Changes in Marketing Channels Formation

Abstract

A marketing channel can be defined as a group of organisational units (internal and external from the point of view of a producer) which carries out functions related to the location of production distribution. Any organisational unit, notwithstanding it is an institution or agency performing one or several of these functions, is considered as a part of a marketing channel. The structure of the channel determines what functions and which organisational unit performs. A proper selection of product traffic channels requires the information where buyers are, and the number of buyers; besides it is necessary to learn the market conditions. While making decisions on marketing channels one must identify the existing situation and reason why the company should choose a certain strategy for the distribution of the production to buyers (the number and types of marketing channels, the point of production sale). The selection of the marketing channel scheme and structure takes longer than any other decision related to marketing mix elements (Svensson, 2002). Therefore, it is very important to make the right choice of the type of the channel, intermediaries and evaluate all elements of the environment which affect formation of a marketing channel.

The necessity of the distribution as a specific economic activity arises from the gap, mismatch between the production of products and consumption place, time, quantity and quality (product range) (Pranulis, Pajuodis, Urbonavicius, Virvilaite, 2008).

The speed of delivery, guaranteed supply and a possibility to purchase products, convenience for buyers and other things may improve the relationship between buyers and sellers and enhance consumer satisfaction. That is why companies more and more focus on marketing channel management in order to deliver products and services required by consumers on time, in the proper place and at a fair price (Frazier, 1999). Each marketing channel generates different revenues; thanks to intermediaries products are supplied to target markets in a more efficient way. By using their relationship, experience, specialisation and economy of scale, intermediaries create a value added to the product to be sold. Therefore, competitive and development possibilities of the company as well as consumer satisfaction are very much dependent on the marketing channels formed, and intermediaries chosen by the company.

Benefits can be seen in reviewing marketing channels in the historical context as well. In the eighties and nineties of the last century multistage, detailed channel formation models were suggested. Recently simpler 4 - 6-step, more universal models are prevailing. The geography of marketing channels management is expanding too: empirical tests on the principles of marketing channel formation have been made in Central and Eastern European countries (Lorentz, Wong, Hilmola, 2007), in Asia (Liu, Tao, Li, El-Ansary, 2008). Channel formation is also affected by modern technologies: a possibility to purchase products on internet, various novelties in the area of logistics. A variety of retail trade forms offers the consumer wider opportunities of choosing the product and the producer to select the most appropriate marketing channel from a wider range of channels of various forms, length, and width (Yan, 2010). Moreover, the decision of a consumer is more and more influenced by the environmental aspects of the product or service, social responsibility of producers and intermediaries (Juscius, Snieska, 2008).

http://dx.doi.org/10.5755/j01.ee.22.3.522