TYPES OF MARKETING CHANNELS

Marketing channel: system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a distribution channel

STRATEGIC IMPLICATIONS: THE ROLE OF MARKETING CHANNELS IN MARKETING STRATEGY

Channels provide the means by which the firm moves the goods and services it produces to ultimate users Channels perform four important functions. They:

TYPES OF MARKETING CHANNELS

Marketing intermediary: wholesaler or retailer that operates between producers and consumers or business users; also called a middleman Wholesaler:

TYPES OF MARKETING CHANNELS

Logistics: process of coordinating the flow of information, goods, and services among members of the distribution channel Physical distribution:

TYPES OF MARKETING CHANNELS

Figure 13.2: Alternative Marketing Channels

Direct Selling
Direct channel: marketing channel that moves goods directly from a producer to ultimate user Direct selling: strategy designed to establish direct sales contract between producer and final user

Dell
Dell Computer: A Direct Seller of Computers

DUAL DISTRIBUTION
Dual distribution:

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CHANNEL STRATEGY DECISIONS

Selection of a Marketing Channel

Channel design includes decisions concerning channel length and channel width Factors which impact the selection of a marketing channel include:

Table 13.1: Factors Influencing Marketing Channel Strategies

Characteristics of Short Characteristics of Long Channels Channels Market factors Business users Geographically concentrated Extensive technical knowledge and regular servicing required Large orders Product factors Perishable Complex Expensive Consumers Geographically diverse Little technical knowledge and regular servicing not required Small orders Durable Standardized Inexpensive

Continued on next slide . . .

Table 13.1: Factors Influencing Marketing Channel Strategies (Continued)

Characteristics of Short Characteristics of Long Channels Channels

Producer factors

Manufacturer has adequate resources to perform channel functions

Broad product line Channel control important

Manufacturer lacks adequate resources to perform channel functions

Limited product line Channel control not important Manufacturer feels dissatisfied with marketing intermediaries performance in promoting products

Competitive factors

Manufacturing feels satisfied with marketing intermediaries performance in promoting products

CHANNEL STRATEGY DECISIONS Distribution intensity: number of intermediaries through which a manufacturer distributes its goods Intensive distribution: channel policy in which a manufacturer of a convenience product attempts to saturate the market

Determining Distribution Intensity

(LengthXWidth)

CHANNEL STRATEGY DECISIONS Exclusive distribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products and a particular geographic area Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line

Determining Distribution Intensity

CHANNEL STRATEGY DECISIONS

Legal problems of exclusive distribution

Determining Distribution Intensity Exclusive-dealing agreement: arrangement between manufacturer and emarketing intermediary that prohibits the intermediary from handling competing product lines Tying agreement: Arrangement that requires a marketing intermediary to carry items other than those they want to sell

Channel Management

Once channels have been designed, the challenge becomes effectively managing all the relationships The challenge is to set up a system or method for assigning responsibilities, controlling behaviors, and monitoring performance Various forms of Vertical Marketing Systems allow us to do this

VERTICAL MARKETING SYSTEMS

Vertical marketing system (VMS): planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain Four types of VMS:

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VERTICAL MARKETING SYSTEMS

Corporate marketing system: a VMS in which a single owner operates at each stage in its marketing channel Example:

Corporate Systems

VERTICAL MARKETING SYSTEMS

Administered marketing system: VMS that achieves channel coordination when a dominant channel member exercises its power Example:

Administered Systems

CHANNEL MANAGEMENT AND LEADERSHIP

Channel Captain: a dominant and controlling member of a marketing channel

VERTICAL MARKETING SYSTEMS

Contractual marketing system: VMS that coordinates channel activities through formal agreements among channel members like: Wholesaler-Sponsored Voluntary Chains Retail Cooperatives Franchises

Contractual Systems

THE ROLE OF LOGISTICS IN DISTRIBUTION STRATEGY

Supply (value) chain: sequence of suppliers that contributes to the creation and delivery of a good or service

Ryder
Ryder, a Member of the Supply Chain, Helps Firms Control Their Delivery Costs

Copyright 2001 by Harcourt, Inc. All rights reserved.

PHYSICAL DISTRIBUTION
A companys physical distribution system contains the following elements:
Customer Service Transportation Inventory Control Protective packaging and materials handling Order Processing Warehousing

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Transportation
Common carriers move freight via all modes of transportation for the general public Contract carriers do not serve the general public Private carriers do not offer services for hire, but provide transportation services solely for internally generated freight

Classes of Carriers

Transportation
Railroads Motor Carriers Water Carriers Pipelines Air Freight Freight Forwarders and Supplemental Carriers Intermodal Coordination

Major Modes of Transportation

FedEx
FedEx: Now Offering a Form of Multinational Intermodal Coordination for Freight When Speed Is Needed

Copyright 2001 by Harcourt, Inc. All rights reserved.

Table 13.2: Comparison of Transport Modes

Mode Speed Dependability in Meeting Schedules Frequency of Shipments Availability in Different Locations Flexibility in Handling Cost

Rail

Average

Average

Low

Low

High

Average

Water
Truck Pipeline Air

Very slow
Fast Slow Very fast

Average
High High High

Very low
High High Average

Limited
Very extensive Very limited Average

Very high
Average Very low Low

Very low
High Low Very high

Warehousing
Storage Warehouse: warehouse that holds goods for moderate to long periods prior to shipment, usually to buffer seasonal demand Distribution Warehouse:

Protective Packaging and Materials Handling

Unitizing: process of combining individual materials into large loads for easy handling Containeriztion: