Directorate of distance education

Marketing Channel Design Decisions
Marketing channel (also termed channels of distribution) design 
decisions are critical for successful product distribution. Marketing 
channels consist of intermediaries who contribute to the product 
distribution process according to consumer demand. They consist of 
merchant middlemen, agent middlemen, and facilitators. 
Companies rely on market intermediaries because of their 
effectiveness in distributing products as well as their capitalization. A 
company`s chosen channel members develop long-term relationships 

---

Notes
52
built on trust, and directly affect the marketing process including price. 
Marketing channels always have a producer and a final consumer.
Merchant Middlemen
Merchant middlemen consist of wholesalers and retailers who 
actually purchase the product and resell it. Wholesalers buy in large lots 
and sell in smaller quantities to retailers who in turn sell individual units 
to the consumer. Wholesalers and retailers assume the risk of ownership 
in return for a profit markup when selling the merchandise to others.
Agent Middlemen
Agent middlemen are sales intermediaries such as brokers, 
product representatives and sales representatives who seek others to 
purchase merchandise. They do not actually purchase any merchandise 
and are compensated on the basis of a percentage of sales and/or salary 
depending on whether they are independent business people or employees 
of companies wishing to sell products.
Facilitators
Facilitators are intermediaries who directly assist in the 
distribution function without taking title to the goods. They consist of a 
range of organizations including advertising agencies, financial lending 
organizations, shipping companies, and storage warehouses.
Channel Length
Channel length describes the number of intermediary levels exist-
ing between the producer and the consumer. A direct, or zero, channel 
is one where there is a direct relationship between the producer and the 
consumer (e.g., a neighborhood bakery may be considered a direct chan-
nel since the retail consumer purchases the finished baked goods directly 
with no intermediaries). A one-level channel has one intermediary which 
is usually a retailer (e.g., a regional bakery goods operation utilizes local 
food stores to distribute the product to the consumer). 

---

Notes
53
A two-level channel has two intermediaries to distribute products 
to the consumer (e.g., a candy manufacturer sells the product to a whole-
saler who in turn sells to the retailer). A three-level channel has three 
intermediaries normally consisting of an agent middleman who sells to a 
wholesaler who then sells to a retailer.