Chapter 01 Notes - 8th Ed

Chapter 1
MARKETING CHANNEL CONCEPTS
Teaching Notes
For students new to marketing, I would first spend time reviewing the 4 Ps of marketing
(product, price, promotion and place) and emphasize that this textbook is an in-depth
examination of the “place” as a source of competitive advantage.
The chapter does a good job illustrating how “place” as a key component of Strategic
Marketing, will offer to the firm an advantage that cannot be easily copied by
competition. In addition, the author stresses that channel management must first be
“managed” by marketing department personnel with and to the same degree that
marketing managers have in the past managed the promotion or price elements of the
marketing mix. Key terms and definitions surrounding these concepts should be
emphasized to the students, as many of them will be new, especially to those students
whose exposure to marketing is limited.
Chapter Objectives
This chapter introduces marketing channels as a competitive advantage to firms as other
forms of traditional competitive differentiations such as price or promotion can be easily
copied whereby channel management may not be so easily duplicated. This growing
awareness of the importance of marketing channels, in the content of a firm’s overall
marketing objectives is deserving of emphasis and study. In addition, the author
introduces key terms and definitions surrounding the topic of channel management and
introduces channel management as a separate marketing function. The chapter closes
with an examination of the flow in and the through marketing channels and how these
channels are structured and how to recognize them and explains the ancillary function.
Learning objectives
1. Realize that new Internet-based technologies have created a metamorphosis in
marketing channels.
2. Recognize that today’s customers expect more choices as to how, when, and
where products and services are made available to them.
3. Be aware of the need for multi-channel strategies and structures to satisfy
heightened customer expectations for channel choice.
4. Understand the definition of the marketing channel from a managerial perspective.
5. See how marketing channels relate to the other strategic variables in the marketing
mix.
6. Know the flows in marketing channels and how they relate to channel
management.
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© 2012 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be
different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Marketing Channel Concepts
7. Understand the principles of specialization and division of labor as well as
contactual efficiency in marketing channels.
8. Be familiar with the concepts of channel structure and ancillary structure and
recognize the difference between them.
Chapter Topics
1) The Multi-Channel Challenge
2) The Marketing Channel Defined
3) Specialization and Division of Labor
4) Contactual Efficiency
Chapter Outline
The Multi-Channel Challenge
To meet business-to-consumer (B2C) and business-to-business (B2B) expectations,

a variety of different channels, often both land based and Internet-based, is needed.
The pursuit of an effective multi-channel strategy raises four key challenges that include:
1. Finding the optimal multi-channel mix
2. Creating multi-channel synergies
3. Avoiding multi-channel conflicts
4. Gaining a sustainable competitive advantage via multi-channel strategy
A) An Optimal Multi-Channel Mix
Internet-based online channels have become mainstream channels in the channel mixes of
of both B2C and B2B organizations. A variety of examples are given that include Apple
Computer, Hensen Natural Corporation and Walmart.
B) Multi-Channel Synergies
Using online channels to obtain information about a product before purchasing it in

conventional “brick and mortar” channels is a common example of multi-channel
synergy. Multi-channel synergies can also emerge when different channels in the mix
“help each other out,” and in doing so, create synergies that result in better customer
service. For example, Johnston and Murphy, a well-known manufacturer of men’s shoes
and apparel, sells its products through its own retail stores, independent retailers, a
catalog mail order channel, and via its online channel. Creating such multi-channel
synergies that satisfy or even delight customers is a worthy aspiration to focus on when
developing multi-channel strategies.
 Synergy: Using one channel to enhance the effectiveness and efficiency of other
channels in the mix.
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Marketing Channels 8e
C) Avoiding Multi-Channel Conflict
This passage introduces the concept of conflict between different channels used to reach
the same customers. It is then explained how the ability to mitigate such conflict requires
knowledge of the economic and behavioral factors that underlie marketing channels as
well as astute channel strategy.
D) Sustainable Competitive Advantage and Multi-Channel Strategy
Companies struggle to find a sustainable competitive advantage that cannot be easily or

quickly copied by competitors. In recent years, the finding of such an advantage is far
more difficult using pricing, product, or promotion strategies. As a result, channel
strategy and particularly multi-channel strategy have attracted increased attention as a
means for gaining a sustainable competitive advantage. One example the author provides
pertains to Caterpillar which is highly regarded, world-wide, for its channel system, of
well-capitalized megadealers, a supply chain that utilizes the most advanced information
technology, and highly trained and motivated employees in the independent Caterpillar.
 Sustainable competitive advantage: A competitive edge that cannot be quickly or

easily copied by competitors.
The Marketing Channel Defined
The definition of “marketing channel” is based upon one’s perspective – that of a

consumer versus that of a manufacturer.
Spend some time with the students and get their perspective or opinions of what
“marketing channels” mean to them. Many students, being consumers, will state that
marketing channels are just a “bunch of middlemen”. Ask the students to view marketing
channels from a producer’s perspective–“path taken to move from producer to
consumer”.
From the perspective of a marketing manager, the marketing channel is viewed and
defined as: “the external contactual organization that management operates to achieve its
distribution objectives”.
Key Terms and Definitions

 External: Marketing channel exists outside of the firm. Firms must use
interorganizational management rather than intraorganizational management.
 Contactual organization: Refers to those firms or parties who are involved in the
negotiatory functions. Negotiatory functions include: buying, selling, or transferring
title from one firm to another.
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 Operates: Involvement by management in the affairs of the channel.
 Distribution objectives: Management has certain distribution goals in mind such as

distribution to particular retail stores of key products at or near key times.
A) Use of the term Channel Manager
Here it is probably a good idea to spend a few minutes discussing Figure 1.3 and helping
the students understand the differences in the job titles illustrated. Students new to
marketing may find themselves confused as to the number of different titles and their
appropriate role in the marketing function(s).
Few firms actually use this term in their job title descriptions. Figure 1.3 illustrates some
of the titles used by selected U.S. firms that involve people in channel management. In
fact, many different executives are involved in making channel decisions. In large
consumer products companies, the people involved can include the V.P. of Marketing,
general marketing manager, product or brand managers, sales managers, or regional sales
manager. For industrial products, it might be the V.P. of Sales and V.P. of Marketing.
For small business or franchisees, it might be the V.P. of Franchising or small business
owner.
Key Term and Definition

 Channel Manager: Refers to anyone in a firm or organization who is involved in
marketing channel decision making. This concept provides a sense of focus for
referring to the important role of channel decision-making within the firm.
B) Marketing Channels and Marketing Management Strategy
Spend some time going over Figure 1.4 at this point. It is important for the students to
realize that marketing management is a balancing act – balancing the “controllables”
and the “uncontrollables” in the business world. Students will begin to appreciate the
magnitude of the job and the level of “unknowns” that exist in the business world.
The marketing mix model portrays the marketing management process as a “strategic
blending” of the four controllable marketing variables (product, price, promotion, and
place) to meet the demands of customers. External uncontrollable elements include the
economy, sociocultural patterns of buyer behavior, competition, government and
technology.
Channel strategy fits under “place” in the marketing management strategy and managers
must operate their marketing channels in such a way as to support and enhance the other
strategic variables in the marketing mix.
The example of STIHL is used at this point in the chapter to illustrate the importance
some manufacturers place upon distribution within their marketing strategies. STIHL
enjoys a reputation for making products of the highest quality. Thus, it is interesting that
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STIHL has chosen not to sell it products through giant home improvement retailers.
Rather it depends upon a network of over 8,000 independent specialty retailers who have
extensive product knowledge, and the capability to service STIHL products. This
channel strategy has enabled STIHL to preserve and protect the core elements of what the
company stands for: high quality and innovative products, priced to provide value to the
customer, solid profitability for STIHL, and a real connection with its customers, not only
before the sale but for many years after as well.
C) Channel Strategy versus Logistics Management
Channel strategy and logistics management comprise the distribution variable of the
marketing mix. (Figure 1.6)
Channel strategy is concerned with the entire process of setting up and operating the
contactual organizations that are responsible for meeting the firm’s distribution
objectives.
Logistics management more narrowly focuses on providing product availability at the

appropriate place and time in the marketing channel.
Channel strategy must first be established before logistics management should be

considered. Logistic management is a subsidiary of channel management.
D) Flows in Marketing Channels
1. Product flow
2. Negotiation flow
3. Ownership flow
4. Information flow
5. Promotion flow
Figure 1.7 illustrates these flows for MillerCoors. It would be appropriate at this point
to spend some time discussing Figure 1.7 as it illustrates to the student the various
components/parts necessary for a successful sale and distribution of products. Many
students are unaware of these components or have never given much thought as to how
complicated the process is to complete.
Product flow is the actual physical movement of the product from the manufacturer
through all of the parties to the consumer.
You may ask students to illustrate an example of this process from their work experience
or interject examples from personal experience. If the students volunteer examples,
ensure that they state all of the steps in the process.
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Negotiation flow represents the interplay of the buying and selling functions associated
with the transfer of title or rights of ownership. Negotiation is a two-way process
involving mutual exchange between buyer and seller.
Ownership flow is the movement of the title of the product from one stage in the process
to another.
Information flow involves two directions – from the manufacturer to the consumer and
from the consumer to the manufacturer. This flow includes transportation as information
deemed necessary for the actual delivery of the product is communicated to the
transportation agents.
Promotion flow refers to the flow of persuasive communication in the form of

advertising, personal selling, sales promotion and publicity. This flow adds the
advertising agency as an element of promotion.
Figure 1.7expands the definition of channel and from a management standpoint,

illustrates the scope and complexity of channel management as it includes those elements
of actual delivery of the product and those involved in the communication of ideas or
concepts.
Emphasize the term “flow” with students as it is used to describe a “fluid” state whereby
information and products change on a constant basis and must in turn be “managed”
and communicated effectively.
E) Distribution through Intermediaries
Economic considerations are very important in determining what form intermediaries will
have in their appearance in marketing channels. Two important concepts are introduced:
specialization and division of labor and contactual efficiency.
Specialization and Division of Labor
When applied to distribution, the concept is that of breaking down complex tasks into
smaller, less complex ones and allocating them to parties who are specialists at
performing them at greater efficiencies.
Figure 1.8 shows the example of the production and distribution for an electric guitar. It
is important here to point out to the students how the same concept(s) of specialization
applies to the distribution function as well as the manufacturing process.
Contactual Efficiency
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From a channel manager’s viewpoint, contactual efficiency is the level of negotiation

effort between sellers and buyers relative to achieving a distribution objective.
Tables 1.2, 1.3, and Figure 1.9 show examples of how additional intermediaries will
increase the contactual efficiency. Here you might want to add additional examples or
ask students to provide examples from their own personal experiences to hone in on this
point. Perhaps a good example to use would be to ask students how grocery retailers
interact between manufacturers and consumers to ensure that one consumer is able to
buy one can or box of his/her favorite food item.
A) Channel Structure
The concept of channel structure as shown in other marketing books (Figure 1.10) fails to
suggest the relationship between channel structure and channel management.

 Channel structure: The group of channel members to which a set of distribution tasks
has been allocated.
The channel manager is faced with allocation decisions, how to allocate or structure the
task of distribution.
Multi-channel strategy is when the firm has chosen to reach its target consumer through
more than one channel. With the advent of E-commerce, many firms have opted to use
multi-channel strategies to reach their target market.
Here the textbook uses the example of Polo® by Ralph Lauren Apparel as an example.
Figures 1.11 illustrates marketing channels used by Ralph Lauren for its Polo® line.
Students should be able to give examples of other such multi-channel companies.
Figures 1.12 shows the channel structure for Sony Music. Figure 1.13 and 1.14 illustrate
marketing channels for consumer electronics and business-to-business markets.
Figure 1.15 shows the channel structure for eBay. Figure 1.16 shows the marketing
channel for services.
B) Ancillary Structure
While so far we have included in the channel management only those participants who
perform the negotiatory functions of channel management (buying, selling, transferring
title, distribution, etc.). There are others that are not members of the channel structure
that assist in the process. These other members will be defined as ancillary structure.

 Ancillary structure: The group of institutions (facilitating agents) that assist channel
members in performing distribution tasks.
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These ancillary members provide services to the channel members after the basic channel
decisions have already been made.
Examples of ancillary members include: banks, insurance agents, storage agents,

contractors, repair shops, etc.
Channel management must also deal with these ancillary members who do not have as
great a stake in the channel as channel members but who are nevertheless key
components in ensuring that the product is available to the consumer.
Answers to Review Questions
1. As the text aptly point out, customers now expect far more and better channel
choices for gaining access to the vast array of products and services from all over the
planet—how, where, and when they want them. For a variety of reasons, customers
have come to expect more from their distributors even though they are often unaware
of the effort made by retailers to accommodate them. One reason is that many
customers have been conditioned by the large retailers such as Walmart and Target to
expect greater value. Retailers such as these provide a wide range of products at
reasonable prices. Or consider the Apple stores where customers are given the
opportunity to try out products without committing themselves to an actual purchase.
Secondly, customers are better educated and prepared when engaging in shopping.
The Internet has made both retailers and manufacturers more transparent as to their
products and costs. As channels has proliferated, customers have come to expect not
just a greater variety of products, but a wider variety of options with which to obtain
the products they want.
2. The proliferation often introduces both horizontal and vertical channel conflict.
Frequently the addition of a new channel, for example the introduction of online
distribution, disturbs the status quo. Existing distributors may view a manufacture's
use of Internet as an attempt to "poach" a portion of their business. At the very least
the proliferation of channels would seem to threaten the ability of distributors to reach
their sales and financial objectives as manufacturers divert a portion of their sales to
its online site. Thus, the vertical nature of the dispute between the manufacturer and
its distributors emerges.
3. The management perspective views the channel from the standpoint of a decision
maker (channel manager) concerned with developing and managing marketing
channels that fulfill his/her firm’s distribution objectives efficiently. In other words,
marketing channel decisions are one of the major decision areas of the marketing mix,
along with product, pricing, promotion, and logistics decisions.
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This emphasis on the managerial aspects of marketing channels differs from several
other views that may be taken in the study of marketing channels. Three other views
are as follows:
a. Macro view - Under this approach, channels are examined as they operate in the
economy. The emphasis is on how and why they are structured in particular ways
and on how efficiently they operate.
b. Societal view - This view is characterized by a concern with the cost of
distribution from a consumer or societal standpoint. The key question has
traditionally been: Does distribution cost too much? That is, are the individual
consumer and society as a whole paying too much for distribution? Classic works
conforming to this mold are:
1) Paul W. Steward and J. Frederich Dewhurst, Does Distribution Cost Too

Much? (New York: The Twentieth Century Fund, 1939).
2) Harold Barger, Distribution’s Place in the American Economy Since 1969
(Princeton, N.J.: University Press, 1955).
3) Margaret Hall, John Knapp, and Christopher Winsten, Distribution in Great
Britain and North America (Oxford, England: Oxford University Press, 1962).
4) Revis Cox, Charles Goodman, and Thomas Fichandler, Distribution in a High
Level Economy (Englewood Cliffs, N.J.: Prentice-Hall, 1965).
c. Behavioral Systems view - This is a quite recent approach to the study of

marketing channels. Here, channels are viewed as behavioral systems operating in
an interorganizational context. Though many important ideas and concepts have
emerged from this school, adherents of this viewpoint are generally only slightly
concerned with the managerial implications of their findings.
4. “Inter” means between or among. “Intra” means within. Thus, interorganizational

management involves managing between or among more than one firm or agency.
Intraorganizational management is management within one firm or agency. Channel
management, by its very nature, involves primarily interorganizational management
because more than one firm or agency participates in the marketing channel.
5. No. Interorganizational management occurs in many other instances. For example,

when a firm “fauns out” (out-sources or sub-contracts) the production of particular
components for a product it produces, hires a management consulting firm, or deals
with governmental bodies, interorganizational management is taking place. Channel
management is simply one instance or a special case of interorganizational
management.
6. Often, total or even substantial control of a marketing channel is not even possible.
This is increasingly true for manufacturers as retailers grow in size and, as a result, in
power. In many cases, the retailer is larger than the manufacturer. The channel
manager does not need total control of the channel effectively. For example, there are
few, if any, suppliers who exercise total control over any channel of which Walmart
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is a member. Nevertheless, many of these suppliers are able to exert some control on
the channel–at least enough to secure the necessary cooperation to fulfill many of
their distribution objectives.
7. The relationship between channel management and the other elements of the
marketing mix can be summarized as complementary and coordinated. Channel
management, along with logistics, fits under the distribution/place function of the
marketing mix. In developing its marketing strategy, a firm must allocate its resources
among the marketing mix elements, using product, price, promotion and
distribution/place to meet the needs of the target market, within the constraints posed
by the external environment.
8. Channel management is a much broader and more basic component of the distribution
strategy variable of the marketing mix than is logistics management. Channel
management involves the entire process of setting up and operating the contactual
organization that is responsible for meeting the firm’s distribution objectives.
Logistics management, on the other hand, is more narrowly focused on providing
product availability at the appropriate times and places in the marketing channel.
9. The five flows in the marketing channel discussed in the chapter are: (1) product
flow, (2) negotiation flow, (3) ownership flow, (4) information flow, and (5)
promotion flow. The direction of the product flow is “down the channel” from
manufacturer to final user. The direction of the negotiation flow is both “up the
channel” (from final user to manufacturer) and “down the channel.” The ownership
flow is down the channel, while the information flow goes both up and down. Finally,
the promotion flow moves down the channel.
From a channel management standpoint, the concept of channel flows provides a

valuable framework for understanding the scope and complexity of channel
management. By thinking in terms of the five flows, it becomes obvious that channel
management involves much more than merely managing the physical flow of the
product through the channel. The other flows of negotiation, ownership, information,
and promotion must also be effectively managed and coordinated to achieve the
firm’s distribution objectives.
10. No. An independent operation of the product flow without the other flows would be
virtually impossible. For example, the information flow is needed to provide the
information on where the product should go. The negotiation flow is required to work
out the terms of sale associated with the products. The ownership flow determines
who takes title to the products in question, and quite often the promotion flow is
needed to stimulate the necessary demand to establish and maintain the product flow.
11. The work performed by the marketing channels can be thought of as a series of
distribution tasks or functions. The allocation of these tasks or functions to those
agencies or parties who can perform them most efficiently represents the application
of the concept of specialization and division of labor to the marketing channel. Such
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an allocation of distribution tasks or functions among channel participants who are
specialists at performing them results in more efficient distribution.
12. No. Though the principle of specialization and division of labor provides an overall
framework for choosing channel participants, many other issues and variables must
be considered. Note: This may be a good point for you to preview to your students
some of the material presented in Chapter 6, particularly the discussion under Phase
5, “Evaluating the Variables Affecting Channel Structure.”
13. Contactual efficiency is the level of negotiation effort between sellers and buyers
relative to achieving a distribution objective. The contactual efficiency relationship
can be expressed as a ratio. The negotiation effort is the input and the distribution
objective is the output. Dollars usually are the operational measure used to represent
the inputs. Outputs are represented in terms of the specific distribution objective
sought (e.g., getting 1,500 bicycle stores to carry a new type of bike saddle).
The concept of contactual efficiency can apply in nonmarketing channel contexts. For
example, our system of congressmen and senators to enable the views of millions of
individual citizens to be heard is in part explained by contactual efficiency. Labor
negotiations by union leaders, and centralized distribution points such as cities, major
airports, and even a telephone switchboard, represent applications of the principle of
contactual efficiency.
14. The key distinction here is that the channel structure is composed of those parties who
are involved in negotiatory tasks while those in the ancillary structure (facilitating
agencies) are not. Only those parties involved in negotiatory tasks make the decisions
that control the flow of goods and services through the channel. From the channel
manager’s standpoint, this usually means that the ancillary structure is much more
easily developed and managed than the channel structure. For example, if a
manufacturer of bubble gum located in California wants to have the gum transported
to New York, all it needs do is call up a common carrier (facilitating agency), pay the
fee, and have the gum shipped. If, however, the manufacturer wants to get a
supermarket chain (channel member) to carry the gum and enthusiastically promote it
by giving it prominent shelf space, it faces a far more difficult task.
15. A truly optimal channel structure would require the channel manager to have perfect
information about all possible channel structure alternatives as well as the ability to
calculate the exact performance of each possible alternative. Only then would he or
she be in a position to select the optimal channel. In the real world, perfect
information and such exact calculation procedures are rarely if ever attainable.
Commentaries on Issues for Discussion
1. The purpose of this question is to get the students to begin to understand how a multi-
channel network provides advantages and opportunities for both the manufacturer and
the customer. While the use of multiple channels provides manufacturers access to
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more market segments, multiple channels benefit consumers by providing more
service and pricing options. Consumers are no longer bound to single channels but
can "surf" channels depending on their needs and interests.
When categorizing auto repairs, there are two relevant categories as defined by
customer need, emergency and non-emergency. As an online auto parts distributor,
ROCKAUTO.COM offers fast but not instant delivery. When consumers experience
auto emergencies, they would probably rely on local brick and mortar auto parts
stores to provide parts quickly. For non-emergency repairs such as routine
maintenance or non-emergency repairs ROCKAUTO.COM offers a more cost
effective alternative to local auto parts stores.
The difficulty of the repair compounded with the level of expertise of the individual
may cause the consumer to seek local advice at the local auto parts store, especially
for technical repairs. Thus, it may come down to service versus price as consumers
decide how and where to purchase auto parts. The key here is to get the students to
examine how each member in the distribution channel adds value to or for the
channel member and ultimately the consumer.
2. This hypothetical yet very typical portrayal of the intermediary as a “parasite” that
does nothing but “rob” producers and increase costs to consumers should set the stage
for a spirited but hopefully (after having read the chapter) informed discussion of this
fallacious belief of the intermediary as parasite.
It may be instructive to organize the discussion around the distribution tasks

performed by the various intermediaries, the importance of those tasks to the
consumer, and the likelihood that the farmer has the ability to perform those tasks
himself.
3. It is clear from the information provided that online retailing is an established

distribution channel. The question then is whether mobile commerce is unique or
merely an extension of the existing online channel. To many consumers, the use of
the Internet is largely one of convenience in which they can make purchases from
their electronic devices. This speaks to buying behaviors as represented by the
"how," "where," and "when" of shopping. The introduction of online shopping made
quantum changes in the ease of all three of these shopping behaviors. The addition of
mobile devices, while providing additional convenience, might be viewed as an
incremental addition to channel options customers enjoy. Still, mobile shopping does
solidify the importance of online shopping as a viable alternative for consumers.
4. This question seems designed to elicit some interesting comments in a class

discussion, as most of the students will be very aware of the process of downloading
music from the Internet. In addition, it should enable students to better understand
the different levels of channel distribution and how technology may affect channel
design by reducing the number of channel levels. In fact, that is what is occurring in
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the music industry as music moves directly from producer (musician or recording
company) to the consumer, often bypassing wholesaler and retailer channels.
Alternative scenarios suggested by students will be varied and contentious as

suggestions and comments such as: “no need for retailers”, “I like the ability to make
my own records” and the like may be suggested by them. The key point for this
discussion will be to focus the student’s attention to the impact an ability to directly
download music has on channel members and on the “value-added” aspect that the
channel members (wholesalers and retailers) add for the consumer of music. For
example, the ability to browse through a record store and look at many different
albums and paraphernalia, the art created in the CD’s jacket cover(s) and related
merchandise. All of these may disappear if downloading of music becomes
commonplace.
5. Edward Jones places a high priority on personal, responsive service to its clients. By
bypassing the Internet as means for customers to trade, Edward Jones is inherently
placing a high priority on customer service. While the Internet is an efficient vehicle
to provide the means of delivering standardized products, it is less effective when
customized products (e.g., stock portfolios) are marketed. For Edward Jones to
maintain its profitable position as a full-service trader, it has chosen to channel its
clients to its brokers where each customer can receive the personal attention they
require. In other words, Edward Jones believes that the impersonal electronic
channels would alienate its customer base by leaving them to trade without the expert
guidance Edward Jones offers.
6. The idea behind this issue is to focus students’ attention on the key concept of
marketing channels from a management perspective and the key challenge of
managing the marketing channel–how to get intermediaries (channel members) who
are independent businesses to do the kinds of things the manufacturer would like
them to do even though they are not part of the manufacturer’s own organization and
so cannot be ordered to conform to the manufacturer’s wishes.
The discussion should be linked to the definition of marketing channels used in the
text to add concreteness to it. Hopefully, this will help students to realize that such
terms as “external,” “contactual organization,” “operates,” and “distribution
objectives” used in the definition are not esoteric academic terms but real issues that
firms using independent intermediaries face every day.
Manufacturer’s “giant end-of-aisle displays” often are not used by retailers because of
difficult assembly, space constraints and differing priorities. Thus, the situation in this
Issue for Discussion is an opportunity to preview the behavioral processes discussed
in Chapter 4, particularly conflict and communication.
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Chapter 1

MARKETING CHANNEL CONCEPTS

The Multi-Channel Challenge

To meet business-to-consumer (B2C) and business-to-business (B2B) expectations,

A) An Optimal Multi-Channel Mix

Using online channels to obtain information about a product before purchasing it in

C) Avoiding Multi-Channel Conflict

D) Sustainable Competitive Advantage and Multi-Channel Strategy

Companies struggle to find a sustainable competitive advantage that cannot be easily or

 Sustainable competitive advantage: A competitive edge that cannot be quickly or

The Marketing Channel Defined

The definition of “marketing channel” is based upon one’s perspective – that of a

Key Terms and Definitions

 Distribution objectives: Management has certain distribution goals in mind such as

A) Use of the term Channel Manager

Key Term and Definition

B) Marketing Channels and Marketing Management Strategy

C) Channel Strategy versus Logistics Management

Logistics management more narrowly focuses on providing product availability at the

Channel strategy must first be established before logistics management should be

D) Flows in Marketing Channels

Promotion flow refers to the flow of persuasive communication in the form of

Figure 1.7expands the definition of channel and from a management standpoint,

E) Distribution through Intermediaries

Specialization and Division of Labor

From a channel manager’s viewpoint, contactual efficiency is the level of negotiation

Key Term and Definition

Key Term and Definition

Examples of ancillary members include: banks, insurance agents, storage agents,

Answers to Review Questions

1) Paul W. Steward and J. Frederich Dewhurst, Does Distribution Cost Too

c. Behavioral Systems view - This is a quite recent approach to the study of

4. “Inter” means between or among. “Intra” means within. Thus, interorganizational

5. No. Interorganizational management occurs in many other instances. For example,

From a channel management standpoint, the concept of channel flows provides a

Commentaries on Issues for Discussion

It may be instructive to organize the discussion around the distribution tasks

3. It is clear from the information provided that online retailing is an established

4. This question seems designed to elicit some interesting comments in a class

Alternative scenarios suggested by students will be varied and contentious as

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