Figure 12.2 Consumer and Business Marketing Channels Figure 12.2B shows some common business distribution channels The business marketer can use its own sales force to sell directly to business customers. Or it can sell to various types of intermediaries, who in turn sell to these customers. Consumer and business marketing channels with even more levels can sometimes be found, but these are less common. From the producer’s point of view, a greater number of levels means less control and greater channel complexity. Moreover, all of the institutions in the channel are connected by several types of flows . These include the physical flow of products, the flow of ownership, the payment flow, the information flow, and the promotion flow . These flows can make even channels with only one or a few levels very complex. 2 CHANNEL BEHAVIOUR AND ORGANIZATION Distribution channels are more than simple collections of firms tied together by various flows. They are complex behavioural systems in which people and companies interact to accomplish individual, company, and channel goals. Some channel systems consist of only informal interactions among loosely organized firms. Others consist of formal interactions guided by strong organizational structures.
Moreover, channel systems do not stand still; new types of intermediaries emerge, and whole new channel systems evolve. Here we look at channel behaviour and how members organize to do the work of the channel. Channel Behaviour A marketing channel consists of firms that have partnered for their common good. Each channel member depends on the others. Each channel member plays a specialized role in the channel. The channel will be most effective when each member assumes the tasks it can do best. Ideally, because the success of individual channel members depends on overall channel success, all channel firms should work together smoothly. They should understand and accept their roles, coordinate their activities, and cooperate to attain overall channel goals. However, individual channel members rarely take such a broad view. Cooperating to achieve overall channel goals sometimes means giving up individual company goals. Although channel members depend on one another, they often act alone in their own short-run best interests. They often disagree on who should do what and for what rewards. Such disagreements over goals, roles, and rewards generate channel conflict. Channel conflict Disagreement among marketing channel members on goals, roles, and rewards —who should do what and for what rewards. Horizontal conflict occurs among firms at the same level of the channel. For instance, some Ford dealers in Calgary might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories.