MANAGING

MARKETING
CHANNELS AND
WHOLESALING

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 You can eliminate the middleman, but
you can not eliminate its functions

• Defining Marketing Channels of

Distribution

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Marketing Channel

Individuals
Individuals and
and firms
firms involved
involved in
in the
the
process
process of
of making
making aa product
product or
or service
service
available
available for
for use
use or
or consumption
consumption by by
consumers
consumers oror industrial
industrial users.
users.

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing intermediaries

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 NATURE AND IMPORTANCE
OF MARKETING CHANNELS

• Value Created by Intermediaries

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

How intermediaries minimize transactions

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing channel functions performed by
intermediaries

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL STRUCTURE
AND ORGANIZATION

• Marketing Channels for Consumer

Goods and Services
 Direct channel
 Indirect channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Common marketing channels for consumer marketing

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Common marketing channels for business marketing

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Representative electronic marketing channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL STRUCTURE
AND ORGANIZATION

• Direct Marketing Channels

• Multiple Channels and Strategic
Alliances
 Dual distribution
 Strategic channel alliances

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Nestlé and General Mills
Food industry’s first strategic alliance

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL STRUCTURE
AND ORGANIZATION

• A Closer Look at Channel Intermediaries

• Merchant Wholesalers
• Agents and Brokers
 Manufacturer’s agents
 Selling agents
 Brokers
• Manufacturer’s Branches and Offices

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL STRUCTURE
AND ORGANIZATION

• Vertical Marketing Systems and

Channel Partnerships

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL STRUCTURE
AND ORGANIZATION

• Vertical Marketing Systems and Channel

Partnerships
• Corporate Systems
• Contractual Systems
 Franchising
• Administered Systems
• Channel Partnerships

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Types of vertical marketing systems

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 CHANNEL CHOICE
AND MANAGEMENT

• Factors Affecting Channel Choice and

Management
• Environmental Factors
• Consumer Factors
• Product Factors
• Company Factors

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

 Making Channel
Strategy Decisions

Discuss the issues

that influence
channel strategy
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
 Market Factors
Customer
Customer profiles
profiles

Consumer
Consumer or
or Industrial
Industrial
Customer
Customer

Market
Market Size
Size of
of market
market
Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices Geographic location
 Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Standardization
Standardization

Product
Product Product
Factors Product Life
Life Cycle
Cycle
Factors
That
That Affect
Affect
Channel
Channel Product
Product Delicacy
Delicacy
Choices
Choices
 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
Levels of Distribution
Intensity
AAform
formof
ofdistribution
distributionaimed
aimedatat
Intensive
Intensive having
havingaaproduct
productavailable
availablein
in
every
everyoutlet
outlet

AAform
formof
ofdistribution
distributionachieved
achieved
Selective
Selective by
byscreening
screeningdealers
dealersto
toeliminate
eliminate
all
allbut
butaafew
fewininany
anysingle
singlearea
area

AAform
formofofdistribution
distributionthat
that
Exclusive
Exclusive established
establishedone
oneororaafew
few
dealers
dealerswithin
withinaagiven
givenarea
area
 Levels of
Distribution Intensity
Intensity Number of
Objective
Level Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Shopping and some
Several
specialty goods.

Work with single

intermediary. Specialty
Exclusive goods and industrial
One
equipment.
Types of Channel Relationships

Describe the
different channel
relationship types
and their unique
costs and benefits
 Types of Channel
Relationships
Benefits Hazards

Arm’s Length Fulfills a one time or Parties unable to

Relationship unique need; low develop relationship;
involvement/risk low trust level

Cooperative Formal contract Some parties may

Relationship without capital need more
investment/long-term relationship definition
commitment; “happy
medium”
Integrated Closely bonded High capital
Relationship relationship; investment; any
explicitly defined failure could affect
relationships every channel
member