13Marketing Channel

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LO 1 Explain what a marketing channel is and why intermediaries are needed

LO 2 Define the types of channel intermediaries and describe their functions and activities

LO 3 Describe the channel structures for consumer and business products and discuss alternative channel arrangements

LO 4 Discuss the issues that influence channel strategy

Learning OutcomesLearning Outcomes

LO 5 Describe the different channel relationship types and their unique costs and benefits

LO 6 Explain channel leadership, conflict, and partnering

LO 7 Discuss channels and distribution decisions in global markets

LO 8 Identify the special problems and opportunities associated with distribution in service organizations

Learning OutcomesLearning Outcomes

Explain what a marketing channel is

and why intermediaries are needed

Marketing ChannelsMarketing Channels

Marketing Channels

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

A Marketing Channel is…

Marketing Channel Functions

Specialization and division of labor Specialization and division of labor

Overcoming discrepancies Overcoming discrepancies

Providing contact efficiency Providing contact efficiency

LO1

Specialization and Division of Labor

Creates greater efficiency

Provides lower production costs

Achieves economies of scale

Aids producers who lack resources to market directly

Builds good relationships with customers

Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the amount an end user

wants to buy.

The difference between the amount of product produced and the amount an end user

wants to buy.

The lack of all the items a customer needs to receive full satisfaction from a product or

products.

The lack of all the items a customer needs to receive full satisfaction from a product or

products.

Overcoming Discrepancies

TemporalDiscrepancyTemporal

Discrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a

customer is not ready to buy it.

A situation that occurs when a product is produced but a

customer is not ready to buy it.

The difference between the location of a producer and the

location of widely scattered markets.

The difference between the location of a producer and the

location of widely scattered markets.

Exhibit 13.1Exhibit 13.1How Marketing Channels Reduce the How Marketing Channels Reduce the Number of Required TransactionsNumber of Required Transactions

Define the types of channel intermediaries

and describe their functions and activities

Channel Intermediaries and Their Channel Intermediaries and Their FunctionsFunctions

Channel Intermediaries

RetailerRetailer A channel intermediary that sells mainly to customers.

A channel intermediary that sells mainly to customers.

MerchantWholesalerMerchant

Wholesaler

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

Agents andBrokers

Agents andBrokers

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

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

Channel Intermediaries

RetailersRetailers

Merchant WholesalersMerchant

Wholesalers

Agents and

Brokers

Agents and

Brokers

Take Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to Goods

LO2

Factors Suggesting Type of Wholesaling Intermediary to Use

Product characteristicsProduct characteristics

Buyer considerationsBuyer considerations

Market characteristicsMarket characteristics

LO2

Factors Suggesting Type of Wholesaling Intermediary to Use

Factor Merchant Wholesalers

Agents/ Brokers

Nature of product Standard Nonstandard, custom

Complexity of product Simple Complex

Product’s gross margin High Low

Frequency of ordering Frequent Infrequent

Time between order and receipt of shipment

Shorter lead time

Longer lead time

Number of buyers Many Few

Concentration of buyers Dispersed Concentrated

Channel Functions Performed by Intermediaries

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

FacilitatingFunctions

FacilitatingFunctions

TransactionalFunctions

TransactionalFunctions

Logistical Functions

Logistical Functions

Logistics

LogisticsThe efficient and cost-

effective forward and

reverse flow and storage of

goods, services, and related

information, into through,

and out of channel member

companies.

Channel Intermediaries and Functions

CHANNELINTERMEDIARIES

CHANNELINTERMEDIARIES

Retailers

Wholesalers

Agents and Brokers

Retailers

Wholesalers

Agents and Brokers

CHANNELFUNCTIONSCHANNEL

FUNCTIONS

Transactional

Logistical

Facilitating

Transactional

Logistical

Facilitating

Perform

Describe the channel structures for consumer and

business products and discuss

alternative channel arrangements

Channel StructuresChannel Structures

LO3

Exhibit 13.3Exhibit 13.3Marketing Channels for Consumer Marketing Channels for Consumer

ProductsProducts

Channels for Consumer Products

Direct Channel

Direct Channel A distribution channel in

which producers sell

directly to consumers.

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Exhibit 13.4Exhibit 13.4Channels for Business Channels for Business and Industrial Productsand Industrial Products

Business-to-Business Exchanges on the Internet

Companies drop the intermediary from the supply chainCompanies drop the intermediary from the supply chain

“Private exchanges” with select suppliers automate the supply chain

“Private exchanges” with select suppliers automate the supply chain

The Internet has forced traditional distributors to expand their model.

Alternative Channel Arrangements

Multiple channels

Strategic channel alliances

Nontraditional channels

Discuss the issues that influence

channel strategy

Making Channel Making Channel Strategy DecisionsStrategy Decisions

Channel Strategy Decisions

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Exclusive DistributionExclusive Distribution

Selective DistributionSelective Distribution

Intensive DistributionIntensive Distribution

Level ofLevel ofDistributionDistribution

IntensityIntensity

Level ofLevel ofDistributionDistribution

IntensityIntensity

Market Factors

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Customer profilesCustomer profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of marketSize of market

Geographic location

Product Factors

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Complexity Product Complexity

Product StandardizationProduct Standardization

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Product PriceProduct Price

Producer Factors

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control

Levels of Distribution Intensity

IntensiveIntensiveA form of distribution aimed at having a product available in every outlet

A form of distribution aimed at having a product available in every outlet

SelectiveSelectiveA form of distribution achievedby screening dealers to eliminate all but a few in any single area

A form of distribution achievedby screening dealers to eliminate all but a few in any single area

ExclusiveExclusiveA form of distribution that established one or a few dealers within a given area

A form of distribution that established one or a few dealers within a given area

Levels of Distribution Intensity

IntensiveAchieve mass marketselling. Convenience goods.

Many

Selective

Exclusive

Work with selected intermediaries. Shopping and some specialty goods.

Work with singleintermediary. Specialty goods and industrial equipment.

Several

One

Intensity Level Objective Number of

Intermediaries

Types of Channel Relationships

Describe the different channel relationship types and their unique

costs and benefits

Benefits Hazards

Arm’s Length Relationship

Fulfills a one time or unique need; low involvement/risk

Parties unable to develop relationship; low trust level

Cooperative Relationship

Formal contract without capital investment/long-term commitment; “happy medium”

Some parties may need more relationship definition

Integrated Relationship

Closely bonded relationship; explicitly defined relationships

High capital investment; any failure could affect every channel member

Types of Channel Relationships

Explain channel leadership, conflict,

and partnering

Managing Channel RelationshipsManaging Channel Relationships

Social Dimensions of Channels

PartneringPartnering

ConflictConflict

LeadershipLeadership

ControlControl

PowerPower

Channel Power, Control, and Leadership

ChannelPower

ChannelPower

A channel member’s capacity to control or influence the behavior of other channel members

A channel member’s capacity to control or influence the behavior of other channel members

ChannelControl

ChannelControl

A situation that occurs when one marketingchannel member intentionally affects another member’s behavior

A situation that occurs when one marketingchannel member intentionally affects another member’s behavior

Channel Leader

Channel Leader

A member of a marketing channel that exercises authority/power over the activities of other members

A member of a marketing channel that exercises authority/power over the activities of other members

Channel Conflict

ChannelConflict

ChannelConflict

A clash of goals and methods

between distribution channel

members

A clash of goals and methods

between distribution channel

members

Channel Conflict

Conflicts may occur if channel members:

Have conflicting goals

Fail to fulfill expectations of other channel members

Have ideological differences

Have different perceptions of reality

Channel Partnering

By COOPERATING, channel members can speed up inventory replenishment, improve customer service, and reduce the total costs of the marketing channel.

the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage.

Channel Partnering (Channel Cooperation) is…

Discuss channels and

distribution decisions

in global markets

Channels and Distribution Channels and Distribution Decisions for Global Markets Decisions for Global Markets

Channels and Distribution Decisions for Global Markets

Global Channel Development

Global Channel Development

Channel structure and type differ

Channel structure and type differ

Gray marketing channelsGray marketing channels

Distribute directly or through foreign partners

Identify the special problems and

opportunities associated with distribution in

service organizations

Channels and Distribution Channels and Distribution Decisions for ServicesDecisions for Services

Distribution in Service Organizations

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BookChapter 13 Videos

Sephora – Marketing Channels

Discuss Sephora’s marketing channel for consumer products.

http://www.cengage.com/marketing/book_content/1439039429_lamb/company_clips/ch13.html