Transcript Marketing channel

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Definition
The marketing channel is the accumulation of buyers,
sellers and middlemen who are involved in reaching the
product from producer to consumer
A marketing channel is a set of practices or activities
necessary to transfer the ownership of goods, and to move
goods, from the point of production to the point of
consumption and as such which consists of all the institutions
and all the marketing activities in the marketing process.
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A marketing channel is a useful tool for management.
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Roles of marketing channel in marketing strategies:
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Links producers to buyers.
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Performs sales, advertising and promotion.
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Influences the firm's pricing strategy.
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Affecting product strategy through branding,
policies, willingness to stock.
Customizes profits, install, maintain, offer
credit, etc.
An example of this is an apple orchard: Apple
orchard > Transport > Processing factory >
Packaging > Final product to be sold >
Consumer
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An alternative term is distribution channel or
'route-to-market'. It is a 'path' or 'pipeline'
through which goods and services flow in one
direction (from vender to the consumer), and the
payments generated by them flow in the opposite
direction (from consumer to the vender).
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A marketing channel can be as short as being
direct from the vender to the consumer or may
include
several
inter-connected
(usually
independent
but
mutually
dependent)
intermediaries such as wholesalers, distributors,
agents, retailers.
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Each intermediary receives the item at one
pricing point and moves it to the next higher
pricing point until it reaches the final buyer.
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1(a) If the product is directly sold to the consumer-
Producer
Consumer
1(b) If the producer sells his product through a single middleman-
Producer
Middleman
Consumer
1(c)
-
If the producer sells his product through more than one
middleman
Producer
2(a)
Whole seller
Retailer
Consumer
Industrially User
Producer
Sells Representative
Production Cell
,
Whole seller
Industrial
user
2(b) If the product is handled over more than four times,
i. Broker
Whole seller
Sells Representative
Purchase Representative
Retailer
Consumer
Or
Contactors
Local Purchaser
ii.
Broker
Producer
Local
Purchaser
Commission
Contactors
Merchant
Retailer
Whole seller
Consumer
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Producer should consider these points in selecting
middleman in order to sell his goods.
i. Number of Consumer
If the number of consumer is not scattered , then direct
sell is possible. But if the numbers of consumers are
scattered then direct sell is not possible.
ii. Area of Market
If the area of a product is smaller and the sell is little,
then direct sell will be possible, But if the area of a
product is larger and the sell is large, then direct sell
will not be possible,
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iii. Amount of purchase
The amount of purchase and choice of consumer
influence the middleman performance. If the volume of
purchase is large then middlemen can be appointed.
iv. Nature of Market
If the product can be sold in consumer market then
direct sell can be possible. If the product is suitable for
industrial market, then agent should be appointed.
v. Unit Price
If the unit price is higher, but number of producer is
smaller, then the product can be sold by the own sales
man. But If the unit price is lower, and number of
producer is larger, then the product can be sold by the
middlemen.
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vi. Sequences of buyer
If the Buyers are clustered in a particular point,
then own sales man is enough, otherwise
middleman is necessary.
vii. Consumer purchasing habit
It should be consider that, purchasing habit of
consumer is highly preferable, if the consumers
are habituated to purchase from middlemen,
then middleman is to be appointed. Otherwise
middleman is not necessary.
Deciding whether to use an intermediary in the
distribution channel depends on many factors, but
essentially it involves determining whether the needs of
the consumer can successfully be met by the available
resources and skills of the producer.
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The three basic functions performed by an
intermediary in the distribution channel are:
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1.
Transactional: This function involves adding value to the
distribution channel by bringing in the intermediary's
resources to establish market linkages and customer contacts.
The intermediary either directly undertakes the marketing and
sales function or helps to establish buyer-seller relationships
by serving as a link between the manufacturer and the retailer.
2. Logistical: This function involves the physical distribution of
goods. It involves sorting and storing supplies at locations
within the reach of the end customer. It also breaks up the bulk
production of the manufacturer into smaller portions and may
include the transportation of smaller shipments to
intermediaries or retailers further down the channel of
distribution.
3. Facilitating: Although often confused with logistics, the
facilitating functions of intermediaries supplement the entire
marketing flow of the product and are separate from
logistics. The facilitating functions include financially
supporting the marketing chain by investing in storage
capabilities. They may include facilitating sales by helping
the consumer buy even when he or she does not have cash
(through financing plans, purchase agreements, etc.).
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Together, these functions performed by the intermediary
ensure market coverage, reduce the cost of market
coverage, increase the availability of cash flow in the
distribution channel, and increase end-user convenience.
A producer can bypass an intermediary by elimination
or substitution, but the tasks performed by the
intermediary
cannot
be
eliminated.
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The advantages of using intermediaries stem from the
core economics of supply-chain management:
market coverage,
customer contacts,
lower costs,
systematic cash flow, etc.
The intermediary adds value to the marketing of the
product by bringing in specialization, marketing
knowledge, capacity to segment the market, and
selling skills that allow the marketer to implement
marketing
strategies
effectively.
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Intermediaries providing logistic support
increase convenience to both the producer
and the consumer by offering effective
delivery and pre- and post-purchase customer
service as well as facilitating manufacturer
services, making them indispensable to most
midand
small-scale
producers.
Manufacturers quite often see intermediaries as
parasites rather than assets.
 The disadvantages of using an intermediary stem
from psychological apprehensions, market antecedents
which have created such apprehensions, and lack of
managerial skills or resources that are sufficient to
balance and manage the intermediary.
 Fears, which may come true if the producer fails to
manage the intermediary, might include:
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fear of losing control
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fear of losing customer contact
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fear of losing customer ownership
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fear of opportunistic behavior
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fear of inadequate communication
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fear that the objectives of the intermediary will
conflict with those of the producer
fear that the intermediary will extract rather than add
to value
fear of poor market management
Furthermore, an intermediary may have many of the
same fears (except for the last two on the list).
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These fears often undermine the working
relationship between a producer and an intermediary
and keep them from effectively utilizing each other's
resources and maximizing the potential of the marketing
mix.
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In general the marketing channel of rice can be introduced as bigger. The marketing channel of
rice is as follows-
Producer
Government
sales Center
Rice Mill
Faria, Bepari, Village
Merchant
Aratdar / Store house
owner
Broker of sales zone
Ration Shop
Ration
Consumer
Retailer
Consumer
Fig: Marketing channel of Rice.
Rice Mill
Retailer
Faria, Bepari, and Village Merchant: These
middlemen are termed on different ways in different places.
They assemble rice from door to door of rice producer
farmers or from local markets. They fix up prices of rice by
negotiations. Now-a-days the beparies of deficit rice area
come to surplus areas and thus make a relationship between
the two areas.
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Aratdar / Store house owner: They are the second
middlemen of rice marketing channel. The business area of
Aratdar or Store house owner is comparatively widened than
that of Faria and Bepari. The Aratdar has to take risk bearing
program. They act as broker and have commission from
both buyer and seller.
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The Retailer: In rice business the retailer is the last
step of middleman. They buy rice from Bepari and
Aratdar as sell it to the consumer. They also buy rice
from general producer. In rice marketing channel
retailer has the most important role.
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For rationing program government has selected
buying center of rice in surplus areas of the country.
These buying centers are involved in buying rice in
selling price. It is not a wide program. Only ration
cardholders can buy rice from rationing rice.
 At present no association of Beparies and Retailers
but in some other places there is association of Aratdar.
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Wholesaler
Producer
Bangladesh Jute mill
Bapari/Faria
Jute Mill
Aratdar/Broker
Kacha Baler
Bangladesh Jute Mill Corporation
Pacca baler
Bangladesh Jute Export corporation
Exporting agent
Foreign Purchaser
Fig: Marketing
channel o f Jute
Retailer
Bapari/Faria: These types of middleman are biggest in
number. They move from door to door for collecting jute
from producer. They also collect jute from village market. In
jute marketing those middleman are the first linkage. They
buy loose jute and sell these to Kacha baler or Aratdar or
directly to jute mills.
 Aratdar and Dalal: This type of middlemen helps to
find out purchaser of jute on behalf of producer, Faria or
Bapari. Before selling the jute it is to be kept under the
custody of Aratdar. Aratdar’s function is flexible. He acts on
commission. Some times he himself sells jute. His principal
function is to make contact between seller & purchaser. The
Dalal is engaged in the transaction of loose jutes. He
receives commission from both seller and purchaser. The
rate of commission depends on the situation of market.
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Kacha baler: This type of middlemen purchase loose
jute, make bales of it. These bales can not export before
turning it to pakka bale. So domestic seller and purchaser
are occurred from Kacha bale to pakka bale condition. The
kacha balers sells these to shipper , Pakka balers and local
mills.
 Bale brokers: They are quite different type of brokers.
They deal with baled jutes. They are found in only some
selected place like Narayngang & Khulna .They make
linkage between Kacha balers, pakka baler shipper, and
some time inland mill. They make assessment of marketable
amount and their expected price & tentative purchasers are
also selected by them.
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Pakka baler/shipper: In most cases of shipper &
pakka baler is the same person or institution. Their
important sales centers are situated in near assembling
center. They turn kacha bales into pakka bales in
Narayngang, khulna & Chittagong.
 Broker in baled jutes: This type of middlemen are
engaged in making (written) contact of selling baled
jutes both as business performances in Narayngang,
khulna & Chittagong terminals.
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