MARKETING CHANNELS

PROBLEM:
1. Industrial sales to auto assemblers OK
2. Retail sales of replacement tires doing poorly

22-2
COMPETITION:
1. Bridgestone / Firestone from Japan
2. Michelin from France / Germany
3. Both companies will sell at low low price to increase North
American market share

SOLUTION re: PLACE

1. Sell replacement tires where people buy them - SEARS
2. Sell higher quality tire through dealerships so dealers
can still bring in high end customers
3. Convert some stores to no-frills quick-serve
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Marketing Channels

Sets of interdependent organizations

involved in the process of making
a product or service available
for use
or consumption.

Marketing Channel
Producer Consumers
Intermediaries
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Creates Utility

Marketing / Distribution Channels create

Time, Place, Possession/ownership utility.

• Delivered at the right time - TIME UTILITY

• Delivered at the right place - PLACE UTILITY
• With appropriate legal requirements -
POSSESSION / OWNERSHIP UTILITY

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Channels and
Marketing Decisions
PUSH
STRATEGY

PULL
STRATEGY

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Categories of Buyers

Habitual shoppers

High value deal seekers

Variety-loving shoppers

High-involvement shoppers

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Should the 4 P’s be replaced?

• Solutions
• Information
• Value
• Access

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Channel Member Functions
Channels provide the means by which the firm moves
the goods and services it produces to ultimate users
• Gather information
• Develop and disseminate persuasive
communications
• Reach agreements on price and terms
• Acquire funds to finance inventories
• Assume risks
• Provide for storage
• Provide for buyers’ payment of their bills
• Oversee actual transfer of ownership 22-9
Increasing Efficiency

22-10
Marketing Channel Flows

22-11
Consumer Marketing Channels

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Industrial Marketing Channels

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Reverse Channel

- used cartridges - Canon

Also used for product recalls or for

broken products that need to be fixed
under Warranty - especially cars, tires
and some expensive electronic
consumer items.
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Conventional Channels

• Consists of one or more independent

producers, wholesalers, and retailers.
• Each is a separate business looking to
maximize profits.
• No channel member has much control
over the others
• No formal means exists for assigning roles
and resolving channel conflict 22-15
 Book Auto Commercial Computer
Publisher Manufacturer Airline Manufacturer

Book Auto
Distributor Dealer

Amazon.com
Auto-By-Tel Travelocity
(Virtual
(Virtual Broker) (Virtual Agent)
Retailer)

Ultimate Buyers
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Channel Service Outputs

Lot size

Waiting/delivery time

Spatial convenience

Product variety

Service backup
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Identifying Channel Alternatives

Types of
intermediaries

Number of
intermediaries

Terms and
responsibilities
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Number of Intermediaries

Exclusive

Selective

Intensive

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Types
• Intensive distribution:
distribution channel policy in which a
manufacturer of a convenience product attempts to
saturate the market

• Selective distribution:
distribution channel policy in which a
firm chooses only a limited number of retailers to
handle its product line

• Exclusive distribution:
distribution channel policy in which a
firm grants exclusive rights to a single wholesaler or
retailer to sell its products in a particular geographic
area
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Types….

Intensive Selective Exclusive

Distribution Distribution Distribution

Levi’s Women’s
503 Jeans

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The Value-Adds Vs Costs of Different Channels

22-22
Channel-Management Decisions

Selecting channel members

Training channel members

Motivating channel members

Evaluating channel members

Modifying channel members

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Channel Power

The capacity of a particular channel

member to control or influence the
behavior of another channel member

• Coercive
• Reward
• Legitimate
• Expert
• Referent 22-24
Bases of Power for Channel Control

• Reward power is based on perception held by channel member

that another group has the ability to provide rewards for varying
performances.
• Coercive power is based on perception held by channel
member that another group has the ability to inflict punishment.
• Legitimate Power is based on perception held by channel
member that another group has the right to influence the
formers action.
• Referent Power is based on perception held by channel
member that another group should be identified with as copying
the latter style, beliefs and actions.
• Expert Power is based on perception held by channel member
that another group should be identified with latter’s knowledge
and expertise.

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Causes of Channel Conflict
When a channel member perceives
that another member’s actions impede the
attainment of his or her goals

Role Incongruities
Resource Scarcities
Perceptual Differences
Expectational Differences
Decision Domain Disagreements
Goal Incompatibilities
Communication Difficulties
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Managing Channel Conflict

• Adoption of
superordinate goals
• Cooptation
• Diplomacy
• Mediation
• Arbitration

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e-Commerce Marketing Practices

• Pure-click
• Brick-and-click
• Brick-and-mortar

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Marketing Debate

 Does it matter where you are sold?

Take a position:
1. Channel images do not really affect the
brand images of the products they sell.
2. Channel images must be consistent with
the brand image.

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Assignment…..

• Your group is
starting a new
business. You have
developed a line of
fashion t-shirts.
What channel of
distribution are you
going to use?

22-30