Managing Marketing

Channels
SUBJECT : Distribution Management
PROFESSOR: Mr. Jimmy A. Labaguez, CHRA, MBA
DATE : March 29, 2024
 Learning Objectives
1.Identify common causes of channel conflict and propose
strategies to resolve them effectively.
2.Explain the importance of a Channel Information System (CIS)
in managing marketing channels.
3.Describe the key elements of a Channel Information System and
their role in improving channel efficiency.
4. Analyze how effective channel management contributes to
overall business success.
Wholesaling
Wholesaling can be defined as all those
activities performed by persons or
establishments which sell to retailers
and other merchants, and /or to
industrial, institutional, and commercial
users, but do not sell in large amounts to
final consumers.
 Roles of wholesaler
a) Ware housing-A wholesale warehouse is a stocks
reservoir from which retailers can draw the required
merchandise, considerably reducing the need for their
own large inventories to maintain adequate supply.
Manufacturers can hold stocks or arrange for storage
near retailers, but this is costlier than the
specialization of a wholesaler’s operation.

b) Financing-The wholesaler provides finance to

producers and manufacturers by sending money in
advance to them. He also sells goods to the retailer on
credit. Thus, at both ends the wholesaler acts as a
financier.
Roles of wholesaler
c) Provide Information- This function of wholesalers is
often neglected. Companies spend fortunes in getting
marketing information by conducting surveys and similar
activities. Much of the information they require is easily
available with the wholesaler, since he is in direct contact
with the market. Many companies are able to get
customers insights simply by talking to their wholesalers.
Wholesalers are able to send to the company various
information such as: • Market demand conditions in
different seasons • Problems encountered in the market by
sales personnel • Product launches and local promotional
activities of competitors • Preference of consumers for
particular brands or companies • Estimated market shares
of different products and brands • Advice on local
promotional activities that can be conducted
Roles of wholesaler
d) Efficiency and distribution- It is the primary role of
wholesaler. Once the goods are received, the wholesaler
sells in small quantities to retailers in his area.

e) Risk bearing- Wholesalers hold inventories, thereby

reducing the risks for manufacturers and retailers. This
includes taking ownership of the products that can
deteriote or become obsolete, bearing the costs of thefts,
and all the expenses involved in safeguarding the
merchandise.
Types of wholesalers A. Wholesaler merchants

The first type, known as 'wholesaler merchants'

or 'merchant wholesalers', buy the products in
large quantities and store them until they are
sold. They take the actual title of the goods.
Their customers are not end users; they sell to
firms and other wholesalers. There are two
types of merchant wholesalers. There are full
service wholesalers who provide all the services
relating to the marketing, carry stock, and make
deliveries. The second is limited service
wholesalers who provide limited services, i.e.,
who just stock the goods and do not undertake
any marketing activities.
Types of wholesalers B. Agents and Brokers

a) Manufacturer’s agents Manufacturer's

agents are firms owned by the companies

themselves for distribution but are considered as
a separate entity. They distribute the goods made
by the manufacturer. These include
manufacturer's sale branches and factory (Aides
that sell goods both to traders and customers.
Manufacturer's agents sometimes sell di, the
output of two or more companies whose goods
do not compete but complement one another. It
is their duty to locate potential buyers and sell to
them. They are restricted to a, geographical area.
Types of wholesalers B. Agents and Brokers

b) Brokers Brokers or agents are firms that work

independently and do not take the title of the
goods They assist in the negotiation process of
selling the goods and help in procuring buyers.
The broker's powers over prices and payment
terms are limited and must seek confirmation
from their principals before finalizing the sale.
Since they do not take the title of the goods,
brokers avoid all risks related to price
fluctuations, changes in market demand, and
damages.
Types of wholesalers C. Manufacturers’ sales branches

Certain companies operate through their own

offices-- these being operated in cities and
towns—by the company's own personnel. These
offices collect orders from agents and dealers in
their respective areas and send them to the head
office, which in turn, sends the goods to the
dealers directly. The local offices monitor the
dealers directly and also serve to solve any
problems that may arise. For example, companies
like Reliance Industries Ltd and Maruti Suzuki
Ltd, have their offices in towns even though the
actual task of selling and delivery is done by their
agents.
Types of wholesalers D. Specialized Wholesalers

Specialized wholesalers deal in specific range of

items. They offer more specialized services than
general merchandise wholesalers. Specially
wholesalers know their customers closely and
understand their needs. For example,
wholesalers of building materials open their
offices near building sites. They stock supplies,
timber supplies, and hardware products and are
often in a position to offer advice to their
customers.
Retailing Retailing encompasses the business
activities involved in selling goods
and services to consumers for their
personal, family, or household use.
It includes every sale to the final
consumer.
Role of retailer a) Location- A retailer invests in a location that is
most convenient for Customers. Small retailers offer
goods where consumers can buy quickly in small lots
without the bother of placing advance orders or
waiting for supplies.
b) Display-The retailer arranges for the latest goods to
be displayed in a manner that appeals to customers
the most. Sometimes events are arranged around
certain products and brands to encourage customer
interest in those brands. Retailers are also in a
position to arrange point-of-purchase (POP) publicity
that educates the customer and entices him to buy.
For example, retailers put up posters and cut-outs in
their stores highlighting the features of certain
products to induce customers to try out these
products.
Role of retailer c) Home delivery
A retailer transports goods from wholesalers to
ultimate consumers. s Some retailers provide a free
home delivery service to their customers, thereby
creating place-utility.
d) Regular supplies
By ensuring uninterrupted and fresh supply of goods,
the retailer saves the customers from the bother of
buying goods in bulk and storing them and maintains
adequate supply of goods so that customers are sure
of getting supplied at the time of their need.
e) Credit Supplies
Although retailers mostly sell goods for cash, they
also supply goods on credit to their regular
customers. Small stores score over large
supermarkets by virtue of this facility.
 f) Interaction with customers
Role of retailer A retailer at least the small retailer—acts as a friend and
guide to his customers. He is able to recommend
products and is at the frontline to receive complaints.
The retailer is the best place to study consumer behavior.
g) Offering choice to customers
The retailer buys goods from different sources and stocks
different varieties of products. In this way, he offers a
wide choice to customers. Further, the customers can
touch and feel the products and make their purchase
decisions.
h) Availability of goods in micro quantities
Sometimes retailers offer smaller packs- smaller than
those offered by the manufacturer- to individuals who
want to purchase less, customers can buy according to
their purchasing power and requirements.
 a) Traditional Retailers
Types of
Retailer ➢Specialty Store Specialty-stores are thus called
because they specialize in a single product line.
Examples of such stores are those specializing in
music instruments, furniture, flowers, hobby items,
sporting goods, pet supplies, and books.

➢Department Store Department-stores carry a

range of product lines, each organized as a separate
department. They carry a wide a range of goods
required by the customer and save the buyer the
time and bother of going to different shops to buy
his daily or monthly needs.
Types of
Retailer ➢Supermarkets
Supermarkets are self- service stores that stock a
very large variety of food and household
merchandise. It is distinguishable from a
department store in the sense that it is much larger
and carries a wider range of product lines.
Supermarkets stock food products such as meat,
fruit and vegetables, dairy products, canned and
packaged goods, baked goods, household cleaners,
toiletries, cosmetics, and so on.
 b) Mass Merchandisers
Types of
Retailer ➢ Discount stores
These retail outlets offer all goods at discounted
prices. An assortment of products such as
umbrella, plastic items, cosmetics, crockery,
decoration items, etc. is put on sale at fixed prices

➢ Off price retailers

Off-price retailers offer a different approach to
discount retailing. As discount houses tried to
increase services and offerings in order to upgrade,
off-price retailers invaded this low-price, high-
volume sector
 ➢ Super Stores
Types of
Superstores are very large supermarkets or shops
Retailer selling household goods and equipment. Superstores
are usually built outside city centers away from other
shops
Superstore vs Super market
A supermarket is mainly food, and will have fresh food
areas such as produce, meat, deli, bakery. They may sell
non-food items such as health and beauty care,
household cleaning, pet food, but the focus is on food.
A superstore will potentially have a grocery section of
varying size, but it will also have many other non-food
areas, and the focus is often on clothing, home decor,
and many other areas. Grocery is just one small area of
many in a superstore.
Types of
Retailer
c) Non-store Retailing

➢ Direct Marketing -is generally a form of advertising

where organizations communicate directly to
customers through a variety of media including cell
phone text messaging, email, websites, online adverts,
database marketing, fliers, catalog distribution,
promotional letters, and targeted television,
newspaper, and magazine advertisements, as well as
outdoor advertising. Among practitioners, it is also
known as direct response.
Types of ➢ Vending Machine
Retailer
A Vending machine is an automatic machine that sells
food or drink or other items. Vending machine foods
include snacks such as potato chips, chocolate bars,
and candy. Hot vending machine drinks include coffee,
tea, and hot chocolate. Cold vending machine drinks
include juice, bottled water, soft drinks.

➢Kiosks Kiosks
are temporary or permanent structures located in high
traffic areas such as busy markets and airports. Kiosks
provides convenience goods to the customers who is
either in a hurry or who does not have the inclination
to visit a store or restaurants.
Agent Middlemen
Manufacturers may use brokers and agents, who do
not take title possession of the goods, in marketing
their products. Brokers and agents typically perform
only a few of the marketing flows, and their main
function is to ease buying and selling—that is, to
bring buyers and sellers together and negotiate
between them. Brokers, most commonly found in
the food, real estate, and insurance industries, may
represent either a buyer or a seller and are paid by
the party who hires them. Brokers often can
represent several manufacturers of noncompeting
products on a commission basis. They do not carry
inventory or assume risk.
Types of Agent Middlemen
a) Manufacturer Agent
Manufacturers’ agents, who represent two or more
manufacturers’ complementary lines on a
continuous basis, are usually compensated by
commission. As a rule, they carry only part of a
manufacturer’s output, perhaps in areas where the
manufacturer cannot maintain full-time
salespeople. Many manufacturers’ agents are
businesses of only a few employees and are most
commonly found in the furniture, electric, and
apparel industries.
Types of Agent Middlemen
b) Sales Agent -are given contractual authority to
sell all of a manufacturer’s output and generally
have considerable autonomy to set prices, terms,
and conditions of sale. Sometimes they perform the
duties of a manufacturer’s marketing department,
although they work on a commission basis. Sales
agents often provide market feedback and product
information to the manufacturers and play an
important role in product development. They are
found in such product areas as chemicals, metals,
and industrial machinery and equipment.
Types of Agent Middlemen
c) Purchase Agent -who routinely have long-term
relationships with buyers, typically receive, inspect,
store, and ship goods to their buyers.
d) Commission Houses -A commission house
provides services for buying and selling all kinds of
assets, including stocks, mutual funds and bonds —
and charges fees for doing so. Unlike self-directed
brokerages that allow customers to place trades on
their own and pay nominal fees, the commissions
charged by these full service providers are often
steep and unnecessary.
MANAGING MARKETING CHANNEL
Channel conflict and co-ordination

Channel conflict is behavior of channel member

that is in opposition to its channel counterpart. It
is opponent centered and direct, in which the goal
or object sought is controlled by the counterpart.
Channel conflict occurs when one member of a
channel views its upstream or downstream partner
as an adversary, as an opponent.
Types of channel conflict
a) Supply-driven Conflict

supply-driven conflict will occur when

companies demand more from their dealers, the
most common conflict is with regard to the size
of the orders placed by him/her and the
payment terms. Further, companies also
demand that all retail outlets in one's territory
be covered. Display in retail stores and local
publicity could also be a bone of contention
Types of channel conflict
b) Channel driven Conflict
Conflict Sometimes channel members protest
against the policies of the company. Either a
large dealer servicing a large market will
demand better terms from the company, or
dealers of a particular area may collectively ask
for change in marketing policies. Such conflicts
are. channel-driven and the company must
learn to respond to them. A common complaint
that is heard is, 'We have worked hard to
establish the brand and develop business, and
no they want to ditch us'.
Types of channel conflict
c) Conflict caused by Evolving Markets

Companies have to respond to market

challenges or make changes in marketing
strategies to meet the growing competition.
Some of these changes may not be to the liking
of the channel partners—who may then
collectively agree not to cooperate with the
company Common conflicts result when
companies add a new channel
Resolving Channel Conflict
All parties must try to resolve conflicts, since a
breakup with partners is usually not an option.
Companies must work hard to establish close
relationships with channel partners and nurture
these relationships, which are very useful in
hard times.
Resolving Channel Conflict
a) Problem solving-Various types of conflicts can
emerge in distribution channel. They should be
solved as soon as possible. Problem solving
method is one of many methods. According to this
method, all the channel members sit together,
interact and find a common solution of the
problem. Channel deader or any other member
can also do such work.
b) Goal Modification-Channel conflict can also be
solved by modifying goal. Under this method all
the channel members sit together, scrutinize the
causes of the conflict and new goal is formed.
Such goal should be accepted by all channel
members.
Resolving Channel Conflict
c) Persuasion
Channel conflict can be solved by clearly interpreting
subject matter or persuading the channel members. Under
this, channel leader persuades and calls all channel
members to work for the interest of group members. In this
method, the channel leader uses his power to persuade or
convince the members and solve the conflict.

d) Bargaining
In this bargaining method, all the channel members sit
together, discuss the responsible causes for the conflict
and agree on a new contract. Neutral member plays an
important role in facilitating new agreement. Such
agreement should be accepted by all the channel
members, channel conflict is automatically solved. But, if
the channel conflict is to be solved promptly, this method
is not suitable.
Resolving Channel Conflict
e) Diplomacy
Conflict among channel members should be minimized r
solved. Diplomatic behavior of management helps it certain
level or solving conflict. When the conflict appears, the
management should notice or information to all the channel
members that it will be properly solved finding out the
responsible causes. Because of mannered conduct equal
behavior, evidential logics of the management channel
members feel satisfied by which the conflict can be slowly
tapered down.
f) Improvement in communication
Distribution channel also needs different information and
notices. So. Information should be clear, meaningful, and
simple. Due to weak information system, conflicts arise in
channel. such conflict can be tapered down through
improvement in information system. But improvement in
communication should be on both sides. Otherwise
information becomes meaningless.
Channel Information System
CIS is the orderly organized flow of pertinent relevant
operational data both internally and between channel
members, for use as a basis of decision making in
specified responsibility areas of channel management

Objective of CIS
a) To provide timely information for decision making
b) Operational data is the bases for planning channel
and evaluating the performance of the channel
c) Operational planning includes forecasting and
providing the information to achieve the forecast
d) Evaluation is concerned with reviewing the results
achieved and to check whether the performance is
satisfactory or not
Elements of Channel information system
a) Transaction processing system

A Transaction Processing System (TPS) is a type of

information system that collects, stores, modifies
and retrieves the data transactions of an enterprise.
A transaction processing system is a computerized
system that performs and records the daily routine
transactions necessary to conduct business.
Examples are sales order entry, hotel reservation
systems, payroll, employee record keeping, and
shipping.
Elements of Channel information system
b) Knowledge Information system

Knowledge Management systems are the set of

processes developed in an organization to create,
gather, store, maintain, and disseminate the firm's
knowledge. Knowledge work systems help create
and integrate new knowledge within the
organization. Knowledge management systems
codify knowledge and experience, make the
collected knowledge and experience available when
and where it is needed, and provide links to external
sources of knowledge.
Elements of Channel information system
c) Management information system

Management information systems (MIS) serve the

management level of the organization, providing
managers with reports and often online access to the
organization’s current performance and historical
records. Typically, MIS are oriented almost exclusively
to internal, not environmental or external, events. MIS
primarily serve the functions of planning, controlling,
and decision making at the management level.
Generally, they depend on underlying transaction
processing systems for their data. MIS generally
provide answers to routine questions that have been
specified in advance and have a predefined procedure
for answering them.
Elements of Channel information system
d) Executive support system

Senior managers use executive support systems

(ESS) to help them make decisions. ESS serve the
strategic level of the organization. They address
nonroutine decisions requiring judgment,
evaluation, and insight because there is no agreed-
on procedure for arriving at a solution. ESS are
designed to incorporate data about external events,
such as new tax laws or competitors, but they also
draw summarized information from internal MIS
and DSS. They filter, compress, and track critical
data, displaying the data of greatest importance to
senior managers.