Page 100 - Marketing the Basics 2nd

92 Marketing: the Basics
CHANNEL LEVELS
Preventing the producer from realizing a sale are the marketing channels the product must traverse before it reaches the consumer. Some products require no intermediaries; others require multiple ones.
A zero-level channel is one where the producer is the distributor. Mail order and companies that sell their products on the Internet have a zero-level channel. Dell is a great example of a company successfully doing this; ICE.com is another example: this online- only firm sells jewellery from Montreal around world with the US and the UK as the dominant markets. They believe that other markets will become more active as they get more experience buying online.
A one-level channel is where there is one intermediary, most often a retailer, between the customer and producer. A two-level channel is where there are two intermediaries, and so on. The number of intermediaries profoundly affects how a product is marketed. The more intermediaries means the less responsibility – and less cost – the manufacturer incurs. However, by outsourcing control to other partners, the producer has less influence in how the product is marketed and distributed. There needs to be a balance between lowering production cost and controlling marketing. When Wal-Mart entered Canada in the early 1990s the number of intermediaries in the Canadian retailing market declined from 5 to 4. Wal-Mart was simply more efficient and their involvement in the Canadian marketplace meant that other retailers had to increase their efficiency; one way was by reducing the number of channel members by one on average.
CHANNEL ORGANIzATION
We said earlier that changing the placement strategy is much more difficult than changing the price or promotion strategy. While the process of distribution is quite static, the players within the system are not; the dynamics within the marketing channel are surprisingly fluid. New types of intermediaries emerge; mergers, bankruptcies and changing market conditions mean channel systems never stand still. Because there is a constant uncertainty within the distribution