Ch15 2

TYPES OF MARKETING CHANNELS Marketing channel: system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a distribution channel

STRATEGIC IMPLICATIONS: THE ROLE OF MARKETING CHANNELS IN MARKETING STRATEGY Channels provide the means by which the firm moves the goods and services it produces to ultimate users Channels perform four important functions. They:

TYPES OF MARKETING CHANNELS Marketing intermediary: wholesaler or retailer that operates between producers and consumers or business users; also called a middleman Wholesaler:

TYPES OF MARKETING CHANNELS Logistics: process of coordinating the flow of information, goods, and services among members of the distribution channel Physical distribution:

Figure 13.2: Alternative Marketing Channels TYPES OF MARKETING CHANNELS

Direct Selling Direct channel: marketing channel that moves goods directly from a producer to ultimate user Direct selling: strategy designed to establish direct sales contract between producer and final user

Dell Dell Computer: A Direct Seller of Computers

DUAL DISTRIBUTION Dual distribution: © PhotoDisc

CHANNEL STRATEGY DECISIONS Channel design includes decisions concerning channel length and channel width Factors which impact the selection of a marketing channel include: Selection of a Marketing Channel

Table 13.1: Factors Influencing Marketing Channel Strategies Continued on next slide . . . Inexpensive Expensive Standardized Complex Durable Perishable Product factors Small orders Large orders Little technical knowledge and regular servicing not required Extensive technical knowledge and regular servicing required Geographically diverse Geographically concentrated Consumers Business users Market factors Characteristics of Long Channels Characteristics of Short Channels

Table 13.1: Factors Influencing Marketing Channel Strategies (Continued) Manufacturer feels dissatisfied with marketing intermediaries’ performance in promoting products Manufacturing feels satisfied with marketing intermediaries’ performance in promoting products Competitive factors Channel control not important Channel control important Limited product line Broad product line Manufacturer lacks adequate resources to perform channel functions Manufacturer has adequate resources to perform channel functions Producer factors Characteristics of Long Channels Characteristics of Short Channels

CHANNEL STRATEGY DECISIONS Distribution intensity: number of intermediaries through which a manufacturer distributes its goods Intensive distribution: channel policy in which a manufacturer of a convenience product attempts to saturate the market Determining Distribution Intensity (LengthXWidth)

CHANNEL STRATEGY DECISIONS Exclusive distribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products and a particular geographic area Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line Determining Distribution Intensity

CHANNEL STRATEGY DECISIONS Legal problems of exclusive distribution Exclusive-dealing agreement: arrangement between manufacturer and e-marketing intermediary that prohibits the intermediary from handling competing product lines Tying agreement: Arrangement that requires a marketing intermediary to carry items other than those they want to sell Determining Distribution Intensity

Channel Management Once channels have been designed, the challenge becomes effectively managing all the relationships The challenge is to set up a system or method for assigning responsibilities, controlling behaviors, and monitoring performance Various forms of Vertical Marketing Systems allow us to do this

VERTICAL MARKETING SYSTEMS Vertical marketing system (VMS): planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain Four types of VMS: © PhotoDisc

Corporate marketing system: a VMS in which a single owner operates at each stage in its marketing channel Example: VERTICAL MARKETING SYSTEMS Corporate Systems

Administered marketing system: VMS that achieves channel coordination when a dominant channel member exercises its power Example: VERTICAL MARKETING SYSTEMS Administered Systems

CHANNEL MANAGEMENT AND LEADERSHIP Channel Captain: a dominant and controlling member of a marketing channel

Contractual marketing system: VMS that coordinates channel activities through formal agreements among channel members like: Wholesaler-Sponsored Voluntary Chains Retail Cooperatives Franchises Contractual Systems VERTICAL MARKETING SYSTEMS

THE ROLE OF LOGISTICS IN DISTRIBUTION STRATEGY Supply (value) chain: sequence of suppliers that contributes to the creation and delivery of a good or service

PHYSICAL DISTRIBUTION A company’s physical distribution system contains the following elements: Customer Service Transportation Inventory Control Protective packaging and materials handling Order Processing Warehousing © PhotoDisc

Common carriers move freight via all modes of transportation for the general public Contract carriers do not serve the general public Private carriers do not offer services for hire, but provide transportation services solely for internally generated freight Transportation Classes of Carriers

Railroads Motor Carriers Water Carriers Pipelines Air Freight Freight Forwarders and Supplemental Carriers Intermodal Coordination Transportation Major Modes of Transportation

Table 13.2: Comparison of Transport Modes Very high Low Average Average High Very fast Air Low Very low Very limited High High Slow Pipeline High Average Very extensive High High Fast Truck Very low Very high Limited Very low Average Very slow Water Average High Low Low Average Average Rail Cost Flexibility in Handling Availabil- ity in Different Locations Frequency of Shipments Depend- ability in Meeting Schedules Speed Mode

Warehousing Storage Warehouse: warehouse that holds goods for moderate to long periods prior to shipment, usually to buffer seasonal demand Distribution Warehouse:

Protective Packaging and Materials Handling Unitizing: process of combining individual materials into large loads for easy handling Containeriztion:

Ch15 2

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