Marketing Management-(MKT-501) VU
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Lesson- 36
DISTRIBUTION CHANNELS (Cont….)
THE DISTRIBUTION CHANNEL
Frequently there may be a chain of intermediaries; each passing the product down the chain to the next
organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution
chain' or, rather more exotically, as the 'channel'.
Each of the elements in these chains will have their own specific needs; which the producer must take into
account, along with those of the all-important end-user.
CHANNEL MEMBERS
Distribution channels can, thus, have a number of `levels'. Kotler defined the simplest level that of direct
contact with no intermediaries involved, as the `zero-level' channel.
The next level, the `one-level' channel, features just one intermediary; in consumer goods a retailer, for
industrial goods a distributor, say. In recent years this has been the level which, together with the zero-level,
has accounted for the greatest percentage of the overall volumes distributed in, say, the UK; although the
very elaborate distribution systems in Japan are at the other end of the spectrum, with many levels being
encountered even for the simplest of consumer goods.
In the UK, a second level, a wholesaler for example, is now mainly used to extend distribution to the large
number of small, neighborhood retailers.
CHANNEL STRUCTURE
To the various `levels' of distribution, which they refer to as the `channel length'.
• Conventional or free-flow - This is the usual, widely recognized, channel with a range of `middle-
men' passing the goods on to the end-user.
• Single transaction - A temporary `channel' may be set up for one transaction; for example, the
sale of property or a specific civil engineering project. This does not share many characteristics with other
channel transactions, each one being unique.
• Vertical marketing system (VMS) - In this form, the elements of distribution are integrated.
THE INTERNAL MARKET
Many of the marketing principles and techniques which are applied to the external customers of an
organization can be just as effectively applied to each subsidiary's, or each department's, 'internal' customers.
In some parts of certain organizations this may in fact be formalized, as goods are transferred between
separate parts of the organization at a `transfer price'. To all intents and purposes, with the possible
exception of the pricing mechanism itself, this process can and should be viewed as a normal buyer-seller
relationship. The fact that this is a captive market, resulting in a `monopoly price', should not discourage the
participants from employing marketing techniques.
Less obvious, but just as practical, is the use of `marketing' by service and administrative departments; to
optimize their contribution to their `customers' (the rest of the organization in general, and those parts of it
which deal directly with them in particular). In all of this, the lessons of the non-profit organizations, in
dealing with their clients, offer a very useful parallel.
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