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.
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.
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.
The marketing channel (for example, a wholesaler) stores the product and then distributes the correct amount to the retail channels. Farmer Joseph relies on his wholesaler to deliver the correct amount of his pies to all of his retail clients. He does not want to deliver too many pies and then have to take a loss on the pies that expire. He also does not want to fall short with the amount delivered to his retailers and have them run out of his pies and lose out on additional profits. The wholesalers keep records of purchased amounts and deliver the correct pie delivery daily.
Farmer Joseph also uses his marketing channel members to help eliminate a discrepancy of assortment. This occurs when there is a lack of all the items a customer needs to receive full satisfaction from a product or products. Farmer Joseph must ensure that he is able to deliver the correct flavor of pies in the correct amount to his retailers. His biggest sellers are apple, blueberry, and pecan. His wholesalers provide the correct delivery amounts to all of his retail customers daily.
Lastly, marketing channel members can provide relief from temporal and spatial discrepancies. Temporal discrepancies occur when a product is produced, but a consumer is not ready to purchase the item. Spatial discrepancy happens when the location of a producer is too far away from the location of the markets for the product.
Temporal discrepancy can be overcome through the use of inventories by wholesalers. Unfortunately, Farmer Joseph's product does not store easily since the pies will spoil. Spatial discrepancy can be overcome by allowing the product (or pies) to be shipped to other area locations. A company must have the correct marketing channel in place to ensure that their product is able to reach their target market effectively.
A marketing channel helps get the right product to the consumer at the right time for purchase. If product assortment, quantity, or availability is not perfect, then the business will potentially have a loss in profits. Marketing channels allow businesses to produce their product and get it to the consumer at exactly the right time, in the right type, and at the right store.
After watching this lesson, you should be able to:
- Define marketing channel
- Describe the three ways marketing channels get products to end consumers
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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.
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.
|1||The 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.|
|2||The large warehousing ability of fulfillment centers means that customers are able to order larger quantities of their favorite goods online than in-store.|
|3||Having designated e-commerce order fulfillment centers have led to more efficient packaging since these employees only package goods and thus have gained experience.|
|4||Using algorithms to track online purchasing patterns have decreased the amount of stock-outs significantly.|
|5||Keeping 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).|
|6||Having 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.|
|1||Overcoming discrepancies of assortment|
|2||Overcoming discrepancies of quantity|
|3||Specialization and division of labor|
|4||Overcoming discrepancies of quantity|
|5||Overcoming temporal and spatial discrepancies|
|6||Specialization and division of labor|
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