marketing channel structure and function

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Marketing Channel Introduction

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Marketing Channel Introduction

Definition: a marketing channel is viewed as an interorganizational system involved with making goods, services, and concepts available for consumption by enhancing their time, place, and possession utilities. The essence of this course is how institutions can transmit items of value from points of conception, extraction, and/or production to points of consumption.

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Marketing Channel Introduction

Part of every product and service purchased Complexity continuum – from highly complicated to simpleDifferent groups work together, sometimes unknowingly, to deliver products and servicesChannel Examples?

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Marketing Channel Introduction

Channel management – ongoing processEvaluation – why is evaluation important? How is a channel evaluated?

Is there a formula?Can all channels be evaluated the same way?Is goodwill important?

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Marketing Channel Introduction

Analyzing the previous channel:A wholesaler could “clean up” on economies of scale that the manufacturers are ignoringOR…the manufacturers could strive to reduce their costs of distribution by working together in the channel

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Marketing Channel Introduction

Why channels/why change?Demand side

Facilitation of SearchAssortment

Supply sideRoutinizing transactionsReducing contact points

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Marketing Channel Introduction

Demand Side:Facilitation of Search: uncertainty on the part of buyers and sellersAssortment Discrepancy: difference between the assortment of goods and services desired by the end user and the assortment of goods and services provided

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Marketing Channel Introduction

Assortment DiscrepancySorting Out AccumulationAllocation Assorting

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Marketing Channel IntroductionSupply Side

Routinization of Transactions: each transaction involves ordering, valuating, and payment. Must be agreement on amount, mode, and timing of payment

i.e. EDI, CRPInventory Turnover = COGS/Inventory (average)

Reduction in number of Contacts: Without channel intermediaries, every buyer would have to interact directly with every seller, or at lease every seller with whom interaction was required

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Selling DirectlyManufacturers

Retailers

40 Contact Lines

Selling Through One Wholesaler

Manufacturers

Wholesaler

Retailers 14 Contact Lines

Selling Through Two Wholesalers

Manufacturers

Wholesalers

Retailers

28 Contact Lines

Contact Complexity with/without Intermediaries 

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Marketing Channel Introduction

The work of the channelFlows, not activitiesReason? The whole point of the channel is to move product and services.

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Marketing Channel IntroductionConsider: SCA Tissue – participation in more than

one channelSvenska Cellulosa Aktiebolaget, SCA   (formerly Wisconsin Tissue Mills)Hygiene Products; tissue products, incontinence care products, baby diapers and feminine hygiene products.Packaging; corrugated board, containerboard, customized protective and specialty packaging.Forest Products; publication papers, pulp, timber and solid-wood products.

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Performance of Marketing Flows  

Physical Physical PhysicalPossession Possession Possession

Ownership Ownership Ownership 

Promotion Promotion Promotion 

Negotiation Negotiation Negotiation Consumers Producers Wholesalers Retailers Industrial

Financing Financing Financing andHousehold

Risking Risking Risking 

Ordering Ordering Ordering 

Payment Payment Payment  

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Marketing Channel Introduction

Performance of flows is correlated to other flowsConcept: members of the channel can be shifted/changed/eliminated, however the flows that they represent cannot.

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Marketing Channel Introduction

Manufacturers: Branded production

• Ford example in textbook (12) – is a “Ford” still only/exclusively a Ford?

Production contracted out• i.e. Packard Company, 1940

Selling under a variety of names• Jeans

Product “package”• i.e. Mutual Funds

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Marketing Channel Introduction

Intermediaries – between the manufacturer and the end user

Wholesale• Walkers Auto Body Supply

Retail• Staples

Specialized• CIT Financial – large client financial

services

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Marketing Channel Introduction

End UsersIn consuming products & services, we often perform channel flowsPossession, ownership, risking, etc

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Marketing Channel Introduction

Analyzing the channelThere is no one “right” way to design a marketing channel

Without a reference or framework, we overlook important aspects of the channel and design it poorly or in a cost-ineffective manner

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Marketing Channel IntroductionQuestions for Group Discussion

TB pg. 17 #1,2,3,4,5 – 10 minutes. In groups of 4, select 1 question, discuss, take point notes, and be prepared to present your answers. Be sure to include all group members’ names

Volunteer needed to:1 – take attendance2 – collect all point notes to enter & email to me

so that I can make them available on the website.