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
TYPES OF
OF MARKETING
MARKETING CHANNELS
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:

© PhotoDisc
 CHANNEL STRATEGY DECISIONS

Selection of a  Channel design includes

Marketing Channel 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 Business users Consumers
factors
Geographically Geographically diverse
concentrated
Extensive technical Little technical knowledge
knowledge and regular and regular servicing not
servicing required required
  Large orders Small orders
Product Perishable Durable
factors
Complex Standardized
Expensive Inexpensive

Continued on next slide . . .

Table 13.1: Factors Influencing Marketing Channel
Strategies (Continued)
Characteristics of Short Characteristics of Long
Channels Channels
Producer Manufacturer has adequate Manufacturer lacks
factors resources to perform adequate resources to
channel functions perform channel functions

Broad product line Limited product line

Channel control important
Competitive factors Manufacturing feels
satisfied with marketing
intermediaries’ performance
in promoting products
Channel control not
important
Manufacturer feels
dissatisfied with marketing
intermediaries’ performance
in promoting products
 CHANNEL STRATEGY DECISIONS

 Distribution intensity: number

of intermediaries through which
Determining a manufacturer distributes its
Distribution Intensity goods
 Intensive distribution: channel
(LengthXWidth) policy in which a manufacturer
of a convenience product
attempts to saturate the market
 CHANNEL STRATEGY DECISIONS

 Exclusive distribution: channel

policy in which a firm grants
Determining exclusive rights to a single
Distribution Intensity 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
 CHANNEL STRATEGY DECISIONS
 Legal problems of exclusive
distribution
Determining  Exclusive-dealing agreement:
Distribution Intensity arrangement between
manufacturer and e-marketing
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:

© PhotoDisc
VERTICAL MARKETING SYSTEMS
 Corporate marketing system:
a VMS in which a single
Corporate owner operates at each stage
Systems in its marketing channel
 Example:
 VERTICAL MARKETING SYSTEMS
 Administered marketing
system: VMS that achieves
channel coordination when a
Administered dominant channel member
Systems exercises its power
 Example:
 CHANNEL MANAGEMENT AND
LEADERSHIP

 Channel Captain: a dominant and

controlling member of a marketing
channel
VERTICAL MARKETING SYSTEMS
 Contractual marketing
system:
VMS that coordinates
Contractual channel activities through
Systems formal agreements among
channel members like:
 Wholesaler-Sponsored
Voluntary Chains
 Retail Cooperatives
 Franchises
 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 company’s physical distribution system
contains the following elements:
 Customer Service
 Transportation
 Inventory Control
 Protective packaging and materials handling
 Order Processing
 Warehousing

© PhotoDisc
 Transportation
 Common  Private carriers do
carriers move not offer services
freight via all for hire, but provide
modes of transportation
transportation for
the general public services solely for
internally generated
 Contract Classes of
carriers do not freight
Carriers
serve the general
public
 Transportation
 Railroads  Freight
 Motor Forwarders and
Carriers Supplemental
 Water Major Modes of
Carriers
Carriers Transportation  Intermodal
 Pipelines Coordination
 Air Freight
 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 Depend- Frequency of Availabil- Flexibility Cost
ability in Shipments ity in in Handling
Meeting Different
Schedules Locations

Rail Average Average Low Low High Average

Water Very slow Average Very low Limited Very high Very low

Truck Fast High High Very Average High

extensive
Pipeline Slow High High Very Very low Low
limited
Air Very fast High Average Average 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: