Chapter Twelve

Marketing Channels
Delivering Customer Value
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall

Chapter 12 - slide 1

What is a Distribution
Channel?
A set of interdependent organizations
(intermediaries) involved in the process
of making a product or service available
for use or consumption by the consumer
or business user.
Channel decisions are among the most
important decisions that management
faces and will directly affect every other
marketing decision.
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall

Chapter 12 - slide 2

Why Use Marketing Intermediaries?

Selling through wholesalers

and retailers usually is much
more efficient and cost
effective than direct sales

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 3

Distribution Channel Functions

Risk
Risk Taking
Taking

Information
Information

Financing
Financing

Promotion
Promotion

Physical
Physical
Distribution
Distribution

Contact
Contact

Negotiation
Negotiation
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall

Matching
Matching
Chapter 12 - slide 4

Marketing Channels

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 5

Conventional vs. Vertical

Marketing Channels

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 6

Vertical Marketing Systems

(VMS)
A vertical marketing system (VMS) consists
of producers, wholesalers, and retailers
acting as a unified system
One channel member either owns the others,
has contracts with them, or wields so much
power that they all cooperate

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 7

Vertical Marketing Systems

(VMS)
Corporate VMS combines successive stages
of production and distribution under single
ownership
Administered VMS coordinates successive
stages of production and distribution through
the size and power of the parties
Contractual VMS consists of independent
firms at different levels of production and
distribution who join through contracts to
obtain economies or sales impact
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall

Chapter 12 - slide 8

Horizontal Marketing Systems

(HMS)
Horizontal marketing systems are when
two or more companies at one level join
together to follow a new marketing
opportunity. Companies combine
financial, production, or marketing
resources to accomplish more than any
one company could alone.
e.g.
Joint R&D projects
Joint Promotions
Copyright 2010 Pearson Education, Inc.
Publishing as Prentice Hall

Chapter 12 - slide 9

Channel Behavior and

Organization
Changing Channel Organization

Disintermediation occurs when product or

service producers cut out intermediaries and
go directly to final buyers, or when radically
new types of channel intermediaries
displace traditional ones

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 10

Channel Design Decisions

Identifying Major Alternatives

Copyright 2010 Pearson Education, Inc.

Publishing as Prentice Hall

Chapter 12 - slide 11