Chapter 07

Marketing Channel

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 Objectives

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 Marketing Channels
AA set
set of
of interdependent
interdependent organizations
organizations
Marketing
Marketing that
that ease
ease thethe transfer
transfer of
of ownership
ownership asas
Channel
Channel products
products move
move from
from producer
producer to
to
business
business useruser or
or consumer.
consumer.

The
The connected
connected chain
chain of
of all
all the
the business
business
Supply
Supply entities,
entities, both
both internal
internal and
and external
external to
to
Chain
Chain the
the company,
company, that
that perform
perform or or support
support
the
the logistics
logistics function.
function.

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 Marketing Channel
Functions
Specialization
Specialization and
and
Division
Division of
of Labor
Labor
Channels
Channels
Fulfill
Fulfill
Three
Three Overcoming
Overcoming
Important
Important Discrepancies
Discrepancies
Functions
Functions

Providing
Providing Contact
Contact
Efficiency
Efficiency

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 Specialization and
Division of Labor
• Provides efficiency and cost savings
• Attains economies of scale
• Aids producers who lack resources to
market directly
• Builds good relationships with customers

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 Overcoming
Discrepancies
Discrepancy The
The difference
difference between
between the
the
Discrepancy amount
of amount ofof product
product produced
produced
of and
and the
the amount
amount an
an end
end user
user
Quantity
Quantity wants
wants to
to buy.
buy.
Discrepancy The
The lack
lack of
of all
all the
the items
items aa
Discrepancy customer
of customer needs
needs toto receive
receive full
full
of satisfaction
satisfaction from
from aa product
product or
or
Assortment
Assortment products.
products.

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 Overcoming
Discrepancies
A
A situation
situation that
that occurs
occurs when
when aa
Temporal
Temporal product
product isis produced
produced but
but aa
Discrepancy
Discrepancy customer
customer isis not
not ready
ready to
to buy
buy it.
it.

The
The difference
difference between
between the
the
Spatial
Spatial location
location of
of aa producer
producer and
and the
the
Discrepancy
Discrepancy location
location ofof widely
widely
scattered
scattered markets.
markets.

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Contact Efficiency

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Channel Intermediaries

A
A channel
channel intermediary
intermediary that
that
Retailer
Retailer sells
sells mainly
mainly to
to customers.
customers.

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

Wholesaling
Wholesaling intermediaries
intermediaries who
who
Agents
Agents and
and facilitate
facilitate the
the sale
sale of
of aa product
product by
by
Brokers
Brokers representing
representing channel
channel member.
member.

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Channel Intermediaries
Retailers
Retailers Take
Take Title
Title to
to Goods
Goods

Merchant
Merchant
Wholesalers
Wholesalers Take
Take Title
Title to
to Goods
Goods

Agents
Agents
and
and Do
Do NOT
NOT Take
Take Title
Title to
to Goods
Goods
Brokers
Brokers

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Factors Suggesting
Type of Wholesaling
Intermediary to Use

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 Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Transactional Negotiating
Functions
Functions
Risk Taking

Physically distributing
Logistical
Logistical Storing
Functions
Functions
Sorting

Facilitating Researching
Facilitating
Function
Function Financing
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 Channels for Consumer
Products
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel

Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

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 Channels for
Business-to-Business
Products
Direct Direct Industrial Agent/Broker Agent/Broker
Channel Channel Distributor Channel Industrial
Channel

Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers
Industrial Industrial
Distributor Distributor
Industrial Govt. Industrial Industrial Industrial
User Buyer User User User
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 Business-to-Business
Exchanges
on the Internet
• Linking buyers and sellers
• Dropping the middleman from the supply
chain
• Creating “private exchanges” to automate the
supply chain

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 Channel Strategy
Decisions
Factors
Factors Level
Level of
of
Affecting
Affecting Distribution
Distribution
Channel
Channel Intensity
Intensity
Choice
Choice

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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Alternative Channel
Arrangements
Multiple Channels

Nontraditional
Channels

Strategic Channel
Alliances

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 Market Factors
Customer
Customer Profiles
Profiles

Consumer
Consumer or
or Industrial
Industrial
Customer
Customer

Size
Size of
of Market
Market
Market
Market Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices Geographic Location

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 Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Life
Life Cycle
Cycle
Product
Product Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices Product
Product Delicacy
Delicacy

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 Producer Factors
Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines

Producer
Producer Factors
Factors
That
That Affect
Affect
Channel Desire
Desire for
for Channel
Channel Control
Control
Channel
Choices
Choices

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 Levels of Distribution
Intensity
Number
Number of
of
Intensity
Intensity Level
Level Objective
Objective Intermediaries
Intermediaries
Achieve
Achievemass
mass market
market
Intensive
Intensive selling.
selling. Many
Many
Convenience
Conveniencegoods.
goods.
Work
Workwith
withselected
selected
intermediaries.
intermediaries.
Selective Several
Several
Selective Shopping
Shoppingandandsome
some
specialty
specialtygoods.
goods.
Work
Workwith
withsingle
single
intermediary.
intermediary.Specialty
Specialty
Exclusive
Exclusive goods
One
One
goodsand
andindustrial
industrial
equipment.
equipment.

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 Managing Channel
Relationships
Channel
Channel Power
Power

Channel
Channel Control
Control
Social
Social
Dimensions
Dimensions Channel
Channel Leadership
Leadership
of
of Channels
Channels

Channel
Channel Conflict
Conflict

Channel
Channel Partnering
Partnering

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 Channel Power,
Control, and Leadership
AA channel
channel member’s
member’s capacity
capacity to
to
Channel
Channel control
control or
or influence
influence the
the behavior
behavior
Power
Power of
of other
other channel
channel members
members

A
A situation
situation that
that occurs
occurs when
when one
one
Channel
Channel marketing
marketing channel
channel member
member
Control
Control intentionally
intentionally affects
affects another
another
member’s
member’s behavior.
behavior.

A
A member
member of of aa marketing
marketing channel
channel
Channel
Channel that
that exercises
exercises authority/power
authority/power over
over
Leader
Leader the
the activities
activities ofof other
other members.
members.

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 Channel Conflict

A clash of goals and methods

between distribution channel members.
Horizontal
Horizontal Occurs
Occursamong
amongchannel
channelmembers
members
Conflict
Conflict on
onthe
the same
samelevel
level

Vertical
Vertical Occurs
Occursamong
amongchannel
channelmembers
members
Conflict
Conflict at
atdifferent
differentlevels
levels

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Channel Partnering

The joint effort of all channel

members to create a supply
chain that serves customers
and creates a competitive
advantage.

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 Production Scheduling
Traditional
Traditional Focus
Focus Customer
Customer Focus
Focus
Push
Push // Pull
Pull Push
Push Pull
Pull
Strategy
Strategy
Start
Start of
of Customer-Order
Customer-Order
Inventory-Based
Inventory-Based
Production
Production Based
Based

Manufacturing
Manufacturing Mass
Mass Production
Production Mass
Mass Customization
Customization

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 Just-in-Time
Manufacturing
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.

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 Benefits of JIT
• Reduces raw material inventories
• Shortens lead times
• Creates better supplier relationships
• Reduces production and storeroom
costs
• Reduces paperwork
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Electronic Data
Interchange
Information technology that
replaces paper documents
that accompany business
transactions.

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Inventory Control
System
A method of developing and
maintaining an adequate
assortment of materials or
products to meet a
manufacturer’s or a
customer’s demand.

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