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Slides, Lecture Notes & Papers Marketing Channel Management
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Pagina |1Slides, Lecture Notes & Papers
Marketing Channel Management
Module 1
A marketing channel is a set of organisations that work together to make goods available for
end users.
- It are multiple independent organisations
- Goods can be FMCG, consumer durables, industrial products and services
- End users can be consumers and business customers
This is an example of a (basic model) channel. The end user
can either be a consumer or a business customer. In this case,
there is only one intermediary. In practice, one can have more
than one or none. Below one can see examples of channels in
both the B2B market and the consumer goods markets.
B2B
One should keep in mind that agents in fact do not buy
the product; which makes the manufacturer still the
owner of it. The agent can be seen as a representative.
Therefore, one can say that a distributor takes more
risk than an agent.
Consumer goods market
One should keep in mind that a wholesaler never sells
directly to the end user (= consumer).
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Importance of channels
- Channels are universal
Behind every product and service is one or more channels. The consumers may not
always be aware of this channel
- Channels are important in economic terms
Total sales through channels is one third of the worldwide annual GDP.
- Channels are an underutilised source of competitive advantage – companies do not
make enough use of it
o Differential potential
Differentiation potential is nowadays increasingly important since goods are
becoming commodities (all products of different companies are alike). This is
a struggle for manufacturers. To differentiate via their channel(s) is one of the
possible solutions.
o Creation of entry barriers
Setting up channels takes a lot of time. Channel members are less willing to
cooperate with new entrants
Manufacturers vs. retailers
In the 1970s, the manufacturers had a lot more power than retailers. This was caused by the
fact that the latter were local, unsophisticated businesses. However, since then a power shift
has occurred that gave retailers an increasing amount of power. This is caused by a growing
retail sector and growing retailer sophistication.
The single largest company in the world is now Walmart, a retailer. When compared to
retailers, brand manufacturers have become small players in the market. A forecast shows that
Internet retailers are becoming increasingly important in the next few years.
The rising of retail power is caused by two factors.
Growing retailer scale
Due to mergers and acquisitions (e.g. growth of Jumbo), and buying groups, retailers have
increased their number of shops and their accessibility. Furthermore, internationalisation
caused companies to expand beyond the boundaries of their origin countries and in that way
gain more power. Thirdly, retailers have invested in multi-channel operations and have
become inventive in designing new formats.
e.g. Jumbo: online ordering + pick-up point
Growing retailer sophistication
This phenomenon is among other things caused by better availability of consumer data,
something the manufacturer does not have. This information can be gathered in different
ways. One can think of store-level data, data that is gathered by the store itself and comprises
what has been sold, how much, at which price, and whether it was promoted. This data
gathering already exists a long time. Another way one can think of, is the loyalty card. This
card registers what a certain customer buys and when. This is individual data as opposed to
store data. Retailers can conclude from the individual data how to attract a certain customer.
This analysation is new, but the collection of data has existed for a longer period of time. The
number of data keeps increasing (online) and is becoming increasingly important big data.
Furthermore, retailers keep optimising its assortment. The rationalisation of stock keeping
units (SKUs) is a key priority for the world’s leading retailers. It is done by being critical
companies use big data to see which products can be “kicked out” because they are e.g. not
liked by the consumer. This means less power for the manufacturer. Thirdly, retailers are
increasingly becoming brands, namely due the production of private labels. These products
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