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‘Place’ in marketing mix:
refers to the availability of the product to the customer at the time and the location where it is
Most producers do not sell their goods directly to the final users
Between producers and the final users stands a marketing channel, a host of marketing intermediaries
performing a variety of functions and bearing a variety of names
Marketing-channel decisions are among the most critical decisions facing management
The company’s chosen channels intimately affect all the other marketing decisions
The company’s channel decisions involve relatively long-term commitments to other firms
There is also a powerful inertial tendency in channel arrangements
Distribution channels go beyond simple convenience they also affect the product’s meaning
International channel function and flows:

A marketing channel performs the work of moving goods from producers to consumers. It overcomes
the time, place, and possession gaps that separate goods and services from those who need or want
them. Members of the marketing channel perform a number of key functions
Collection of information
Promotion of the products
Negotiation with customers
Financing of inventories
Risk sharing
Delivery and physical transfer of the products to customers
Payment collection
Title taking & transfer
The channel decision is very important. In theory at least, there is a form of trade-off: the cost of using
intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods
manufacturers could never justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries (particularly at the agent and
wholesaler level) can sometimes cost more than going direct.
Many of the theoretical arguments about channels therefore revolve around cost. On the other hand,
most of the practical decisions are concerned with control of the consumer. The small company has no
alternative but to use intermediaries, often several layers of them, but large companies 'do' have the
However, many suppliers seem to assume that once their product has been sold into the channel, into the
beginning of the distribution chain, their job is finished. Yet that distribution chain is merely assuming a
part of the supplier's responsibility; and, if he has any aspirations to be market-oriented, his job should
really be extended to managing, albeit very indirectly, all the processes involved in that chain, until the
product or service arrives with the end-user. This may involve a number of decisions on the part of the
Channel membership
Channel motivation

Monitoring and managing channels

Channel membership

Intensive distribution - Where the majority of resellers stock the `product' (with convenience products,
for example, and particularly the brand leaders in consumer goods markets) price competition may be
Selective distribution - This is the normal pattern (in both consumer and industrial markets) where

`suitable' resellers stock the product.
Exclusive distribution - Only specially selected resellers (typically only one per geographical area) are
allowed to sell the `product'.

Channel motivation

It is difficult enough to motivate direct employees to provide the necessary sales and service support.
Motivating the owners and employees of the independent organizations in a distribution chain requires
even greater effort. There are many devices for achieving such motivation. Perhaps the most usual is

`bribery': the supplier offers a better margin, to tempt the owners in the channel to push the product
rather than its competitors; or a competition is offered to the distributors' sales personnel, so that they
are tempted to push the product. At the other end of the spectrum is the almost symbiotic relationship
that the all too rare supplier in the computer field develops with its agents; where the agent's personnel,
support as well as sales, are trained to almost the same standard as the supplier's own staff.

Monitoring and managing channels

In much the same way that the organization's own sales and distribution activities need to be monitored
and managed, so will those of the distribution chain.
In practice, of course, many organizations use a mix of different channels; in particular, they may
complement a direct salesforce, calling on the larger accounts, with agents, covering the smaller
customers and prospects.

Vertical marketing

This relatively recent development integrates the channel with the original supplier - producer,
wholesalers and retailers working in one unified system. This may arise because one member of the
chain owns the other elements (often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a retailer will own its own
suppliers, this being 'backward' integration. (For example, MFI, the furniture retailer, owns Hygena
which makes its kitchen and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-operation (in the way that Marks
& Spencer co-operates with its suppliers).
Alternative approaches are `contractual systems', often led by a wholesale or retail co-operative, and

`administered marketing systems' where one (dominant) member of the distribution chain uses its
position to co-ordinate the other members' activities. This has traditionally been the form led by
The intention of vertical marketing is to give all those involved (and particularly the supplier at one end,
and the retailer at the other) 'control' over the distribution chain. This removes one set of variables from
the marketing equations.
Other research indicates that vertical integration is a strategy which is best pursued at the mature stage
of the market (or product). At earlier stages it can actually reduce profits. It is arguable that it also
diverts attention from the real business of the organization. Suppliers rarely excel in retail operations

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and, in theory, retailers should focus on their sales outlets rather than on manufacturing facilities (Marks
& Spencer, for example, very deliberately provides considerable amounts of technical assistance to its
suppliers, but does not own them).

Horizontal marketing

A rather less frequent example of new approaches to channels is where two or more non-competing
organizations agree on a joint venture - a joint marketing operation - because it is beyond the capacity of
each individual organization alone. In general, this is less likely to revolve around marketing synergy

Effectiveness of international distribution channels:

The Five C’s Framework can be used by international marketers to determine the effectiveness of their
international distribution channels;
– Ability of channel to reach targeted customers to achieve market share and growth objectives
– Compatibility of channel with the firm’s desired product positioning
– Loyalty of the channel to the firm
– Ability of the firm to control total marketing program for the product or service
– Investment required to establish and maintain the channel-variable associated with sales level.
Fixed costs required to manage the channel: inventories, facilities, training of sales force

Control over distribution:

• Worldwide the trend is toward shorter distribution channels and closer links, if not direct
relationships, with those active participants in the channel.
• Some would argue that the only way to internationalize is to move closer and closer to full control by
means of wholly owned subsidiary. This is quite erroneous.
• First, we have to consider industry characteristics, the value-added of the business and what the
customer actually want. Second, it is often possible to achieve close control through a commission
agent or a joint venture. Control should not be equated directly with ownership.

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