Financing and Marketing Management

Unit 12 - Approaches for studying the problems in marketing

12.2. Marketing Channels and Supply Chain
In today’s economy, most producers do not sell their goods directly to the final users. Between them and the final users stand a host of marketing intermediaries performing a variety of functions and bearing a variety of names. Some intermediaries such as wholesalers and retailers-buy, take title to, and resell the merchandise; they are called merchant middlemen. Others such as brokers, manufacturers’ representatives and sales agents-search for customers and may negotiate on behalf of the producer but do not take title to the goods; they are called agent middlemen. Still others such as transportation companies, independent warehouses, banks and advertising agencies assist in the performance of distribution but neither take title to goods nor negotiate purchases or sales; they are called facilitators.
Marketing channels decisions are among the most critical decisions facing management. The company’s chosen channels intimately affect all the other marketing decisions. The company’s pricing depends on whether it uses mass merchandisers or high quality boutiques. The firm’s salesforce and advertising decisions depend on how much training and motivation the dealers need. In addition, the company’s channel decisions involve relatively long term commitments to other firms. When an auto maker signs up independent dealers to sell its automobiles, the auto maker cannot buy them out the next day and replace them with company-owned outlets. When a drug manufacturer relies on independent retail druggists to sell its products, the drug manufacturer must heed them when they object to its selling through mass-distribution outlets. Thus there is a powerful inertial tendency in channel arrangements. Therefore management must choose channels with an eye on tomorrow’s likely selling environment as well as today’s.