Page 207 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes inventory, selling, transporting, financing, promoting, negotiating, conducting marketing
research and servicing. These functions are summarized in the following table and a smooth
conduct of these functions will enable products to flow from producers to consumers in a timely
and efficient manner.

Table 9.1: Performed by Marketing Channels

Roles Description
Buying Purchasing a broad assortment of goods from the producer or other channel
members.
Carrying Inventory Assuming the risks associated with purchasing and holding an inventory.
Selling Performing activities required for selling goods to consumers or other
channel members.
Transporting Arranging for the shipment of goods to the desired destination.
Financing Providing funds required to cover the cost of channel activities.
Promoting Contributing to national and local advertising and engaging in personal
selling efforts.
Negotiating Attempting to determine the final price of goods and the terms of payment
and delivery.
Marketing Research Providing information regarding the needs of customers.
(Information)
Servicing Providing a variety of services, such as credit, delivery and returns.

9.1.3 Channel Design Decisions

The most important task in channel management is the design of an effective and efficient
channel for smooth flow of products, titles, payments, and information and promotion programs.
A systematic approach should be followed for designing distribution channel by analyzing the
demands of customers. This is because there may be different kinds of requirements for different
market segments. The end user analysis helps in identifying an optimum flow; removing all
bottlenecks and developing desired customer value. The company should also evaluate its
existing channel alternatives for sales, delivery and service to customers in terms of efficiency
and effectiveness. This analysis should be done in relation to company’s objectives and
positioning decisions about its products and services.
A constraint analysis should be conducted to identify limits, which have to be built into any
proposed channel structure. These include evaluation of customer loyalty level, sales target of
the company etc. Once these evaluations are over, the company can identify the gaps, which
exist and then plan for the ideal channel design by evaluating possible channel alternatives.
In the case of a new business, as the organization increases its scope of distribution, the distribution
channel design evolves in response to market demands and coverage strategy decided by the
firm. In a local market, the company prefers self-distribution through company owned sales
force or through a few intermediaries; but as the business grows the company covers new
geographical territories and decides to follow different types of distribution channels with
varying levels as explained earlier. So an ideal channel system evolves in response to the
evolving demands and decision on product market coverage. A typical channel design decision
involves the following steps.
Let us discuss each of these steps in detail and debate on the issues related to the designing of a
distribution channels. A typical channel design involves identification of customer’s service

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