Page 205 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes Introduction

In this unit, you are going to learn how the goods produced by a manufacturer are distributed
for the use of the ultimate customer. Every marketing activity starts with the customer and ends
with the customer. The customer is the ultimate target for a marketer. The availability of the
product in the market depends on the efficacy of distribution channel. Therefore, the distribution
channel plays a significant role in the marketing activities. The success of a company’s marketing
effort depends upon its command on the distribution network. Once the product is developed
and priced, the marketing manager should now plan to develop distribution strategy and design
distribution channel to reach customers.
Management of distribution involves processes to place the finished goods from a manufacturer
to a customer for final consumption and usage. This encompasses flow of goods and ownership
from manufacturer to the customers. This unit will also introduce the important aspects of
distribution, namely, logistics and supply chain, wholesaling, and retailing.

9.1 Marketing Channel

A marketing channel is a system of relationships existing among businesses that participate in
the process of buying and selling products and services.
Marketing channel decisions are often harder to change than price, promotion, and product
decisions. Legal contracts may limit changes and developing effective relationships with channel
members, often takes longer and costs more. It may also be hard to move retail outlets and
wholesale facilities once they are set up. E. Raymond Corey writes in his book:
“Normally it takes years to build (distribution channel), and it is not easily changed… It represents
a significant corporate commitment to large numbers of independent companies whose business
is distribution – and to the particular markets they serve”.

9.1.1 Channel Functions

Most manufacturers do not sell their products directly to end-users. Between the end-user and
the producer, there are channel members performing a variety of functions. Some of these
resellers such as wholesalers and retailers purchase from producers, take ownership title, and in
turn resell the products to parties or consumers at the next level. They are called merchants. In
contrast brokers, agents, and producer’s sales- persons search and negotiate with buyers on
behalf of the producer and do not acquire ownership title to merchandise. Other channel members
work as facilitators in the process of distribution and include transporters, privately owned
warehouses, banks, and others who neither negotiate with buyers or sellers on behalf of producer
nor take ownership tile of merchandise.
A single channel member may perform all these functions in certain situations. However, in
most of the situations, channel members at different levels are involved in performing the
following functions jointly:

1. Channel Members Create Utility: Marketing channels create time, place, and possession
utility. Time utility refers to making products available to customers when they want
them. They create place utility by making products available in locations, where customers
desire them to be available for buying. Possession utility means customers having access
to obtain and have the right to use or store for future use. This may occur through ownership
or some arrangements such as rental or lease agreements that entitle the customer the
right to use the product.

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