Marketing – Distribution Channels – Traditional, Electronic, Vertical, Horizontal 8.6

1. Traditional Marketing Channels:
   • Characteristics: Traditional marketing channels rely on physical distribution methods, often involving face-to-face interactions and tangible assets like brick-and-mortar stores, warehouses, and physical transportation.
   • Components: This includes intermediaries like wholesalers, retailers, agents, and brokers. Producers typically sell to wholesalers, who then sell to retailers, and finally, retailers sell to consumers.
   • Communication: Communication is often direct and personal. Sales representatives, trade shows, and physical marketing materials play a significant role in traditional channels.
   • Examples: Brick-and-mortar stores, wholesalers, physical advertising, and trade shows.
2. Electronic Marketing Channels:
   • Characteristics: Electronic marketing channels, also known as digital or online channels, rely on internet-based technologies for distribution and transactions. This can include e-commerce websites, social media platforms, and email marketing.
   • Components: Online retailers, virtual marketplaces, social media platforms, and e-commerce websites are key players. Transactions can be conducted entirely online, and products can be shipped directly to consumers.
   • Communication: Communication is primarily digital. Email marketing, social media advertising, and online chat support are common methods of communication.
   • Examples: E-commerce websites (e.g., Amazon, eBay), social media platforms, email marketing, and online advertising.
3. Vertical Marketing Systems (VMS):
   • Corporate VMS:
     • Characteristics: In a corporate VMS, a single entity owns and operates multiple levels of the channel, from production to retail.
     • Example: Apple Inc. controls everything from product design and manufacturing to distribution through Apple Stores and their online store.
   • Contractual VMS:
     • Characteristics: In a contractual VMS, independent firms at different levels of the channel agree to work together under contractual agreements. This can include franchising and retail cooperatives.
     • Example: The franchise system, where individual businesses operate under the brand and guidelines of a larger franchisor.
   • Administered VMS:
     • Characteristics: An administered VMS does not have formal contracts but is coordinated by the dominant firm or channel leader through power and influence.
     • Example: Walmart, as a dominant retailer, has considerable influence over its suppliers in terms of pricing, packaging, and distribution.
   • Horizontal Marketing Systems:
     • Characteristics: In this system, two or more companies at the same level in the channel work together to exploit a marketing opportunity.
     • Example: Airlines forming partnerships to expand their reach through code-sharing agreements.
   • Multichannel Distribution Systems (Hybrid):
     • Characteristics: This involves using multiple channels to reach customers.
     • Example: A company may sell products both through its own website and through various retailers.

These different types of marketing channels and vertical marketing systems offer businesses various options for reaching and serving their target markets. The choice of channel strategy depends on factors like the nature of the product, target market, competitive environment, and the company’s overall marketing objectives.