information, coordination of channels, or leadership.
What is Omni-Channel (Multi-Channel ) Marketing?
We can define multi-channel marketing as a whole of communication and marketing strategies, including digital and offline applications. Its aim is to produce solutions that can be integrated with each other according to the location of the consumer by using different marketing techniques on a market basis. Marketing and communication activities are done not according to the market, but according to the consumer’s experience, that is, multi-channel marketing is consumer-oriented. Omni-Channel marketing also means targeting multiple people through multiple marketing channels.
Marketing Channels – Distribution Points
Distribution types include:
- Intensive distribution – products are sold in most retail outlets.
- Selective distribution – the manufacturer relies on several middlemen, such as specialist retailers, to transport its products.
- Exclusive distribution – the manufacturer relies on very few retailers (partners with luxury brands)
Marketers need to help their organizations choose the most appropriate marketing channel, train and motivate agents, and monitor the channel’s performance. Over time, they may need to change some of their channels or choose a new mix. They must also work to prevent “channel conflict” that occurs when a broker makes moves that threaten another part of the channel, such as a retailer.
Marketing Distribution Channels: Sample “Nestle Chocolates”
Nestle is one of Germany’s most popular chocolate brands. We can easily buy Nestle products from any of the markets in many countries of the world. But do you know how it got all over the country, even towns, and villages?
All this is possible, thanks to marketing channels. Nestle does not have factories in all countries and cities, which means it has limited production units. Therefore, it should establish the supply chain well from production facilities to sales points. Thanks to a well-designed marketing channel, products reach warehouses in different countries, in different cities. From these warehouses, it is sent to the contracted or personally owned agencies of the company, and from there it reaches distributors in different cities.
Distributors deliver the product to wholesalers and wholesalers to retail stores where the products are offered to customers.
Retail Marketing Channels
Marketing channels that provide the flow of products from the producer to the consumer are also known as distribution channels. This is because one of the core functions of marketing channels is distribution. The first definitions of Retail Marketing channels also focused on physical distribution. For example, according to one such definition, the marketing channel is the path followed in the flow of products from production points to end-use points. Retail Marketing channels are a means of reaching a store’s market.
The Retail Marketing channel is a tool where products move, and marketing functions are fulfilled, and time, space, and ownership benefits are created through this tool. The concept of utility expresses the ability of a product to satisfy human desires.
We can talk about four types of utility concepts.
– Shape benefit
– Time benefit
– Space benefit
– It is an ownership benefit.
A series of flows occurs with the creation of a distribution channel. These flows create a link that connects channel members and other institutions involved in the distribution of products and services.
The most important of these flows in terms of Retail Marketing channel management are:
– Physical flow
– Flow of ownership
– Flow of money (payment relationships)
– Information flow
– Promotion (sales efforts) is the flow.
Functions of Marketing Channels
Marketing channels initially target the availability of products or services to potential customers. This channel is chosen based on the factors mentioned above.
Agents are individuals or organizations that act as a link between manufacturers and customers. They perform multiple functions to facilitate both companies and customers.
Sorting: Brokers purchase goods from multiple producers. It groups products according to various characteristics such as quality, feature, size.
Spooling: Marketing channels ensure the steady supply and circulation of goods in the market, as the intermediaries involved in the process are responsible for maintaining the required stock in abundance.
Allocation: While the goods are produced in bulk, customers prefer to buy a much less quantity of products. Deliveries are made in small packages according to the customer’s needs.
Diversification: As intermediaries purchase goods from manufacturers or suppliers in different regions and make them available to customers, customers can buy a variety of products from a single intermediary.
Product Promotion: Agents involved in the distribution channel, sometimes directly or indirectly display the sale of a particular product as a special display, loyalty programs, additional discounts, sales organization, etc. encourages through.
Negotiation: The intermediary firm is the person who negotiates with both the manufacturer and the consumer for various features such as the price, rate, quality, after-sales service, and warranty of the product.
Risk Taking: Agents, i.e. wholesalers and retailers, expiration, breakage, deterioration, damage, etc. It has to bear the risks associated with the products. These risks arise even during transportation and storage.
The Role and Importance of Marketing Channels
Marketing channels offer sales expertise:
1) The sales representative plays an important role in all marketing processes.
They assist the process of creating new products on the market. They specialize in word-of-mouth sales and promotion of products. They guarantee pre-sale and after-sale services to consumers.
2) Since these channels are in direct and regular contact with consumers, they both sell and provide accurate and valuable feedback for producers.
3) Distribution channels increase distribution efficiency: Intermediate channels facilitate the sales process as they are in direct contact with the customer. They have narrowed the gap between producers and consumers both ecologically and efficiently. These intermediaries reduce the number of processes involved in making products offered from manufacturers to consumers.
For example, there are four manufacturers aiming to sell their products to four customers. If there is no distribution channel, sixteen transactions will be involved. However, if producers use distribution channels, the number of such transactions will drop to eight, thus reducing shipping costs and efforts.
4) Marketing channels offer a variety of products demanded by consumers. Just as manufacturers have expertise in manufacturing, intermediaries have their own expertise. Wholesalers specialize in moving and transferring products from various manufacturers to a greater number of retailers. Similarly, retailers have expertise in selling a wider range of goods to a greater number of end customers.
5) Wholesalers and retailers, allow consumers to buy the products they need from a store close to their home, instead of ordering from the factory.
6) Marketing channels help commercialize products: Agents that speed up product shopping from retail shelves to customer baskets are included in the marketing channel.
7) Marketing channels help execute the price mechanism between the firm and the end customers: Intermediaries assist in reaching an acceptable price level for both producers and consumers.
8) Distribution channels help keep stock: Brokers perform a variety of other functions, such as financing products, storing products, handling risks, and providing the required warehouse space.