A Marketing Channel is

a set of interdependent organizations

that eases the transfer of ownership
as products move from producer to
business user or consumer.

2013 by Cengage Learning Inc. All rights reserved

Channel Intermediaries
A
A channel
channel intermediary
intermediary that
that
sells
sells mainly
mainly to
to customers.
customers.

Retailer
Retailer

Merchant
Merchant
Wholesaler
Wholesaler

An
An institution
institution that
that buys
buys goods
goods
from
from manufacturers,
manufacturers, takes
takes title
title
to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.

Agents
Agents and
and
Brokers
Brokers

Wholesaling
Wholesaling intermediaries
intermediaries who
who
facilitate
facilitate the
the sale
sale of
of aa product
product by
by
representing
representing channel
channel members.
members.

2013 by Cengage Learning Inc. All rights reserved

Channel Intermediaries

Retailers
Retailers

Take
TakeTitle
Titleto
toGoods
Goods

Merchant
Merchant
Wholesalers
Wholesalers

Take
TakeTitle
Titleto
toGoods
Goods

Agents
Agents
and
and
Brokers
Brokers

Do
DoNOT
NOTTake
TakeTitle
Titleto
toGoods
Goods

2013 by Cengage Learning Inc. All rights reserved

Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Transactional
Functions
Functions

Negotiating
Risk Taking
Physically distributing

Logistical
Logistical
Functions
Functions

Storing

Facilitating
Facilitating
Functions
Functions

Researching

Sorting

Financing

2013 by Cengage Learning Inc. All rights reserved

Logistics
Logistics
The efficient and costeffective forward and
reverse flow and storage of
goods, services, and related
information, into through,
and out of channel member
companies.
5

2013 by Cengage Learning Inc. All rights reserved

Designing a
Marketing Channel System

Analyze customer needs

Establish channel objectives
Identify major channel alternatives
Evaluate major channel alternatives

Exhibit 13.3
Marketing Channels for Consumer Products

2013 by Cengage Learning Inc. All rights reserved

Channels for Consumer

Products
Direct
Direct
Channel
Channel

2013 by Cengage Learning Inc. All rights reserved

Exhibit 13.4
Channels for Business and Industrial
Products

2013 by Cengage Learning Inc. All rights reserved

Business-to-Business
Exchanges on the Internet
The Internet has forced traditional
distributors to expand their model.
Companies
Companiesdrop
dropthe
theintermediary
intermediary
from
fromthe
the supply
supplychain
chain
Private
Privateexchanges
exchangeswith
withselect
select
suppliers
suppliersautomate
automatethe
thesupply
supplychain
chain

10

2013 by Cengage Learning Inc. All rights reserved

Reverse-Flow Channels
Reverse-flow channels are important to:
(1)reuse products or containers (such as
refillable chemical-carrying drums);
(2)refurbish products for resale (such as
circuit boards or computers)
(3)recycle products (such as paper)
(4)dispose of products and packaging

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall

Channel Strategy Decisions

12

Factors
Factors
Affecting
Affecting
Channel
Channel
Choice
Choice

Level
Level of
of
Distribution
Distribution
Intensity
Intensity

Market
Market Factors
Factors

Intensive
Intensive Distribution
Distribution

Product
Product Factors
Factors

Selective
Selective Distribution
Distribution

Producer
Producer Factors
Factors

Exclusive
Exclusive Distribution
Distribution

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Market Factors

13

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Levels of
Distribution Intensity

14

Intensity
Level

Objective

Number of
Intermediaries

Intensive

Achieve mass market

selling.
Convenience goods.

Many

Selective

Work with selected

intermediaries.
Shopping and some
specialty goods.

Several

Exclusive

Work with single

intermediary. Specialty
goods and industrial
equipment.

2013 by Cengage Learning Inc. All rights reserved

One

Managing Channel Relationships

Explain channel
leadership, conflict,
and partnering

6
2013 by Cengage Learning Inc. All rights reserved

15

Social Dimensions of Channels

Power
Power
Control
Control
Leadership
Leadership
Conflict
Conflict
Partnering
Partnering
16

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Channel Power, Control,

and Leadership

17

Channel
Channel
Power
Power

AAchannel
channelmembers
memberscapacity
capacityto
tocontrol
controlor
or
influence
the
behavior
of
other
channel
members
influence the behavior of other channel members

Channel
Channel
Control
Control

AAsituation
situationthat
thatoccurs
occurswhen
whenone
onemarketing
marketing
channel
channelmember
memberintentionally
intentionallyaffects
affectsanother
another
members
membersbehavior
behavior

Channel
Channel
Leader
Leader

AAmember
memberof
ofaamarketing
marketingchannel
channelthat
thatexercises
exercises
authority/power
authority/powerover
overthe
theactivities
activitiesof
ofother
othermembers
members

2013 by Cengage Learning Inc. All rights reserved

Causes of Channel Conflict

Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries dependence on
manufacturer

Channels and Distribution

Decisions for Services

Identify the special problems

and opportunities associated
with distribution in service
organizations

8
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19

Terms and Responsibilities

of Channel Members

Price policy
Condition of sale
Distributors territorial rights
Mutual services and responsibilities

Figure 14.4
Break-Even Cost Chart

Channel-Management Decisions

Selecting channel members

Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members

Channel Power
Coercive
Reward
Legitimate
Expert
Referent

Table 14.2 Strategies for

Managing Channel Conflict
Strategic
justification
Employee
exchange

Cooptation
Diplomacy
Mediation
Legal recourse

Distribution in Service Organizations

Minimizing wait times is a key factor in maintaining
service quality.

Managing service capability is critical to

successful service distribution.

Improving service delivery makes it easier and

more convenient for consumers to use the service.

Standardizing services across regions gives

customers quality service wherever that service is
consumed.

25

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