Question

In the wake of the COVID-19 pandemic being faced by the world, ABC Company Ltd has produced a new brand of hand sanitizers which are herbal based. The company is about to enter the market with these new products.

You are also required to help ABC Company Limited to develop effective Marketing Channels.

a. Explain what Marketing Channels are, using relevant examples. ​

b. Distinguish between direct and indirect marketing channels, using relevant examples.​​​ ​​ ​​​

c. Explain eight (8) functions that channel members may have to perform to achieve a strong market presence very quickly.​ ​​​

Answer 1

a. Marketing channel refers to the methods through which the physical distribution of goods happens from the manufacturer to the customers, either directly or through intermediaries. The manufacturer can likewise embrace Multi-Channel marketing in the event that he thinks that its reasonable for his product and the business.

b. Direct selling the oldest forms of selling. It doesn’t involve the inclusion of an intermediary and the manufacturer gets in direct contact with the customer. Examples of direct channels are peddling, brand retail stores, taking orders on the company’s website, etc. Direct channels are usually used for selling perishable goods, expensive goods, and whose target audience is geographically concentrated. For example, bakers, jewellers, etc.

When a manufacturer involves a middleman/intermediary to sell its product to the end customer, it is said to be using an indirect channel. Indirect channels can be classified into three types:

• One-level Channel (Manufacturer to Retailer to Customer): Retailers buy the product from the manufacturer and then sell it to the customers. One level channel of distribution works best for manufacturers dealing in shopping goods like clothes, shoes, furniture, toys, etc.
• Two-Level Channel (Manufacturer to Wholesaler to Retailer to Customer): Wholesalers buy the bulk from the manufacturers, breaks it down into small packages and sells them to retailers who eventually sell it to the end customers. Goods which are durable, standardised and somewhat inexpensive and whose target audience isn’t limited to a confined area use two-level channel of distribution.
• Three-Level Channel (Manufacturer to Agent to Wholesaler to Retailer to Customer): Three level channel of distribution involves an agent besides the wholesaler and retailer who assists in selling goods. These agents come handy when goods need to move quickly into the market soon after the order is placed. They are given the duty to handle the product distribution of a specified area or district in return of a certain percentage commission. The agents can be categorised into super stockists and carrying and forwarding agents. Both these agents keep the stock on behalf of the company. Super stockists buy the stock from manufacturers and sell them to wholesalers and retailers of their area. Whereas, carrying and forwarding agents work on a commission basis and provide their warehouses and shipment expertise for order processing and last mile deliveries.

c.

1. Assuming the risk connected with carrying out channel work or being a part of a channel. If the distributor or channel member is buying a product, it does not sell, or the distributor suffers bad debts or any untoward thing happens, then these are risks which the channel member has to take and it is the function of channel member.
2. Most companies deal in advance payments or a credit limit. However, it is not necessary that the channel member is getting the payments from customers within that period of time. A company might take advance payment for product X but maybe that product sold after 40 days. So till 40 days, the financial burden of that product was on the channel member. Channel member should be ready for such financing.
3. Look at any channel driven company and you will find that there are different modes to reach the end customer. The company is responsible for delivering the product to channel member. But it is the function of channel members to ensure that the goods are distributed to end customer at the earliest and in optimum condition.
4. All negotiations with the end customers is done by channel members and the company does not take part. Once a product has been purchased by the channel member, it belongs to the channel member, and the sale of the same depends on the channel member as well.
5. The distributor or dealer has to match the inventory which is in demand in the market, and which is in his stock. He should not uselessly order material which is not being sold in the market because this will block the dealers inventory and finances.
6. Maintaining contacts with existing customers as well establishing contacts with potential customers and sharing the same with the company is the work of channel dealers. Good companies also enable their dealers to maintain a CRM and use it for better customer retention.
7. Promotions are not only done at the company level or brand level, but they are done quite a bit on the channel level as well. Whenever a dealer or distributor wants to create more brand awareness and let customers know about the buying point for the brand, at that time he uses marketing and promotions to attract customers to him. This is in fact an inherent function of channel members – to increase sales in their locality.
8. Gathering information about potential customers, competition as well as tracking the environmental factors is a function of channel member. He is intricately involved in making marketing strategies for the company, because without information from the channel member, the company cannot move in the right direction.