Channel Management Part 1

Unit 4

Channel Management

CM:001

Explain the nature and scope

of channel management

Part 1

Channels of Distribution - 1

Businesses have many different options for
moving their products to consumers and
businesses who want to buy them.

These routes are known as channels of
distribution.

CM:001 Explain the nature and scope of channel management

Channels of Distribution - 2

These channels include intermediaries (or channel
members), often represented by wholesalers and
retailers, who handle the products as they make their
way from producer to final consumer.

Every channel member should add value to the
product as it moves through the channel.

CM:001 Explain the nature and scope of channel management

Multiple Choice

What are channels of distribution in business?

• Routes for employee communication

• Paths for moving products to consumers

• Marketing research methods

• Financial strategies for businesses

Channel Tasks - 1

As products move through these channels of
distribution, many channel tasks must be completed no
matter how many intermediaries are involved.
Since it is often impractical for a producer to perform all
of the channel tasks needed to get a product into the
hands of final consumers, any channel member that can
perform one or more of these tasks expertly adds value
to the product and benefits every member in the channel.

CM:001 Explain the nature and scope of channel management

Channel Tasks - 2

The following are some of the most common channel tasks:

Providing marketing information

Companies rely on market research to determine their
target markets’ needs and wants.

Since intermediaries tend to interact more closely with
consumers than producers, they are often good sources
of marketing information based on what they are
hearing from the consumers themselves.

CM:001 Explain the nature and scope of channel management

Channel Tasks - 3

Promoting products

When a producer sells its products through intermediaries,
the cost and responsibilities associated with product
promotion can be shared.

Retailers, for example, often assume a large portion
of promotion responsibilities.

Shared promotion activities within the channel can lower
channel members’ individual costs while producing the
same results.

CM:001 Explain the nature and scope of channel management

Multiple Choice

Why do companies rely on intermediaries for marketing information?

• Intermediaries are cheaper than market research firms.

• Intermediaries interact closely with consumers.

• Producers are too busy for market research.

• Intermediaries manufacture products.

Multiple Choice

What is one advantage of shared promotion activities within a channel of distribution?

• Increased individual costs

• Lowered channel effectiveness

• Lower individual costs

• Decreased promotion responsibilities

Channel Tasks - 4

Negotiating with customers

Producers often don’t have the time or the capacity to
negotiate with final customers on issues such as price,
delivery, installation, etc.

When the channel works smoothly, all the channel
members are profitable, and the final customer
receives the product in an efficient, effective manner.

CM:001 Explain the nature and scope of channel management

Channel Tasks - 5

Financing and risk-taking

Moving products through a channel costs money.

It takes money to manufacture products, to
transport and store them, to promote them, to
gather information about target market needs, to
extend credit to customers, etc.

When channel members work together to finance these
activities and to assume the inherent financial risks,
channels will be more effective.

CM:001 Explain the nature and scope of channel management

Multiple Choice

Why do producers prefer intermediaries to negotiate with customers?

• Producers lack time for negotiations

• Producers have negotiation expertise

• Intermediaries avoid negotiation tasks

• Negotiation is unnecessary in channels

Multiple Choice

What role does financing play in channel effectiveness?

• It increases individual costs

• It decreases financial risks

• It is irrelevant to channel activities

• It is the responsibility of the final customer

Effective Channel Management - 1

Proper management is crucial for channels to be
effective.

Those designing and overseeing channel
strategies must make informed decisions
regarding distribution patterns as well as
the selection of channel members and
assignment of their responsibilities.

Channels are only effective if channel
members share common goals.

CM:001 Explain the nature and scope of channel management

Effective Channel Management - 2

CM:001 Explain the nature and scope of channel management

There must be a commitment to the quality of the
product and to satisfying the target market’s needs and
wants.

Channel tasks must be shared appropriately; each
channel member should be assigned tasks that they can
perform the best.

Multiple Choice

Why is proper management crucial for effective channels of distribution?

• To increase individual costs

• To decrease channel effectiveness

• To eliminate financial risks

• To make informed decisions about distribution

Multiple Choice

Why should channel tasks be shared appropriately?

• To increase individual costs

• To avoid assigning tasks

• To assign tasks based on members' capabilities

• To decrease channel effectiveness

Acknowledgments

©2019, Maryland State Department of Education

Content sourced from intellectual property owned by

MBA Researchand Curriculum Center®

Digital-Based Photography Sources

Getty Images
Various images, including Thinkstock images, used in this presentation are ©2019 Getty Images.
All rights reserved www.gettyimages.com

Copyright

All photographic digital images in this PowerPoint are owned by the aforementioned
photographic resources or their licensors and are protected by the United States copyright laws,
international treaty provisions, and applicable laws. No title to or intellectual property rights to
the images in this PowerPoint are transferred to you. These sources retain all rights and are not
to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of
federal copyright laws.