Module 2
Distribution Management PMCM10
Evolution of Marketing channels
Marketing Channel
to your second module!
This module is a combination of
synchronous & asynchronous learning
and will last for two weeks
A pretest will be given via
Google Form in asynchronous test
Kimberly I. Ciruelos
Course Instructor
Contact Number: 09976035187
February 21, 2022
Date Initiated
March 5, 2022
Date of Completion
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
DISTRIBUTION MANAGEMENT
MODULE 2 OUTLINE
MODULE DURATION
I. February 21, 2022, to March 5, 2022, Synchronous Meeting and Asynchronous Learning.
II. For asynchronous learning inquiries, you may reach me through email ([email protected]) or group
messenger
LEARNING OBJECTIVES
After completing this module, you are expected to:
I. explain Marketing Channels;
II. identify Background Development (Evolution);
III. define Structures and Functions (Framework); and
IV. discuss Roles and Marketing Channels.
LEARNING ACTIVITIES
1. Group discussion during a synchronous meeting
2. Asynchronous Learning
Individual activity:
Explain the Evolution of Marketing Channels
OL & NOL Students:
Activity will be posted in Google Classroom
Deadline:
OL & NOL March 14, 2022, 8:00PM.
ASSESSMENT/EVALUATION
I. Synchronous Test with a time limit.
A long test link will be provided through our group chat. This is a synchronous test with a time limit.
II. Asynchronous Learning
ASSIGNMENT
1. What is Marketing Channel?
2. What are the Channel functions?
Deadline:
OL & NOL March 14, 2022, 8:00PM.
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
DISTRIBUTION MANAGEMENT
MODULE 2
INTRODUCTION
A marketing channel is a medium by which goods and services are made available to the customers for use and consumption.
For easier transfer of goods and services, both tangible and intangible products, this concept in the marketing channel will be
emphasized. It is the means by which goods move from producers or manufacturers to consumers – A level 1 channel of
distribution or channel 1 of the distribution channel. Speed in product and service delivery and physical location significantly
affects the efficiency of a marketing channel. The middlemen or the channel or the channel of distribution can affect the
efficiency in transferring the products.
Another less known form of the marketing channel is the Dual Distribution Channel. This channel is the less traditional form
that allows the manufacturer or wholesaler to reach the end-user by using more than one distribution channel. It can be a
wholesaler, retailer, jobber, agent, etc. 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, ie., a store.
MARKETING CHANNEL – a marketing channel (or
channel of distribution or trade channel) is a group of
interrelated intermediaries who direct products to
customers. It can be a salesman, broker, agent, retailer,
wholesaler, etc.
CHANNEL FUNCTIONS:
❖ They gather information about potential and current customers, competitors, and other actors and forces in the
marketing environment.;
❖ They develop and disseminate persuasive communications to stimulate purchasing;
❖ They reach an arrangement on price and other terms so that the transfer of ownership or possession can be affected;
❖ They place orders with manufacturers;
❖ They provide for the successive storage and movement of physical products.
EVOLUTION OF MARKETING CHANNELS
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
There have been major stages in the history of marketing, which are:
❖ THE TRADE ERA – production consisted of handmade goods that were limited and generally traded through
exploitation.
❖ THE PRODUCTION ORIENTATION ERA – enter the industrial stage. Since goods were scarce, businesses focused
mainly on manufacturing. As long as someone was producing, someone else would want to buy it. This orientation
rose to popularity due to shortages in the market, hence creating the foundation of Jean-Baptiste say’s famous
remark: “Supply creates its own demand”.
❖ THE SALES ORIENTATION ERA – after the Industrial Revolution, competition grew, and focus turned to selling.
Marketing, branding, and sales became an important pillar as outputs surpassed demand, and companies competed
for customers.
❖ THE MARKETING ORIENTATION ERA – from the second half of the 20th century onward, the saturation of markets
led companies to bestow upon marketers the opportunity to perform on a more strategic level. Through a profound
knowledge on the customer, these professionals were involved in what the company would produce, its distribution
channels, and pricing strategy. Employees within an organization were also motivated to acquire marketing
knowledge, which set the grounds to clients obtaining a general brand experience.
❖ THE RELATIONSHIP MARKRETING ERA – the focus of companies shifts toward building customer loyalty and
developing relationships with clients.
❖ THE SOCIAL/MARKETING ERA – it concentrates on social media interaction and real-time connection with clients.
Businesses are connected to current and potential customers 24/7 and engagement is a critical success factor.
Consider how much marketing has changed in the last century and will continue to shift as channels of
communication, production levels, and social alter. As markets expand and new marketing platforms emerge, the
science and practice of this profession are being transformed by the minute.
CONTACTUAL EFFICIENCY – channels consist of sets
of marketing relationships that emerge from the exchange
process. An important function performed by
intermediaries is their role in optimizing the number of
exchange relationships needed to complete transactions.
Contactual efficiency describes this movement toward a
point of equilibrium between the quantity and quality of
exchange relationships between channel members.
SORTING – organizations strive to ensure that all market
offerings they produce are eventually converted into goods and
services consumed by those in their target market. The process
by which this market progression unfolds is called sorting. In the
context of a channel, sorting is often described as a smoothing
function. This function entails the conversion of raw materials to
increasingly more refined forms until the goods are acceptable
for use by the final consumer. The product is then packaged and
distributed to retailers.
Two principal tasks are associated with the sorting function. They are:
1. CATEGORIZING – every channel at large amounts of heterogeneous supplies has to be converted into smaller
homogeneous subsets. The items within these categories are then categorized further to satisfy the specific needs
of individual consumers.
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
2. BREAKING BULK – it is necessary for intermediaries to break homogeneous lots into smaller units. The opportunity
to acquire smaller lots means smaller capital outflows are necessary at a single time. The sorting function’s
contributions to profit are astounding and convert billions of pesos of unproductive inventory into more sales.
MINIMIZING UNCERTAINTY
- The role that intermediaries help in reducing uncertainty is the most unnotified task. Several types of uncertainty
develop normally in all market settings.
NEED UNCERTAINTY
– refers to the doubts that the sellers often have regarding whether they actually understand the needs of their
customers. Most of the time neither sellers nor buyers understand the exact machines, tools, or services required to
reach optimal levels of productivity.
MARKET UNCERTAINTY
- Market uncertainty depends on the number of sources available for a product or service. Market uncertainty is
generally difficult to manage because it often results from uncontrollable environmental factors such as social,
economic, and competitive factors.
TRANSACTION UNCERTAINTY
- Transaction uncertainty relates to channel flows between buyers and sellers. The delivery of materials frequently
must be timed to precisely imperfect coincide with the use of those goods in the production processes of other
products or services. Problems arising at any point during these channel flows can lead to higher transaction
uncertainty. Uncertainty within marketing channels can be minimized through careful actions taken over a
prolonged period of exchange. Naturally, as exchanged processes become standardized, need, market, and
transaction uncertainty is lessened. The functions performed by marketing intermediaries concurrently satisfy the
needs of channel members in several ways.
1. FACILITATING STRATEGIC AIMS – the most basic way that the needs of market channels can be assessed and
then satisfied centers on the role of channel intermediaries can perform in helping channel members reach the goals
mapped out in their strategic plans.
2. FULFILLING INTERACTION REQUIREMENTS – this refers to the degree of coordination and on-site service
required by members of a marketing channel. Coordination provides the means by which harmony in ordering
systems, delivery timing, and merchandising is achieved between buyers and sellers.
3. SATISFYING DELIVERY AND HANDLING REQUIREMENTS – these questions typify the processes involved in
matching channel functions to the need for efficient resource management within marketing channels. Channel
members are often unaware of their precise delivery and handling requirement needs. By minimizing transaction
uncertainty, channel intermediaries help clarify these processes.
4. MANAGING INVENTORY REQUIREMENTS – the cost of financing and carrying inventory differ across product
categories and channel members. The proficiency, with which they determine and ultimately satisfy warehousing,
stock-out, and product substitutability needs, sets intermediaries apart from each other. Channel intermediaries help
by bridging producers and their customers, are instrumental in aligning an independent organization’s mission with
the
market(s) it serves. Channel intermediaries foster relationship-building by providing these fundamental fucntions in
the marketing channel.
STRUCTURES AND FUNCTIONS (FRAMEWORK)
The concept of channel structure is one that often is not explicitly defined in the marketing literature. Perhaps the
most typically discussed is length – the number of levels of intermediaries in the channel.
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
Manufacturer Consumer (two-level)
Manufacturer Retailer Consumer (three-level)
Manufacturer Wholesaler Retailer Consumer (four- level)
Manufacturer Agent Wholesaler Retailer Consumer (five-level)
CHANNEL TYPES AND FUNCTIONS:
1. ONE LEVEL MANUFACTURER – retailer- consumer, or manufacturer- distributor – industrial buyer.
2. TWO LEVELS MANUFACTURER – wholesaler – retailer – consumer, or manufacturer – agent – distributor – buyer.
3. THREE LEVELS MANUFACTURER - wholesaler – jobber – retailer – consumer.
The economic reason for the existence of intermediaries is more efficiency and effectiveness. If every manufacturer is a
market distributing separately to every buyer, the members of channels would be enormous: the interposition of a distributor
cuts down those members drastically.
There are many different functions performed by channel members:
1. PHYSICAL DISTRIBUTION – the transport and storage of goods.
2. MATCHING – making available the assortment of goods and services desired by the channel member’s customers.
3. TIME AND PLACE – making them available at the time and in the place desired by the customers and consumers.
4. FINANCE – finances the first three functions.
5. TRANSFERRING TITLE – ensuring the legal and ownership passes to the final buyer.
6. RISK-TAKING – bearing part of the risk inherent in business.
7. RESEARCH AND PROSPECTING – Find out what potential buyers want.
8. PROMOTION AND SELLING – persuading potential buyers to buy.
9. SERVICE – pre-and after-sales service.
10. SUPPORT SERVICES – insurance, documentation, management.
TYPES OF DISTRIBUTION SYSTEMS:
The marketing channels are created in order to cater to the needs of other businesses. The following are the different ways
to present the systems used in the distribution process:
❖ CONVENTIONAL DISTRIBUTION SYSTEM – “traditional/customary” channel for goods, is the most popular and
widely used channel organization. In this structure, various channel members make little or no effort to cooperate with
each other. They simply buy and sell from each other: and that is all. Each channel member considers only his/her
own best interest and nothing else.
❖ VERTICAL MARKETING SYSTEM (VMS) – in contrast to conventional Distribution System, wherein the whole
channel focuses at the end of the channel on the same target markets. This type of distribution channel organization
system is the vertical marketing system.
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
• CORPORATE CHANNEL – some corporations develop their own vertical marketing systems. They do this
by undergoing international expansions and/or buying other firms. In a corporate vertical marketing system,
a firm at one channel level owns the firms at the next level or owns the entire
San Mateo Municipal College
College of Business and Accountancy
Prepared by Kimberly I. Ciruelos
