The Role of Marketing Channels
Why does a producer delegate some of the selling job to intermediaries, relinquishing control over how and to whom its products are sold? Through their contacts, experience, specialization, and scale of operation, intermediaries make goods widely available and accessible to target markets, offering more effectiveness and efficiency than the selling firm could achieve on its own.12 Many producers lack the financial resources and expertise to sell directly on their own. The William Wrigley Jr. Company would not find it practical to establish small retail gum shops throughout the world or to sell gum online or by mail order. It is easier to work through the extensive network of privately owned distribution organizations. Even Ford would be hard-pressed to replace all the tasks done by its thousands of dealer outlets worldwide.
Channel Functions 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 (see Table 12.1).
Some of these functions (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; others (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions. Five flows are illustrated in Figure 12.1 for the marketing of forklift trucks. If these flows were superimposed in one diagram, we would see the tremendous complexity of even simple marketing channels.
A manufacturer selling a physical product and services might require three channels: a sales channel, a delivery channel, and a service channel. The question for marketers is not whether various channel functions need to be performed—they must be—but, rather, who is to perform
TABLE 12.1 Channel Member Functions
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• Gather information about potential and current customers, competitors, and other actors and forces in the marketing |
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environment. |
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• Develop and disseminate persuasive communications to stimulate purchasing. |
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• Negotiate and reach agreements on price and other terms so that transfer of ownership or possession can be made. |
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• Place orders with manufacturers. |
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• Acquire the funds to finance inventories at different levels in the marketing channel. |
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• Assume risks connected with carrying out channel work. |
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• Provide for the successive storage and movement of physical products. |
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• Provide for buyers’ payment of bills through banks and other financial institutions. |
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• Oversee transfer of ownership from one organization or person to another. |
FiGURE 12.1 Five Marketing Flows in the Marketing Channel for Forklift Trucks
them. All channel functions use up scarce resources; they can often be performed better through specialization; and they can be shifted among channel members. Shifting some functions to intermediaries lowers the producer’s costs and prices, but the intermediary must add a charge to cover its work. If the intermediaries are more efficient than the manufacturer, prices to consumers should be lower. If consumers perform some functions themselves, they should enjoy even lower prices.
