Like any other concept, channel systems do change according to the development and the need of the hour.
Like any other concept, channel
systems do change according to the development and the need of the hour. With
consumers becoming conscious of where they buy and how they want things to be
delivered there has emerged different systems namely the vertical, horizontal
and multichannel marketing systems.
The conventional or the
traditional marketing channel encompasses a producer, one or few wholesalers
and one or few retailers. The objective of theses different players is to see
that they make enough profits, they are highly independent and don’t have
control over other channel members.
In contrast, the Vertical Marketing System (VMS) has the
three members acting as one unified team, there is one channel member who owns
the other members or allows franchising but ensures a greater role in the execution. Many organizations have started to
operate in this format as strong channel members try to dictate terms for the
producer as well as when they found the objectives of different channel members
differ from that of the producer.
There are three variants of
vertical marketing system namely corporate, administered and contractual
vertical marketing system. In case of corporate the organization combines the
production and the distribution under one roof. Organisations like Asian
paints, Amul are not only involved in the production of the products but they
also own a considerable no of outlets. An administered vertical marketing
system coordinates the production and distribution efficiencies but use their
size as a dominant influence.
HLL commands a greater shelf
space or Samsung gets better displays in retail outlets purely because of their
size and the reputation they carry with them. The third variant namely
contractual vertical marketing system coordinates the activities of individual
firms at different levels integrating their programs at contractual levels.
Firms like McDonalds, KFC use this type of vertical marketing systems for the
integration of their businesses.
The Horizontal marketing systems is one where two or more unrelated
businesses come together pull in resources to exploit the emerging
opportunities. Many private players especially banks have got into the act of
tie-ups with retail stores or even with fuel outlets in order to gain greater
market. ICICI bank has got tied with Big Bazaar, and this has greatly enhanced
the reputation of both these firms as well as increasing the customer base
The Multi-channel marketing systems as the term simplifies it is one in
which a firm uses multiple channels to reach different customer segments. In
the present scenario most organizations have started to use multiple channel
method because it helps in the expansion of the market coverage, it costs
little when the target segment is small instead of using a bigger channel and
mainly helps in customizing the offering according the need of the segments.
Exhibit 4.12 gives an idea about the different products and AT & T uses
different channels to reach out to different segments.
When distribution when goes
overseas they are bound to face a lot of restraints and problems like the host
country laws, the laws of the country to which the goods are shipped, the laws
of the nations through which the goods pass must be abided by the company.
Apart from this, other environmental factors do play an active role when
considered from a macro-marketing perspective. In the next lesson, we deal with
the role of retailers, wholesalers and logistics in this value chain and how do
they facilitate the process of performing the channel function effectively.
Tags : MARKETING MANAGEMENT - Structure and Design of Marketing Channels
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