you can buy a single bar of Lever 2000, along with a shopping cart full of small quantities of toothpaste, shampoo, and other related products as you need them. Thus, intermediaries play an important role in matching supply and demand. In making products and services available to consumers, channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who use them.
Members of the marketing channel perform many key functions. Some help to complete transactions: • Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. • Promotion: Developing and spreading persuasive communications about an offer. • Contact: Finding and communicating with prospective buyers. • Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging. • Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred. Others help to fulfill the completed transactions: • Physical distribution: Transporting and storing goods. • Financing: Acquiring and using funds to cover the costs of the channel work. • Risk taking: Assuming the risks of carrying out the channel work. The question is not whether these functions need to be performed—they must be—but rather who will perform them. To the extent that the manufacturer performs these functions, its costs go up and therefore its prices must be higher. When some of these functions are shifted to intermediaries, the producer’s costs and prices may be lower, but the intermediaries must charge more to cover the costs of their work. In dividing the work of the channel, the various functions should be assigned to the channel members who can add the most value for the cost. Number of Channel Levels Companies can design their distribution channels to make products and services available to customers in different ways. Each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer is a channel level. Because both the producer and the final consumer perform some work, they are part of every channel. Channel level A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. The number of intermediary levels indicates the length of a channel.
Figure 12.2A shows several consumer distribution channels of different lengths. Channel 1, called a direct marketing channel , has no intermediary levels; the company sells directly to consumers. The remaining channels in Figure 12.2A are indirect marketing channels , containing one or more intermediaries.