Overview
This lecture covers the main functions performed by marketing channel partners and explains the roles various organizations play in delivering products to consumers.
Functions of Channel Partners
- Channel members add value by performing functions like promotion, sorting, inventory management, distribution, risk ownership, and information sharing.
- Marketing communications are disseminated by wholesalers, distributors, and retailers to inform and persuade customers.
- In a push strategy, manufacturers persuade intermediaries to stock and promote products, focusing efforts on channel partners rather than end consumers.
- In a pull strategy, manufacturers create consumer demand, causing retailers to stock the products due to direct customer requests.
- Joint promotions between manufacturers and retailers (e.g., coupons, ads) are common and require role agreements.
Product Handling and Inventory
- Wholesalers and distributors break down large product quantities into smaller units and provide a variety of products to businesses.
- Product sorting and regrouping ensure the right products reach the right businesses in appropriate amounts.
- Channel members store and manage inventory to prevent stockouts, though carrying inventory incurs costs.
- Storage also applies to raw materials (e.g., grain) before further processing.
Physical Distribution
- Large channel members may own transportation fleets, while others use third-party logistics companies.
- Reliable tracking of products during transit is crucial to minimize losses and ensure timely deliveries.
Risk Assumption and Credit
- Ownership risk for products (e.g., damage or loss during transit) is distributed among channel members according to contract terms and FOB provisions.
- Companies may delay ownership to reduce storage burdens, especially in uncertain markets.
Information Sharing
- Channel partners share data on demand, inventory, and competition to improve efficiency and competitiveness.
- Confidentiality is maintained through nondisclosure agreements (NDAs) to protect proprietary information.
Key Terms & Definitions
- Push Strategy — Manufacturer motivates intermediaries to sell products, focusing promotion on channel partners.
- Pull Strategy — Manufacturer drives consumer demand so retailers and distributors must stock the product.
- Free on Board (FOB) — Contract term indicating who owns goods and pays shipping costs at specific points.
- Nondisclosure Agreement (NDA) — Legal contract protecting proprietary information shared between channel partners.
Action Items / Next Steps
- Review the differences between push and pull strategies in marketing.
- Consider why ownership of products is a vital channel function.
- Identify which types of firms handle inventory management within channels.