11

Principles of
Marketing
2nd Quarter

Module 3 (Week 3)

Structure of Distribution Channels, its Functions and the Nature

of Supply Chain Management

Yvonne P. Recelestino
Module Writer

Department of Education – Republic of the Philippines Page 1

Content Standards:
The learners demonstrate an understanding of…
1. the essence of the new product development, pricing, placing (distribution),
and promoting a product or service
2. the necessity of a marketing plan in business
3. and proper interpretation of marketing strategies through workshop and
presentation

Performance Standards:

The learners shall be able to…

 design a new product or service, decide types of pricing approach, and
choose distribution methods and promotion tools that respond to
market trends
 create a new product or service design and pricing, and promotion
and distribution strategies
 orally defend the mini-marketing plan to a group of marketing
professionals

Learning Competency:

 discuss the structure of distribution channels, its functions, and the nature
of supply chain management

Learning Objectives:

At the end of this module the students will be able to:

1. Understand the nature and importace of marketing or distribution channels.

2. Understand its structure and functions.
3. Elaborate the importance of a supply chain
4. Appreciate the importance of this in the business industry

To the Learners

This module will equip you a necessary content knowledge, skills, and
competencies about the nature and importance of marketing channels, its
structure and functions. The supply chain and the value of delivery network, and
how the product will be well-distributed and accessible in the market.

You read and understand carefully each part of the module so that you can
be able to answers various activity that will help you develop your potentials in
understanding the lesson.

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 This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of

the lesson. This aims to help you discover
and understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled into process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or
skill into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of
the lesson learned. This also tends retention
of learned concepts.

Answer Key This contains answers to all activities in the

module.

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 What I need to Know

In this module you will be able to encounter terminologies such as

marketing channel or distribution channel, value delivery network, supply chain
mamagement etc. You are expected to understand the meaning and importance of
a marketing channel and how it helps a company generate profit.

There are various activities prepared by the writer/s that will help you
understand the meaning and importance distribution channels or marketing
channels in making the product accessible for its final buyers or customers. It is
hope that you will learn to value the knowledge and wisdom of this module.

What I Know

Instruction: True or False. Write T if the statement is true and F if it is false.

___________1. Marketing channel is not important in a business.

___________2. Direct marketing channel is a marketing channel that has many
intermediary levels
___________3. The supply chain is the network of companies that supplies materials
to a manufacturing company.
___________4. Channel level refers to the layer of intermediaries that performs some
work in bringing the product to the final buyer.

___________5. Indirect marketing channel has no intermediary levels.

___________6. Exclusive distribution happens only for some international brands.

___________7. The producer shall establish a list price and a fair set of discounts for
the intermediaries.
___________8. The company doesn’t have to monitor its marketing channels.
___________9. Companies need to be sensitive to their channel partners.
___________10. Mutual services and duties must need to be spelled out carefully,
especially in franchise and exclusive distribution channels.

What’s In

On your previous lesson you learned about pricing. Kindly explain in your own
words the meaning of the following terms:

Variable cost- ___________________________________________________________________

_________________________________________________________________________________

Fixed cost- _____________________________________________________________________

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Total cost- ______________________________________________________________________

Price- ___________________________________________________________________________

Customer-value-based pricing- __________________________________________________

__________________________________________________________________________________

Cost-based pricing- ______________________________________________________________

__________________________________________________________________________________

Before the lesson proper, kindly write the following guide questions to be given to
you in a piece of paper. Answer them based on your stocked knowledge or even as
a knowledgeable guess. After the discussion, try to answer those questions again,
and now apply the things learned from the lesson.

1. What is marketing or distribution channel?

2. What is supply chain management?
3. Give the structure and functions of a distribution channel.
4. As an ABM student, is it important that you know this topics? Why?
5. How can you be able to apply the things learned from the lessons in your
everyday living?

What’s New

Producing a product or service and making it available to buyers

requires building relationship noy only wth customers but also with key suppliers
and resellers in the company’s supply chain. So how does this works?

The supply chain is consists of upstream and downstream partners. Upstream

from the company is the set of firms that supply the raw materials, components,
parts, information, finances and expertise needed to create a product or service.

Marketers, however, have traditionally focused on the dowstream side of the supply
chain- on the marketing channels, such as wholesalers and retailers, form a vital
connection between the firm and its customers.

What is it

Few producers sell their goods directly to final users. Instead, most use
intermdiaries to bring their products to market.

Marketing channel or distribution channel- a set of interdependent organizations

that help make a product or service available for use or consumption by the
consumer or business user.

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A company’s channel decisions directly affect every other marketing decision.
Pricing depends on the whether the company works with national discount chains,
uses high-quality specialty stores, or sells directly to consumers via web.

Channel Level- a layer of intermediaries that performs some work in bringing the
product and its ownership closer to the final buyer.

Direct marketing channel- a marketing channel that has no intermediary levels;

the company sell their products door-to-door, through home and office sales parties
and through the internet.

Indirect marketing channel- channel containing one or more intermediary levels.

Marketing channel design - designing effective marketing channels by analyzing

customer needs, setting channel objectives, identifying major channel alternatives,
and evaluating those alternatives.

Exclusive distribution - giving a limited number of dealers the exclusive right to

distribute the company’s products in their territories.

Selective distribution - the use of more than one but fewer than all the
intermediaries who are willing to carry the company’s products.

The producers and the intermediaries need to agree on the terms and
responsibilities of each channel member. They should agree on price policies,
condition of sales, territory rights, and the specific services to be performed by each
party.

The producer shall establish a list price and a fair set of discounts for the
intermediaries. It must define each channel member’s territory, and it should be
careful about where it places new resellers.

Mutual services and duties must need to be spelled out carefully, especially in
franchise and exclusive distribution channels.

Marketing channel management-

The company must regularly check channel member performance against

standards such as sales quotas, average inventory levels selecting, managing, and
motivating individual channel members and evaluating their performance over
time, customer delivery time, treatment of damaged and lost goods, cooperation in
company promotion and training programs, and services to the customers. The
company should recognize and reward intermediaries who are performing well and
adding good value for consumers. Those who are performing poorly should be
assisted or, as a last resort, replaced.

Finally, companies need to be sensitive to their channel partners. Those who treat
their partners poorly risk not only losing support but also causing some legal
problems.

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Marketing logistics (physical distribution) - planning, implementing, and
controlling the physical flow of materials, final goods, and related information from
points of origin to points of consumption to meet customer requirements at a profit.

To some managers, logistics means only trucks and warehouses. But modern
logistics is more than this. Marketing logistics also called physical distribution
involves planning, implementing, and controlling the physical flow of goods,
services and related information from points of origin to points of consumption to
meet customers’ requirements at a profit.

Supply chain management- managing upstream and downstream value-added

flows of materials, final goods, and related information among suppliers, the
company, resellers, and final consumers.

Inbound logistics Outbound logistics

Customers
Suppliers Company Resellers

Reverse logistics

What’s More

Activity 1: Matching Type: Choose the answer from the following terms/concepts.
Write the letter of the correct answer.

A. supply chain management D. selective distribution

B. channel level E. company
C. marketing logistics F. marketing channel
__________1. It refers to the way of managing upstream and downstream value-
added flows of materials, final goods, and related information among suppliers, the
company, resellers, and final consumers.

__________2 It refers to the use of more than one but fewer than all the
intermediaries who are willing to carry the company’s products.

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__________3. It refers to the layer of intermediaries that performs some work in
bringing the product and its ownership closer to the final buyer.

__________4. It refers to the set of interdependent organizations that help make a

product or service available for use or consumption by the consumer or business
user.

__________5. It refers to the process of planning, implementing, and controlling the

physical flow of materials, final goods, and related information from points of origin
to points of consumption to meet customer requirements at a profit.

What I have learned.

Activity 2

Instruction: In your own words, define and give the importance of the
following terms.

1. Marketing channel- _______________________________________________________

___________________________________________________________________________

2. Supply chain management- _____________________________________

_______________________________________________________________

3. Inbound logistics- ______________________________________________

_______________________________________________________________

4. Exclusive distribution- __________________________________________

_______________________________________________________________

5. Selective distribution- ___________________________________________

_______________________________________________________________

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 What I can Do

Activity 3

Instruction: Name a product or brand and draw it in the table and then
explain the distribution channels or marketing channels that you will design
or use in order to make the product ready for use or consumption of your
customer.

Product or Brand Marketing channel or distribution

channel

Assessment

Instruction: Read and understand the statement below and choose the
letter of the correct answer.

1. Which of the following refers to the set of interdependent organizations that help
make a product or service available for use or consumption by the consumer or
business user?

A. marketing C. selective distribution

B. marketing channel D. exclusive distribution

2. Which of the following refers to the giving of a limited number of dealers the
exclusive right to distribute the company’s products in their territories?

A. exclusive distribution C. logistics

B. selective distribution D. outbound logistics

3. Which of the following refers to the process of managing upstream and

downstream value-added flows of materials, final goods, and related information
among suppliers, the company, resellers, and final consumers?

A. supply chain C. supply chain management

B. marketing D. marketing channel

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4. Which of the following refers to the marketing channel that has no intermediary
levels; the company sells their products door-to-door, through home and office
sales parties and through the internet.

A. exclusive distribution C. selective distribution

B. channels D. direct marketing channel

5. Which of the following refers to the the use of more than one but fewer than all
the intermediaries who are willing to carry the company’s products.

A. exclusive distribution C. logistics

B. selective distribution D. outbound logistics

Additional Activity

Instruction: Names of some popular brands of products are listed

below. Kindly write the strategy that their company are using, in
order for the product to reach their customers and gain profit.

Products Distribution strategy

Pepsi

Coca-Cola

Dove Beauty Soap

Palmolive conditioner

Nivea deodorant

REFERENCES

I. Principles of Marketing 14th Edition (Kotler, Armstrong, 2012)

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