Introduction

A marketing channel consists of the people, organizations, and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. It is the way products get to the end-user, the consumer; and is also known as a distribution channel. A marketing channel is a useful tool for management, and is crucial to creating an effective and well-planned marketing strategy.

Another less known form of the marketing channel is the Dual Distribution channel. This channel is a less traditional form that allows the manufacturer or wholesaler to reach the end-user by using more than one distribution channel. The producer can simultaneously reach the consumer through a direct market, such as a website, or sell to another company or retailer that will reach the consumer through another channel, i.e., a store. An example of this type of channel would be franchising.

Marketing channels are the ways that goods and services are made available for use by the consumers. All goods go through channels of distribution, and marketing depends on the way goods are distributed. The route that the product takes on its way from production to the consumer is important because a marketer must decide which route or channel is best for his particular product.

Stern & El-Ansary define marketing channels as; “Sets of independent organisations involved in the process of making a product or service available for use or consumption.”

What are Marketing Channels?

A marketing channel is defined as a path that consists of tools, strategies, medium platforms, and distribution of products or services from producers to consumers. Marketing channels connect the producers to their consumers and build a healthy relationship between them. Marketing channels can be online, offline, paid, or unpaid. These channels act as a vital part of the business process as it affects the success rate of the product. In short, a marketing channel is a medium that is used by a company for the advertisement of its products and services.

It is an effective way through which the products are delivered to their customers; therefore, marketing channels are also known as Distribution Channels. For example, Coca-Cola is one of the most famous soft drinks in India. But, how does this product reach every part of India? The company provides the product to every part of India through its Marketing Channel. The company uses two basic marketing channels; direct channel and indirect channel. Under the first channel, it directly communicates with the audience. However, by using indirect channels, it distributed the product through different offline and online media like newspapers, advertisements, events, promotion campaigns, billboards, social media, etc. 

Importance of Marketing Channel

Marketing channels are essential as they help the business to reach customers. Before a product or service is released to customers, a company ensures its basic and important elements, such as product, price, place, and promotion. Thus, a marketing channel is important for a business because of the following reasons:

1. Reach More Customers

Marketing channels help to reach more customers within less time. If a company uses efficient online platforms where the traffic is more, it can reach more customers within less time.

2. Builds a Healthy Relationship with Customers

Marketing channels build a healthy relationship between producers and consumers with the help of interaction related to products and services. This relationship helps to gain more trust from customers and increase the company’s sales.

3. Product-related Information

Marketing channels provide use, importance, benefits, and strategies regarding products and services. This helps to encourage the customers for buying the product.

4. Customer Support

Marketing channels provide customer support for all consumers. This helps customers to interact through phones, emails, and social media and get their questions and problems solved as soon as possible. 

5. On-time Delivery

Marketing channels help a company make sure that its products are delivered to the customers at the right time. It is important to provide the customers with their product on time because otherwise, the company has a high possibility of losing the customer.

6. Enough Stock

Proper marketing channel also helps a company in maintaining enough products in stock with itself. The company can easily store its products in warehouses and supply them according to the prevailing market demand.

Number of Channel Levels

The channel level includes Direct Marketing Channels, where sales take place between producer and consumer, and Indirect Marketing Channels where producers take the help of retailers for the distribution of the product. 

1. Direct Marketing Channel

Direct Marketing Channel is defined as a type of channel where the sales of products take place directly from producers to consumers. There is no involvement of any third party, such as retailers, for their distribution. For example, any online shopping website, such as Amazon sells its products directly from its shopping website to the customers.

2. Indirect Marketing Channel

An indirect Marketing Channel is defined as a type of channel where any third party, such as wholesalers, distribution agents, and retailers are involved in the distribution of products. The manufacturer makes contact with such third parties located at different locations and then sells their products. For example, Amazon also uses indirect marketing channels. Customers can purchase goods from independent retailers through Amazon, and those companies/retailers will have to fulfil the deliveries on time. 

Indirect Marketing Channel is further classified into three categories:

• One-Level Channel: One level channel is a channel where only one intermediary; i.e., the retailer is involved in the sales between the manufacturer and consumers.

• Two-Level Channel: Two level channel is a channel where two intermediaries; wholesalers and retailers are involved in the sales.

• Three-Level Channel: Three-Level Channel is a channel where three intermediaries; distribution agents, wholesalers, and retailers are involved in sales.

Roles of marketing channel in marketing strategies

• Links producers to buyers.

• Influences the firmʼs pricing strategy.

• Affecting product strategy through branding, policies, willingness to stock.

• Customizes profits, install, maintain, offer credit, etc.

Function:

• Promotion: Persuasive communication is disseminated through the channels to the customers. The channels also often help in the design of these communication messages.

• Information: The marketing channels perform the task of collecting and disseminating of marketing information about customers, competitors as well as potential customers and other market forces.

• Negotiation: The channel members are the ones who negotiate with other channel members and customers to facilitate the transfer of ownership.

• Risk taking: The channel members assume the risk for carrying out the channel work.

• Physical possession: The channel members also take the responsibility of storage of goods during the successive stages to the final consumers.

• Financing: The marketing channels work towards the acquisition and allocation of funds required to finance inventories at different levels of the marketing channels.

• Ordering: This function is with regards to the communication of channel members regarding the intention to purchase.

• Title: The channel members facilitate actual transfer of ownership from one organisation or person to the other.

• Payment: The channel members also assume responsibility for the buyers honouring their payments to the sellers through banks and other financial instruments.

Reasons

• Many organisations lack the resources (financial as well as other resources), to carry out direct marketing and reach out to their many customers without the help of any intermediary. For this purpose, marketing channels are used to take the products from the manufacturing organisations to the final consumers.

• For many smaller products, direct marketing may not be feasible considering that exclusive retail outlets for small products may not work, and having to stock other products might end up in having just another grocery or food outlet which would not serve the purpose. Setting up exclusive retail stores for marketing of small products like chocolates would not be a feasible idea.

• Given the lower return on investments in the retail business, organisations would be better off investing their money in their main business rather than taking up retailing or other channel functions.