MarketingManagement.pdf

238 CHAPTER13 SELECTING ANDMANAGINGMARKETINGCHANNELS

facturer shifts some functions to intermediaries, its costs and prices go down, but the

intermediaries will charge more to cover their increased responsibilities. Still, if the

intermediaries are more efficient than the manufacturer, the prices to consumers

should be lower. If consumers perform some functions themselves, they should enjoy

still lower prices. In general, changes in channel institutions tend to reflect the discov-

ery of more efficient ways to combine or separate the economic functions that provide

assortments of products to target customers.

Channel Levels

The producer and the final customer are part of every channel. We will use the num-

ber of intermediary levels to designate the length of a channel. Figure 5-3a illustrates

several consumer-goods marketing channels of different lengths, while Figure 5-3b

illustrates industrial marketing channels.

Azero-level channel(also called a direct-marketing channel) consists of a manufac-

turer selling directly to the final customer through Internet selling, door-to-door sales,

home parties, mail order, telemarketing, TV selling, manufacturer-owned stores, and

other methods. A one-level channelcontains one selling intermediary, such as a retailer.

Atwo-level channelcontains two intermediaries; a three-level channelcontains three inter-

mediaries. From the producer’s point of view, obtaining information about end users

and exercising control becomes more difficult as the number of channel levels

increases.

Channels normally describe a forward movement of products. One can also talk

aboutbackward channels,which recycle trash and old or obsolete products no longer

used by customers. Several intermediaries play a role in backward channels, including

Figure 5-2 Five Marketing Flows in the Marketing Channel for Forklift Trucks