A channel of distribution is the route or path followed a product as it moves from the producer to the consumer/final user.
They are mainly classified into two main categories ie
- Direct/zero channel.
- Indirect channel.
This is the distribution system where no intermediary is used and the company sells the product directly to the consumer.
REASONS FOR GROWTH OF DIRECT/ZERO MARKETING.
- High cost of driving, traffic congestion and packing headaches. Have made people prefer goods to be directly delivered to their homes.
- Lack of enough/inadequate/insufficient time.
The market is now comprised of high market nitches (narrowly defined groups),each with different preferences.
- Long queues at counters.
- Electronic communication is growing and products can now be sold through the internet.
- Home shopping is convenient.
- Saves time
- Customers can do comparative shopping browsing the internet.
- Customers benefit learning about available products without meeting a sales person.
- It can be timed to reach customers at the right moment e.g. at home.
- Direct mail.
- Tele marketing-calling through telephone.
- Kiosk marketing-this is placing machines in busy places such as airports and bus stops where customers can get specific goods e.g. stamps, sweets and soft drinks a good example is the automatic vending machines.
- One level channel e.g. producer-retailer-consumer.
- Two level channel e.g. producer-wholesaler-retailer-consumer.
Three level channel e.g. producer-agent/broker-wholesaler-retailer-consumer. Producer-wholesaler- jobber-retailer-consumer.
This are disagreements among marketing channel members on goals and roles ie who should do what for what rewards.eg
- Horizontal conflict-refers to same level (among retailers).
- Vertical conflict-this are conflicts between different levels e.g.(wholesalers and retailers).
- i) Role incongruities-A role is a set of prescriptions defining what the behavior of the position member should be.
- ii) Resource scarcities-Disagreement over the allocation of some valuable resources needed to achieve a given goal may cause conflict
iii) Perceptual differences-Perception refers to the way an individual selects and interprets environmental stimuli in relation to objective reality.
- iv) Exceptional differences-Channel members have expectations about the behavior of other channel members. These expectations are predications concerning the future behaviors of other channel members. These predictions could turn out to be inaccurate but non-the less channel members take action based on these predictions.
- v) Decision Domain disagreements-Channel members’ explicitly or implicitly carve out for themselves an area of decision making that they feel is exclusively theirs. In contractual channel system, such as a franchise, these decisions domains are quite explicit and are usually spelled out meticulously in the franchise contract. But in more traditional, loosely aligned channels made up independent firms; the decision domains are sometimes “up for grabs”. Hence conflict can arise over which member has the right to make what decisions.
- vi) Goal incompatibilities-Each member of the marketing channel has his/her own goals and if these are incompatible, conflict arises.
vii) Communication difficulties-Communication is the vehicle for all interactions among the channel members, where such interactions are cooperative or conflicting. Breakdown in communication can lead to conflict in the channel.
In practice, conflict is usually spotted after it is well developed and obvious. This is because the potentially negative effects of the conflict may have a head start and may be already out of hand.
It is therefore better for the channel manager to have some kind of early warning system using perception surveys, marketing channel audit and distributors advisory councils or channel members’ committees.
- Dual compensation-this is applied when conflict exist between direct and indirect channels. The goal is to move the indirect channel from the position of potential adversary for direct sales force to one of partner for direct sales force.
- Activity based compensation/discount-it is used to manage cross-channels conflict or conflict between channels of differing cost structures and capabilities.it is applied paying a channel a specific discount if it performs a measurable task or function.
- Compensation for market share-it is usually applied to direct versus indirect conflict, direct sales representatives is compensated based on total market in a territory.it motivates the direct representatives to partner with indirect channels to maximize territory volume.
- Economic solutions-compensate channels fairly for function performed and help direct channels away from functions that create destructive conflict.
- Control-put a structure around a channel strategy to limit the potential for undue destructive conflict.
Rosenberg suggested methods that a channel manager may use to resolve conflict. These are:-
- a) A channel wide committee- comprising of manufactures, distributors and retailers representatives
- b) Joint goal setting the committee.
- c) A distribution executive position may be created for each major firm in the channel. The individual in this position will be responsible for exploring the firms distribution related problems, create awareness of the possible effects of conflict.
- d) Arbitration, which is advantageous as it is fast, is less expensive than litigation, preserves secrecy, involves the industry experts and most importantly confronts the problem in the early stage when it is easier to solve.