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Direct Channel - A channel of distribution is the path that a product takes from producer to consumer. Distribution channels of varying length exist in modern business. A direct channel of distribution is the shortest and simplest form of distribution channel; it has become increasingly common since the advent of the Internet. A direct channel of distribution describes a situation in which the producer sells a product directly to a consumer without the help of intermediaries. A direct chain of distribution may involve face-to-face sales, computer sales or mail order but does not involve any form of distributor other than the original producer. Chains of distribution that involve nonaffiliated retailers or wholesalers cannot be described as direct channels of distribution and are instead classified as indirect chains of distribution.

Examples

Although major retailers and indirect channels of distribution are ubiquitous in the United States, there are many examples of direct distribution in US economy. Farmers who sell produce on site or at farmers markets use a direct channel of distribution. A company that produces its own products and sells them directly to the consumer in its own retail stores is using a direct chain of distribution. Producers frequently connect directly to consumers through company websites or assisted marketing systems such as eBay or Etsy.

Indirect Channel - A chain of intermediaries through which a product moves in order to be made available for purchase by a consumer. An indirect channel of distribution typically involves a product passing through additional steps as it moves from the manufacturing business via distributors to wholesalers and then retail stores.

For example: Producers sell goods in bulk to wholesalers, wholesalers sell to retailers, retailers sell to consumers in single items.

Channel Behavior

A marketing channel consists of firms that have partnered for their common food, with each member playing a specialized role. Each channel member depends on the others. For example, a Ford dealer depends on Ford to design cars that meet consumer needs. In turn, Ford depends on the dealer to attract consumers, persuade them to buy Ford cars, and service cars after the sale. The Ford dealer also depends on other dealers to provide good sales and service that will uphold the brand's reputation. In fact, the success of individual Ford dealers depends on how well the entire Ford marketing channel competes with the channels of other auto manufacturers.

•Channel conflict refers to disagreement over goals, roles, and rewards by channel members.

–Horizontal conflict is conflict among members at the same channel level.

–Vertical conflict is conflict between different levels of the same channel.

A vertical market is one in which all of your customers are in one particular industry, regardless of where in the food chain they are. For example, the site Noodle.org is a vertical search engine for the education industry. It doesn’t matter if you’re looking for a kindergarten class, an Ivy League college, or a polka dancing course, it covers its industry top to bottom.

A horizontal market is one in which all of your customers use your product to do the same thing, regardless of what industry they are in. For example,Google.com is a search engine that can be used to find polka classes…as well as ball bearings and hippopotami.

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STEP 1: Analyzing consumer need

·  Finding out what target consumers want from the channel-

·  What segments to serve

Gen Y= Direct marketing (website/ mobile shopping)

Gen X/ babyboomers= Indirect marketing as they are the type of consumer who needs interactions

·  Best channels to use

·  Minimizing the cost of meeting customer service requirements

STEP 2: Setting channel objectives

·Targeted levels of customer service – decide which segments to serve & the best channels to use in each case.

EG: household items (detergents, fast moving goods etc.) through TV advertising

·Balance consumer needs not only against the feasibility and costs of meeting these needs but also against customer price preferences

STEP 3: Identifying major channel alternatives

·  Types of intermediaries (WHO?)

·  Number of marketing intermediaries – intensity of coverage (HOW MANY?)

1. Intensive

2. Selective

3. Exclusive

· Responsibilities of channel members

STEP 4: Evaluation

Each alternative should be evaluated against:

·  Economic criteria

·  Control

· Adaptive criteria