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Marketing Channels

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Marketing Channels

Have you noticed the role of marketing channels in your daily life? Have you ever thought about how much they influence our purchase behaviour? Not only do marketing channels influence our purchase decisions, but they also make our lives easier in many ways. Wondering how? Read along to find out how!

Marketing channel definition

Marketing channels make our lives easier by informing us about new products in the market and bringing them closer to us. They bring the products we desire as close to us as possible from the manufacturing site. Although not all businesses require a specific marketing channel, most companies use an intermediary to facilitate the availability of products.

Marketing channels are a group of entities that facilitate the promotion and availability of a good or service for customers.

A company's marketing channel also affects other facets of a product. How and where a product is sold will affect its price; for example, if the product is sold at a discounter, it cannot be very high-priced. The brand's reputation and value may also determine where a product is sold.

A marketing channel can be as simple as the transaction between the producer and the buyer. It can also pass through many channels from the producer before it reaches the buyer. These channels are also called intermediaries. Marketing channels or intermediaries enhance the efficiency in making the products available to the target customers.

Marketing channel types

Different marketing channel types make it easier for companies to reach more customers in less time. Organisations must communicate marketing messages and deliver products. Marketing channels fulfil all these functions.

Vertical Channels

In a vertical marketing channel, the producers, wholesalers, and retailers act as a single unit to bring the products to the target customers, in contrast to the conventional distribution channels. No channel member has much control over the other members as no formal roles are established. As a result, it can be difficult to resolve conflict. There are three vertical distribution channels - corporate, contractual, and administered.

Conventional distribution channels are marketing channels with independent producers, wholesalers, and retailers. Thus, no members have control over the others.

  • Corporate Vertical Channel - common ownership and integration of different levels of production and distribution stages.

  • Contractual Vertical Channel - firms operating at different levels of production and distribution function together under a contractual agreement.

  • Administered Vertical Channels - different stages of production and distribution collaborate due to the size and dominance of one of the parties.

Horizontal Channels

Two or more organisations working at the same level join to function as one. Different companies may have the upper hand in different marketing, financial, or production facets, making this union beneficial for all the involved parties. This union may be between competitors or non-competitors. Such companies benefit from synergies, and this channel also works well globally.

Apple partnered with Nike and helped athletic customers of both brands improve or measure their performance using an iWatch.

Multi-channels

Multi-channels involve creating multiple marketing channels to reach one or more customer segments and increase sales. This benefits companies by reaching customers through many channels - expanding customer reach. Multi-channel marketing may be a fast method for increasing sales, as more customers are aware of the products through the different channels.

Starbucks sells its products at its cafés, webshops, and grocery stores.

Functions of marketing channels

The various functions of marketing channels prove to be advantageous for companies. However, giving away the distribution function also means letting go of a certain level of control.

Marketing channels make products available to the target group quickly and efficiently (compared to if they were distributed directly by the manufacturer). This is because these channels have the resources, contacts, experience, and scale that help them function efficiently. They help not only producers but also customers.

Marketing channels reduce the chaos and hassles of distributing and purchasing a product. Multiple manufacturers can work with one distributor to distribute the products from all the manufacturers to all the customers.

When buying a new television, you can visit an electronics store to see your options. The electronics store will present you with various options from many companies. Here, the electronics store is the distribution channel. Imagine how much more work you would have had to do if there were no distribution channels like the electronics store. You would have had to contact every company you were interested in through their different contact channels to compare your purchase options.

As outlined in the example, the various channels buy supplies from multiple manufacturers in large quantities, which allows them to present customers with a wide variety of products in smaller quantities. This makes it easier for customers to choose and make a purchase.

Not only do marketing channels distribute products to customers, but they also perform other significant functions. Spreading awareness about products and promoting them to target customers are vital functions of marketing channels.

The different channels understand their customers' needs and see the product gaps clearly as they work directly with customers. This also helps them identify the appropriate market for the right product.

Risk-taking, financing and negotiating are a few additional functions of marketing channels.

Cross channel marketing and cross marketing

Cross-marketing and cross-channel marketing are two essential concepts of marketing. Let us take a look at them both in detail.

Cross Marketing

When two or more businesses work together to promote their products and increase sales, it is called cross marketing. As a result of cross-marketing, brands can provide something new to their customers.

Cross-marketing is the union of businesses (usually two) to improve promotion and sales and provide a better experience for customers.

Although cross-marketing aims to increase sales and fulfil business goals, it can only be possible if the target market, their wants and needs, social status, income, and other demographics are similar for all the involved parties. The following are the steps followed by companies that plan to market their products using cross-marketing channels:

  • Setting objectives,

  • Analysing the target audience,

  • Looking for potential partners,

  • Creating a partnership agreement

Spotify and UBER collaborated and marketed their services using cross marketing. UBER users could create Spotify playlists to listen to during their ride while waiting for the cab.

Cross-channel Marketing

As you may have guessed, a cross-channel marketing strategy uses different channels to reach its customers.

Cross-channel marketing provides different channels for customers to connect with a brand.

Companies mainly provide two or more channel options to reach their customers, ensuring more customers can interact with the brand. Providing more channels also allows customers to connect with their preferred or trusted channels. Different communication channels include e-mail, SMS, social media, brand websites, phone, etc.

Zara offers their customers to shop with them via their physical stores, mobile app, or company website. Customers can choose their most convenient method of shopping to make a purchase.

Marketing channels examples

Marketing channels perform many tasks, promotion and distribution being the main ones. Some marketing channel examples are outlined below.

Promotion channels

Marketing channels used to promote a product:

These are different channels that raise awareness of a product among the target group. Marketers can use each channel to reach different audiences.

Distribution Channels

Distribution channels are used to get the products or services from the producer to the customer. The different channels that may be used are as follows:

  • Wholesaler

  • Retailer

  • Dealer

  • Agents

  • Internet

  • Sales Team

  • Value-Added Reseller

  • Consultant

Therefore, marketing channels make the manufacturers' and end-users' lives easier by acting as a medium to promote and distribute goods and services. They play a crucial role in our day-to-day lives and businesses.

Marketing channels - Key takeaways

  • Marketing channels are a group of entities that facilitate the promotion and availability of a good or service for customers.
  • In a vertical marketing channel, the producers, wholesalers, and retailers act as a single unit to bring the products to the target customers.
  • There are three vertical distribution channels - corporate, contractual, and administered.
  • In horizontal channels, two or more organisations working at the same level join to function as one and benefit from synergy.
  • Setting up multiple marketing channels to reach one or more customer segments and increase sales is called multi-channel marketing.
  • Efficient distribution and promotion of products, understanding customers and product gaps to serve the right market, risk-taking, financing and negotiating are some functions of marketing channels.
  • Cross marketing is the union of businesses (usually two) to improve promotion and sales and provide a better experience for customers.

Final Marketing Channels Quiz

Question

Define marketing channels.

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Answer

Marketing channels are a group of entities that facilitate the promotion and availability of a good or service for customers.

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Question

Marketing channels are also sometimes referred to as ___________.

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Answer

intermediaries

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There are three types of marketing channels, and they are:

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Answer

vertical, horizontal, and multichannel

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Question

In a _______ marketing channel, the producers, wholesalers, and retailers act as a single unit


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Answer

vertical 

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None of the members has control over the rest of the members in a ________ channel.


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Answer

vertical

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Question

The three types of vertical distribution channels - corporate, _______, and _______.


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Answer

contractual, and administered channels

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A _________ includes the common ownership and integration of different levels of production and distribution stages.


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Answer

corporate vertical channel 

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Question

Firms operating at different levels of production and distribution functioning together under a contractual agreement is called a ________.


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Answer

contractual vertical channel

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Question

When different stages of production and distribution collaborate to function together, but the control is given to the dominant member, it is a(n) 


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administered vertical channel.

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Question

Procter & Gamble is an example of a(n) ________ vertical channel.

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Answer

administered

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Question

Two or more organizations working at the same level join to function as one, and this is a _______ channel.


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Answer

horizontal

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Question

Companies use _________ marketing to reach one or more customer segments and increase sales. 

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Answer

multichannel

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Starbucks sells its products at its cafés, online stores, and also at grocery stores. What kind of marketing channel is used here?


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Answer

Multi-channel

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Question

List some functions of the marketing channels.

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Answer

  • Efficient distribution and promotion of products
  • understanding customers and product gaps to serve the right market
  • risk-taking
  • financing
  • negotiating

Show question

Question

What is cross marketing?

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Answer

Cross marketing is the union of businesses (usually two) to improve promotion and sales and provide a better experience for customers.

Show question

Question

 The following are the steps followed by companies that plan to market their products using cross marketing:


  • Setting Business Goals
  • ____________________
  • ____________________
  • Creating a Partnership Agreement


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Answer

  • Setting Business Goals
  • Analysing Target Audience
  • Looking for Potential Partners
  • Creating a Partnership Agreement

Show question

Question

Select the promotional channels

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Answer

Influencer Marketing


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Question

Agents, retailers, and consultants are distribution channels


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Answer

True

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Question

Define vertical marketing systems

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Answer

The vertical marketing system is made up of the three primary partners in the distribution channel: the manufacturer, the wholesaler, and the retailer. These partners collaborate as a single unit to meet the requirements of the end consumer.

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Question

Which of the following is not part of vertical marketing system?

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Answer

Outbound marketing

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Question

_________ system unifies the many phases of production and distribution into a single ownership structure.

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Answer

Corporate VMS 

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_______ ties independent enterprises at various distribution tiers together to gain economies of scale and increased sales effect.


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Answer

Contractual VMS 

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In an __________, the leadership of the system is often determined not by shared ownership or contractual relationships but rather by the size and influence of one or a small number of the system's most powerful channel members.


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Answer

Administered VMS

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Question

Contractual vertical marketing systems are made up of separate businesses operating at varying levels of production and distribution that come together under the guise of contractual relationships to achieve more sales effect or economies of scale than they could on their own. 


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Answer

True

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What is the most common kind of contractual agreements?

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Answer

The most common kind of contractual agreement is the organization known as a franchise. 

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Question

What are the three categories of franchise opportunities?

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Answer

  1. Manufacturer-sponsored retailer franchise system. 
  2. Manufacturer-sponsored wholesaler franchise structure. 
  3. Service-firm-sponsored retailer franchise system. 

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Question

KFC franchise model is an example of _____.

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Answer

Contractual VMS.

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Walmart is an example of ________.

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Answer

Administered VMS

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What are the benefits of vertical marketing systems?

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Answer

Benefits of VMS include more resources, efficiency, better communications, branding, and sales.

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Explain how VMS created more efficiencies.

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Answer

In a vertical marketing system, the producers, distributors, and retailers are all working together toward a shared objective. This fosters the ability to design systems that are both superior and more efficient. This enables companies to have a comparative advantage over their competitors.

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Question

What's the difference between vertical marketing systems and conventional marketing system?

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Answer

In the traditional model of marketing, the manufacturer, wholesaler, and retailer all worked independently, intending to increase their respective profits as much as possible, even if it meant competing against one another. 

On the other hand, VMS is made up of the three primary stakeholders in the distribution channel: the retailer, the wholesaler, and the manufacturer. One of the channel members either owns, has a contract with, or has influence to the extent that other members must cooperate.

Show question

Question

ertical marketing systems that are administered make use of formal contractual obligations, and corporations take control of the distribution channel. 


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Answer

False

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Question

Explain how VMS provides a company with more resources.

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Answer

A company has a better chance of achieving success if it collaborates with a more significant number of organizations working toward the same objective. It does not have to, for instance, negotiate with a third-party shipping business since it has the capabilities to transport its products, which saves time and money. The company will have greater control over shipping costs and delivery times now that having access to this resource.

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Customers want companies to understand their needs and wants and deliver a product that meets their requirements. 

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Answer

True

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For a company to consistently meet the demands of customers, it is essential to have an effective ________ strategy.

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Answer

Channel

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Define channel strategy. 

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Answer

A channel strategy is a plan of action through which businesses make the product/service available to the end user.

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A good channel strategy could help businesses to reduce costs, gain a competitive advantage and deliver the maximum _____ to the customers. 

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Answer

Value

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The channel strategy ________ helps companies to structure and design the strategies effectively.

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Answer

Framework

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Why does a business need to identify customer needs? 

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Answer

To find and analyze the preferences and requirements of the target market. 

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Question

What is the purpose of setting objectives in the channel strategy framework? 

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Answer

To identify the segments a company wants to serve and the channels that could be used to serve those segments of customers.

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Question

Define intensive distribution. 

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Answer

Intensive distribution means keeping the products in many outlets as possible. 

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Question

Define exclusive distribution. 

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Answer

Exclusive distribution means keeping products limited to a few outlets.  

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Question

What is channel management about? 

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Answer

Channel management is about selecting, motivating, and evaluating the channel members over time. 

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Why is it important for companies to have a good relationship with channel partners?

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Answer

Companies and channel partners work together to deliver value to the customers. 

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What are the three types of channel strategy?

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Answer

Direct, indirect, and dual channel strategies. 

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Question

What is a direct channel? 

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Answer

Through the direct channel, the company sells the product/service directly to the end customer by bypassing the channel intermediaries such as wholesalers and retailers.

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Define an indirect channel. 

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Answer

Through an indirect channel, companies sell products to customers via intermediaries such as wholesalers and retailers.

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Question

Define dual channel. 

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Answer

It is a combination of direct and indirect channels. Some distribution is handled by the company itself and the rest is delegated to the intermediaries..

Show question

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