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Marketing Channel: Definition and Function in the Marketplace

Lesson Transcript
Instructor
Jennifer Lombardo

Jennifer Lombardo received both her undergraduate degree and MBA in marketing from Rowan University. She spent ten years in consumer marketing for companies such as Nielsen Marketing Research, The Dial Corporation and Mattel Toys. She is currently an adjunct professor of marketing at Rowan University and a social media marketing consultant.

Expert Contributor
Steven Scalia

Steven completed a Graduate Degree is Chartered Accountancy at Concordia University. He has performed as Teacher's Assistant and Assistant Lecturer in University.

The marketing channel allows producers to deliver their products to consumers based on the correct quantity, time, type, and location. Learn the definition of a marketing channel and its function in the marketplace, and explore the ways a marketing channel accomplishes its goals. Updated: 08/18/2021

What is a Marketing Channel?

What comes to mind when you think of a channel? Does a television station enter your mind, or a deep canal near the shore? In marketing terminology, a channel refers to a way of making a product available to distribute to the end consumers. A marketing channel helps by getting the right products to the right consumer in time for purchase. This channel terminology falls under the P of physical distribution in the four P's of the marketing mix.

There are three ways that marketing channels can accomplish this task. One of Farmer Joseph's tasks is to make sure his pies are delivered to his customers when they need them. He has to be concerned with providing specialization and division of labor, overcoming discrepancies, and providing contact efficiency.

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  • 0:05 What is a Marketing Channel?
  • 1:10 Providing…
  • 2:24 Overcoming Discrepancies
  • 4:46 Lesson Summary
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Providing Specialization/Division of Labor

Farmer Joseph's first task is to be able to manufacture his pies in an efficient manner. He has achieved economies of scale by using large ovens to cook hundreds of pies daily. This has resulted in producing large enough quantities that he can supply his local farmers' market plus outside vendors with his delicious pie specialties.

Specialization and division of labor means breaking down complex tasks into simpler ones and training specialists to accomplish the tasks. This leads to greater production, efficiency, and profits. Marketing channels allow the farmer to train his employees with product specialization to make his pies quickly and efficiently.

He also uses specific channel members to enhance his pie delivery. He realized early on that the local wholesaler could help him deliver his pies to his growing list of retail clients. The local wholesaler takes daily delivery of his pies and then uses their trucks to get their pies to local retailers within a 50 mile radius. The use of the wholesaler's trucks provides the farmer with over $5,000 extra per week per vendor.

Overcoming Discrepancies

Another important task of marketing channels is that they provide the ability to overcome discrepancies of quantity, assortment, time and space. Marketing channels provide the ability to overcome discrepancies of quantity. This means that the channel providers help eliminate the key differences between the amount of product purchased and the amount of product an end user wants to buy.

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Additional Activities

Marketing Channel - A Practical Exercise:

The following exercise is designed to help students apply their knowledge of the concept of marketing channels in real-life business situations.

Exercise:

Wal-Mart is known to be one of the biggest retailers to ever exist in the world. That being said, its large size did not stop it from continuously looking for new and better marketing channels to optimize their operations. In the past decade, Wal-Mart went from being an entirely brick and mortar operation to a hybrid of physical retail outlets and a strong e-commerce presence. Below are examples of benefits that Wal-Mart has reaped from its new marketing channel. For each benefit listed, determine whether it represents (1) Specialization and division of labor, (2) Overcoming discrepancies of quantity, (3) Overcoming discrepancies of assortment, or (4) Overcoming temporal and spatial discrepancies.

No.Benefit
1The large warehousing ability of fulfillment centers means that customers are more likely to find items that might be temporarily out of stock in their local stores.
2The large warehousing ability of fulfillment centers means that customers are able to order larger quantities of their favorite goods online than in-store.
3Having designated e-commerce order fulfillment centers have led to more efficient packaging since these employees only package goods and thus have gained experience.
4Using algorithms to track online purchasing patterns have decreased the amount of stock-outs significantly.
5Keeping items in fulfillment centers has reduced the amount of items that are considered dead weight (i.e. taking up space on store shelves but not being sold).
6Having large order fulfillment centers has also optimized the company's shipping costs since all goods go through a center before being shipped using courier services.

Solution:

See below.

No.Benefit
1Overcoming discrepancies of assortment
2Overcoming discrepancies of quantity
3Specialization and division of labor
4Overcoming discrepancies of quantity
5Overcoming temporal and spatial discrepancies
6Specialization and division of labor

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