The Marketing Mix: Marketing Channels

Channels in Marketing

Traditional classifications of the elements of the marketing mix typically include place as one of the elements of the so-called "4 Ps" (or "3 Ps" or "7 Ps" or "13 Ps" or "however-many-Ps-it-is-this-week"!!!). Rosenbloom (2001), however, points out that the distribution medium now often contains no actual physical place whatsoever (e.g. distribution via the Web). Rather than getting into needless philosophical discussions about concepts such as "virtual places" and the like, marketers therefore now increasingly prefer to use the term marketing channel (or sometimes channel of distribution). According to Rosenbloom, the marketing channel can be seen as a bridge to the market place. As with all other elements of the marketing mix, marketing channel decisions directly affect sales. No matter how cheap a product is, or how good it is, it cannot be sold if it is not available via the right channel at the right time.

Each producer of goods or services faces the problem: "How do I ensure my customers are adequately serviced when it is not possible to do so myself?". The answer is delegation. Seen from this perspective, a marketing channel can thus be seen as a chain of companies or individuals, each of whom facilitates movement of the product from producer to end user.

The two essential parties are the manufacturer and the end user. Theoretically, intermediaries are superfluous as they inflate the manufacturer's price in order to accommodate their own costs and profits. In reality, of course, it would be virtually impossible for most large scale manufacturers to sell their products direct to the consumers - imagine the problems if Heinz had to sell its baked beans to you direct! In practice, therefore, the presence of a wholesaler and a retailer is essential if the manufacturer is to supply sufficient quantities to the market and the consumer, wherever he/she may be, is to be able to obtain a ready supply.

Functions of Intermediaries

Seen from the point of view of the manufacturer, intermediaries in the marketing channel fulfil five key roles:-

Stockholding Function: By holding the producing firm's stock, intermediaries can offset the effects of peaks and troughs in demand. They allow raw materials to be purchased in bulk, goods to be produced in economic batch sizes and finished stock levels to be minimised.

Marketing Function: Many producers of goods can remain just that - producers. They do not brand their own goods, instead supplying them to intermediaries who have copyrighted brand labels of their own. For example, many companies produce goods sold under the Marks and Spencer brand name St. Michael. Often, these companies are producing goods exclusively, with no brand names of their own. Conversely, Marks and Spencer sell only their own St. Michael range of products, despite engaging in no manufacturing activity whatsoever.

Distribution Function: Firms specialising in distribution can yield significant economies of scale for the manufacturer. By delivering several lines from several different manufacturers simultaneously, they are able to significantly reduce transportation costs.

Cash-Flow Function: By using a distributor, the manufacturer can often gain a more secure income. By buying goods to re-sell to the end user, the distributor is effectively taking on more of the risk of poor payment or even non-payment, providing the manufacturer with a degree of insulation from the problems associated with the end user.

Information-Flow Function: A further saving may come about because the distributor is able to convey market information back to the manufacturer. This information may be costly and difficult for the manufacturer to compile and interpret - not having to pay for this information is a great advantage!