CONVENTIONAL MARKETING
SYSTEMS
Teacher – Shahed Rahman
INTRODUCTION
Design Issues are critical in marketing channels
 Selecting the right members
 Assigning them the proper functions
 Having everyone fulfill their responsibilities
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CONVENTIONAL MARKETING CHANNELS
AS ORGANIZATIONAL TEAMS
Most marketers work in a team
 Shoemakers, blacksmith and woodworkers work
with their wives as their teammates
 While Husband take care of production, wife
take care of customers and apprentice
 Conventional channel teams are loosely aligned
teams of organization designed to bridge gaps
between producers and consumers
 For conventional channels to succeed – each
members have to work hard
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CONVENTIONAL MARKETING CHANNEL:
ISSUES AND ANSWERS
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Producers, Wholesalers, Other intermediaries
such as agents or support servicers and retailers
all face the channel design decision
WHAT IS CHANNEL DESIGN
Indicate a pattern, arrangement or structure of
parts
 Arrangements that exist between organizations
in marketing system
 Design also reflect the rules and regulations that
system members use to create and sustain the
system
 Channel Design refer to those decisions
associated with the formation of new marketing
channel or the alteration of existing channels
 It is a strategic decision
 A proper design can create a sustainable
competitive advantage.
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WHY ARE CHANNEL DESIGN DECISIONS
CRITICAL?
A design effect all the marketing decisions
 Producers’ prices vary substantially according to
whether they use mass merchandisers or high
quality boutiques
 Channel Design decisions typically involve
relatively long term commitments to other
organizations and also the market that channel
member serves
 It is the key external resource of many
manufacturers
 It take years to build a successful channel
 You wont see the results instant
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ENSURE TEAM WORK
Channel members need to convert their special
skills into a successful team performance
 Manufacturer >> Intermediary >>> end users
linkage
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MARKETING FUNCTIONS FACTOR INTO
THE CHANNEL DESIGN DECISION?
Information
 Promotion
 Negotiation
 Ordering
 Financing
 Risk Taking
 Possession
 Billing
 Payment
 Title
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WHEN IS IT TIME TO DESIGN OR REDESIGN
A CHANNEL
When the nature of market change
 Organization's development of a new product or
product line
 Decision to target a new market segment
 Do a PEST Analysis to see whether the External
Environmental Changes

MAKING THE CHANNEL DESIGN DECISION
Organization should reach a workable
compromise between what is ideal, what is
adequate and what is obtainable.
 New manufacturers often feature small
operations within a limited market area
 Larger firms tend to use different types of
channels in different markets.
 Wholesale distributor ----- for large market
 Direct Retailers ---- for small market

MAKING THE CHANNEL DESIGN DECISION
Large or small an organization’s channel design
should develop in response to a SWOT Analysis
 SWOT Analysis should consider key success
market success factors, Market attractiveness to
a new entrants or a barrier to entry
 Technology issue – Social or culural trends
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CHANNEL DESIGN OPTION

Making channel design decisions, a number of
conventional channel systems are available
1.
2.
3.
Number of level present in the Channel
Number of intermediaries operating at the various
levels
Types of intermediaries used at each level
NUMBER OF LEVELS IN THE CHANNEL
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Each intermediary that performs a function necessary
to convey a good or service closer to final users
represents a channel level
A channel’s length is described by the number of
intermediary levels other than producers and users
that it contains
Zero level channel or direct channel marketing exist
when manufacturer sells directly to the final users
One level channel design feature one selling
intermediary. Eg. Retailers buy directly from the
manufacturer
Two level channel feature two selling intermediaries.
Such as whole saler and retailer
NUMBER OF INTERMEDIARIES AT EACH
LEVEL

Intensive Distribution
Distribute through as many outlet as possible
 Depends on product and consumer characteristics
 Low involvement product or consumers want more
convenience

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Exclusive Distribution
Places limits on the number of intermediaries
operating at any given channel level
 Used when producers want to retain control over the
quality of service levels

NUMBER OF INTERMEDIARIES AT EACH
LEVEL
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Selective Distribution
This lies between the two extreme.
 More than one but fewer than all available
intermediaries are used

TYPES OF INTERMEDIARIES AT EACH
LEVEL
Manufacturer’s sales force
 Manufacturers Representatives
 Industrial Distributor
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EVALUATING CHANNEL DESIGN ALTERNATIVES
Expected Sales and Costs Criteria
 Control and Resources

All companies want to control over its product and
resources as possible
 Control often proves the deciding factor in this
intermediary selection decision

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Flexibility
Degree of commitment to the proposed relationship
 Respond to a changing environmental opportunities
and threats

SELECTING THE BEST CHANNEL DESIGN

Analyzing Desired Channel Output Utilities
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Analyzing Channel Objectives and Product
Characteristics
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Convenience Utility
Lot size Utility
Selection Utility
Service utility
Unit Value
Standardization
Bulkiness
Complexity
Stage of Product Life Cycle
Analyzing Market Behaviors and Segments
MODIFYING EXISTING CHANNELS
Organization must do more than construct a good
channel design, set it in motion, and then sit
back and watch.
 Channel adjustment – purposeful modification to
intermediaries relationship- become necessary
when consumers buying pattern change, market
expand, new competition arise or newer
innovative distribution channel options become
available.

Add or drop individual intermediaries
 Add or drop particular marketing channels
 Develop a total new way of distributing and selling
goods within a particular market

MODIFYING EXISTING CHANNELS
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Product Life Cycle Changes
Introductory Stage
Declining
Growth stage
Mature Stage
MODIFYING EXISTING CHANNELS
Customer – Driven Refinement of Existing
Channels
 Growth of Multichannel Marketing System
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Multichannel marketing occurs when a single firm
uses two or more marketing channels to reach one or
more market segments
This is also know and dual distribution
By pursuing more segments firms usually achieve
increased market coverage
Companies also establish different channels to sell
different sized customers
Direct sales may be best for handling larger
customers