Marketing

Channels

Session 7
Marketing Channels: Nature & Importance
o A set of independent organizations involved in the
process of making a product available for consumption
o Value Delivery Network
• The network made up of the company, suppliers, distributors,
and ultimately customers who “partner” with each other to
improve the performance of the entire system.

o Channel choices link other decisions in marketing mix

• Pricing, Marketing communications

o Strong distribution system can be a competitive

advantage
o Channel decisions involve long-term commitments to
other firms
 Key Functions Performed by
Channel Members
o Information
o Negotiation
o Promotion
o Physical Distribution
o Contact
o Financing
o Matching
o Risk taking
How Channel Members Add Value
Ensure fewer contacts to move the product to final purchaser
Help match product assortment demand with supply.
Bridge major time, place, and possession gaps
Marketing Channels: Nature & Importance
o The number of intermediary
levels indicates the length of a Producer
marketing channel

Indirect Marketing
Direct Marketing
• Direct Channels
• Indirect Channels Wholesaler

o Producers lose more control

and face greater channel Retailer
complexity as additional
channel levels are added.
Customer
 Channel Behavior and Organization
A. Channel Conflict
• When channel members disagree on roles/activities/ rewards.
• Horizontal: occurs among firms at the same channel level
• Vertical: occurs among firms at different channel levels

B.1. Vertical Marketing Systems (vs. conventional distribution channel)

• Corporate VMS (common ownership)
• Contractual VMS
• Manufacturer-sponsored retailer franchise system (Ford)
• Manufacturer-sponsored wholesaler franchise system (Coca-cola)
• Service-firm-sponsored retailer franchise system (KFC)
• Administered VMS (GM-dominating power)

B.2. Horizontal Marketing Systems

Channel Behavior and Organization (contd.)

B.3. Multi-channel Distribution Systems

• Also called hybrid marketing channels
• Occurs when a firm uses two or more marketing channels
• Hybrid marketing has many advantages
Producer

Distributors
Catalogs, Sales
Telephone, force
Internet
Retailers Dealers

Consumer Consumer Business Business

Segment 1 Segment 2 Segment 1 Segment 2

C. Changing Channel Organization

• Disintermediation
 Channel Design Decisions
o Step 1: Analyzing Consumer Needs
• Cost and feasibility of meeting needs must be considered
o Step 2: Setting Channel Objectives
• Set channel objectives in terms of targeted customer service

o Step 3: Identifying Major Alternatives

• Types of intermediaries
• Company sales force, manufacturer’s agency, industrial distributors
• Number of intermediaries
• Intensive, selective, and exclusive distribution
• Responsibilities of channel members

o Step 4: Evaluating Major Alternatives

• Economic criteria
• Control issues
• Adaptive criteria
 Channel Management Decisions
o Selecting Channel Members
• Identify characteristics that distinguish the best channel
members

o Managing and Motivating Channel Members

• Partner relationship management (PRM) is key

o Evaluating Channel Members

• Performance should be checked against standards
• Channel members should be rewarded/replaced as dictated
by performance
 Bank Distribution Network
o In Banking ‘Place’ means branch location and
Distribution
o Professor Kotler expressed this as any means
of increasing the availability and/or
convenience of a service that increases its
revenue from its use
o This is very important and much overlooked
area of a bank’s marketing mix
 Bank Distribution Network (contd.)
Bank services can be distributed either
• Directly or
• Indirectly
Bank Marketing Mix

Product Price Place Promotion

(Channels of Distribution)

Direct Indirect
(Bank Branch) Bank Credit Cards
Location & Coverage Telebanking/mails
Creating Branch Image In-shop Branches
In-touch Services
 Bank Distribution Network (contd.)
o Bank Branches
• Most important channel
• as fixed in location, must be conveniently situated
o Bank Credit Cards
• through cards banks offer credit services to its customers
• overcomes inseparability
• Increases use of bank services by existing customers
• establishes contacts with a wider variety of customers
o Telebanking/ mailbanking
• increases availability and convenience of bank services
• expanses geographical area
o In-shop Branches
• offer banking services in shops
• customers may even get statements
o In-touch Financial Services
• customers use home-computers, connect through network and bank with
banks in paying bills, knowing balances etc.
Bank Distribution Subcomponents
1.PEOPLE
• Managing and making best use of own-people
(Internal Marketing)
• Very important for delivering service than goods
• Customers judge products partly in terms of the
providers (friendly, knowledgeable)
• Branch managers must carefully
Process
• Select
• Train
Place Presentation
• Motivate front-line people
and others People
Bank Distribution Subcomponents (contd.)
2. PRESENTATION
o making a branch user-friendly
• interior - clean, tidy & neat
• people- warm, friendly, ever ready to help
• exterior- matching with the interior
• overall branch environment
• customer oriented & customer friendly
Process
• a place customer would love to walk
in & would be always ready Presentation
Place
to recommend
People
Bank Distribution Subcomponents (contd.)

3. PROCESS
o Systems & procedures
• making decisions on how the customers will get
their needs met
• helping customers, not having barrier in rendering
prompt & good services
• being not officious, longwinded and cumbersome
• letting not customers routed through Process

several contact points

Place Presentation
• not every time referring them to
the next higher authority at branch
People
 How to Gain That
In most cases the branch manager inherits the
branch location from the previous, yet s/he has
considerable scope to convert it into an effective
tool and improve the marketing mix thus
achieving the marketing goal.
o Office Environment Management
o Stationary Management
o Furniture & Fixture Management
o Noise Management
o Others
Office Environment
oA neat, tidy & clean branch is
essential for delivery of effective
customer service

o A good working environment has a

lot to do with job satisfaction

o Upkeep & maintenance is a regular

process
 Office Environment (contd.)
o Branch Layout should be
• Physically conductive for speedier movement of
vouchers/ documents and enough free space for
movement of sub-staff & customers. That:
• enables closer supervision & problem solving
• better work-coordination between & within departments
• improves efficiency by
o better guidance to a staff
o lesser movements of registers/ledgers
o better filing of papers
o better view of officer in-charge of administration & branch
manager
Stationery Management
o requirement of at least one year should be
planned and indented much in advance from the
bank’s stationery cell
o evaluate the possible misuse & fix it
• supervise closely
• educate staff
o do not hold excess stationery
• reduces available space and
• blocks working funds
Furniture & Fixture Management
o Make annual plans in consonance with the
present & proposed layout
• Customer should not be kept standing for want of a chair!

Noise Management
o Reduce the noise level by
1. a proper layout
2. sustained staff-education program (to speak low &
avoid shouting)
Direct Distribution Network
o More than 90% of the bank services are
distributed Directly through branches

o But branch management is often

ignored

o Two important stages are

1. Location of Bank Branches
2. Creating Branch Image
Location of Bank Branches
o Location decision is very important as it
involves considerable amount of
expenditure for long-term

o Different options are available and the

manager will decide according to the
ultimate goal
• City-center position is unavoidable as most
businesses are around there
Location of Bank Branches (contd.)
o It could be in High Streets in clustering with
other banks’ branches
• customer convenience
• easy to be selected by potential customers

o Might be to serve a particular segment of

customers
• University Campus area (students/teachers)
• Factory area
• Shopping Centers
• Trade fair etc.
 Creating Branch Image
o Uniform image for each branch for the
same bank makes
• clear advertisement for the bank as a whole
• psychological reassurance to the customer of
familiar home branch

o Architectural style of the building

(exteriors)
o Uniformity of appeal to all segments of
customers (interiors)
Creating Branch Image (contd.)
o Uniformity of interiors of each branch of
the same bank
o Internal layout
• well-labeled counters
• separate pay-off & withdrawal counters
etc.
o Internal people
• uniform dresses for sub-staff & might be for
front-desk employees
Changing Trend in Bank Distribution
o Banks now are becoming ‘one-stop
bank’, or ‘all-purpose bank’
• extending the range of services thus
becoming Supermarket of Financial
Services

o Thus creating image for such a vast

institution with such a diversified range of
products needs considerable focus.