BASIC MARKETING

Chapter 11
Place and
Development of
Channel
Systems

For use only with Perreault/Cannon/ McCarthy texts, © 2011 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin
Channel System May Be Direct or Indirect

Greater
Greater Control
Control

Lower
Lower Cost
Cost

Internet
Internet Makes
Makes Direct
Direct
Distribution
Distribution Easier
Easier
Direct
Direct Contact
Contact with
with
Some Customers
Customers
Reasons Quicker
Quicker Response
Response oror
For Choosing Change
Change in
in Marketing
Marketing Mix
Mix
Direct Channels Suitable
Suitable Intermediaries
Intermediaries
Not
Not Available
Available
Direct Channels
Are Common
with Business
Customers and
Services
Channel Specialists Adjust Discrepancies
with Regrouping Activities
Accumulating
Accumulating
(collecting
Bulk-Breaking
Bulk-Breaking
(collecting
products (dividing
(dividing larger
larger
products from
from
many quantities
quantities into
into
many small
small
producers) smaller
smaller quantities)
quantities)
producers)

Assorting
Assorting Sorting
Sorting
(putting
(putting together
together (separating
(separating
aa variety
variety of
of products
products into
into
products)
products) the
the grades)
grades)
A Discrepancy
of Assortment
Channel Relationship Must Be Managed

Choosing
Choosing thethe Type
Type ofof
Relationship
Relationship (e.g.,
(e.g., traditional
traditional
or
or VMS).
VMS).

Whole-Channel
Whole-Channel Product-
Product-
Key Market
Market Commitment
Commitment
Key
Issues
Issues In
In
Channel
Channel Conflict
Conflict Handling
Handling
Management
Management
Role
Role of
of Channel
Channel Captain
Captain
(guides
(guides channel
channel
relationships)
relationships)
Producers or Intermediaries May Be
Channel Captains
 Vertical Marketing Systems Focus on Final
Customers

Type of channel

Characteristics Vertical marketing systems

Traditional
Administered Contractual Corporate

Amount of Little or Some to Fairly good

Complete
cooperation none good to good

Economic One
Control maintained None power and Contracts company
by leadership ownership

Typical
General
Examples “inde- McDonald’s Florsheim
Electric
pendents”
The Best Channel System Should Achieve Ideal
Market Exposure (product available to satisfy target customer needs)

Intensive Market
Market
Intensive
Exposure
Exposure
Strategies
Strategies
Selective
Selective

= number of
Exclusive
Exclusive outlets
Intensive Distribution

© 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Interactive Exercise: Ideal Market Exposure
 Limiting Market Exposure

Producer
Producer

Vertical
Arrangements
May Be Legal Wholesaler
Wholesaler

Retailer
Retailer Retailer
Retailer Retailer
Retailer

Horizontal Arrangements
Are Illegal
Channel Systems Can Be Complex
(multichannel distribution)
 Entering International Markets

Management Joint
Joint Direct
Licensing
Licensing
Exporting Contracting Venture Investment
Investment
(e.g., patent)
(mgt/mkt
(mgt/mkt skills)
skills)(partnership)
(partnership) (ownership)
(ownership)

Generally increasing investment, risk, and control of marketing