Business to Business Marketing 11 1

Brief Summary

This video reviews key concepts related to marketing channels, including their definition as a network of independent organizations involved in making products or services available for consumption. It highlights the value of channels in search facilitation, sorting, routinization of transactions, and reducing the number of contacts needed to cover a market. The video also emphasizes that while channel members can be eliminated or substituted, the functions they perform cannot. The video concludes with a quiz to test understanding of these concepts.

• Marketing channels are a set of independent organizations involved in the process of making a product or service available for consumption.
• Channels create value through search facilitation, sorting, routinization of transactions, and reducing the number of contacts.
• While channel members can be eliminated or substituted, the functions they perform cannot.

Introduction to Marketing Channels

The video starts by introducing the concept of marketing channels and their importance in making products or services available for consumption. It emphasizes the need to understand what marketing channels are and how they function. The presenter sets the stage for a review of previously learned material, encouraging viewers to test their knowledge.

Definition of Marketing Channels

A marketing channel is defined as a set of independent organizations involved in the process of making a product or service available for use or consumption. This definition highlights that a marketing channel consists of multiple independent entities, not just a single firm. Each member of the channel, whether a manufacturer, distributor, or retailer, depends on the others to perform their specific roles. The process of distribution is ongoing and doesn't end with a sale; it includes after-sales service and support. The ultimate goal of the marketing channel is to satisfy the end-user, whether a consumer or a business buyer.

Value of Channels

The video discusses why marketing channels exist and the value they bring to the distribution process. Instead of manufacturers selling directly to end-users, channels create value through several key functions. These functions include search facilitation, sorting, routinization of transactions, and reducing the number of contacts.

Search Facilitation

Search facilitation addresses the uncertainty faced by both end-users and sellers. End-users may not know where to find the products they need, while sellers may struggle to reach their target audience. Intermediaries help bridge this gap by making it easier for buyers and sellers to find each other. They provide a platform for sellers to showcase their products and for buyers to discover and evaluate their options.

Sorting Function

Independent intermediaries perform the valuable function of sorting goods, addressing the discrepancy between the assortment of goods produced by manufacturers and the assortment demanded by end-users. Manufacturers typically produce large quantities of a limited variety of goods, while consumers demand smaller quantities of a wide variety of goods. The sorting functions include sorting out (breaking down heterogeneous supply into homogeneous stocks), accumulation (combining similar stocks from multiple sources), allocation (breaking homogeneous supply into smaller lots), and assorting (building up an assortment of products for resale). These functions create utility for end-users by ensuring products are available in the right assortments, at the right places, and at the right time.

Routinization of Transactions

Each purchase transaction involves ordering, determining the valuation, and paying for goods and services. The costs of distribution can be minimized if these transactions are routinized. Routinization leads to efficiencies in the execution of channel activities by standardizing the process and reducing the need for bargaining in each transaction.

Fewer Contacts

Intermediaries reduce the number of contacts necessary to cover a market. Without intermediaries, every producer would have to interact with every potential buyer, leading to a large number of transactions. By using intermediaries, the number of transactions is significantly reduced, lowering transaction costs. The video uses a visual example to illustrate how a distributor can reduce the number of transactions between manufacturers and customers.

Eliminating Channel Members vs. Functions

While distribution channel agencies or institutions can be eliminated or substituted, the functions they perform cannot. When channel members leave the channel, their functions shift either forward or backward to be assumed by other channel members. The example of the airline industry is used to illustrate this point, where travel agencies are being eliminated, but their functions of promotion and ticket sales are being taken over by airlines and online travel websites.

Quiz: Marketing Channel Definition

The video includes a quiz question to test the viewer's understanding of the definition of a marketing channel. The correct answer is that a marketing channel is a collection of interdependent organizations that participate in the process by which customers use or consume a product or service.

Quiz: Distribution Channel Functions

Another quiz question focuses on the functions of a distribution channel. The correct answer is that distribution channel functions cannot be removed, although they can be replaced or substituted. Distribution channel organizations, on the other hand, can be removed.