13 Marketing Channel Professor Close Learning Outcomes

13 Marketing Channel Professor Close

Learning Outcomes 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 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

Marketing Channels Explain what a marketing channel is and why intermediaries are needed

Marketing Channels A Marketing Channel is… a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer.

Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency LO 1

Specialization and Division of Labor u Creates greater efficiency u Provides lower production costs u Achieves economies of scale u Aids producers who lack resources to market directly u Builds good relationships with customers

Overcoming Discrepancies Discrepancy of Quantity The difference between the amount of product produced and the amount an end user wants to buy. Discrepancy of Assortment The lack of all the items a customer needs to receive full satisfaction from a product or products.

Overcoming Discrepancies Temporal Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. Spatial Discrepancy The difference between the location of a producer and the location of widely scattered markets.

Exhibit 13. 1 How Marketing Channels Reduce the Number of Required Transactions

Channel Intermediaries and Their Functions Define the types of channel intermediaries and describe their functions and activities

Channel Intermediaries Retailer A channel intermediary that sells mainly to customers. Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

Channel Intermediaries Retailers Merchant Wholesalers Take Title to Goods Agents and Brokers LO 2 Take Title to Goods Do NOT Take Title to Goods

Factors Suggesting Type of Wholesaling Intermediary to Use Product characteristics Buyer considerations Market characteristics LO 2

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 Transactional Functions Negotiating Risk Taking Physically distributing Logistical Functions Storing Sorting Facilitating Functions Researching Financing

Logistics The efficient and costeffective forward and reverse flow and storage of goods, services, and related information, into through, and out of channel member companies.

Channel Intermediaries and Functions CHANNEL INTERMEDIARIES Retailers CHANNEL FUNCTIONS Perform Transactional Wholesalers Logistical Agents and Brokers Facilitating

Channel Structures Describe the channel structures for consumer and business products and discuss alternative channel arrangements

Exhibit 13. 3 Marketing Channels for Consumer Products LO 3

Channels for Consumer Products © AP Photo/Matt Slocum Direct Channel A distribution channel in which producers sell directly to consumers.

Exhibit 13. 4 Channels for Business and Industrial Products

Business-to-Business Exchanges on the Internet The Internet has forced traditional distributors to expand their model. Companies drop the intermediary from the supply chain “Private exchanges” with select suppliers automate the supply chain

Alternative Channel Arrangements Multiple channels Nontraditional channels Strategic channel alliances

Making Channel Strategy Decisions Discuss the issues that influence channel strategy

Channel Strategy Decisions Factors Affecting Channel Choice Level of Distribution Intensity Market Factors Intensive Distribution Product Factors Selective Distribution Producer Factors Exclusive Distribution

Market Factors Customer profiles Consumer or Industrial Customer Market Factors That Affect Channel Choices Size of market Geographic location

Product Factors Product Complexity Product Price Product Standardization Product Factors That Affect Channel Choices Product Life Cycle Product Delicacy

Producer Factors Producer Resources Number of Product Lines Producer Factors That Affect Channel Choices Desire for Channel Control

Levels of Distribution Intensity Intensive A form of distribution aimed at having a product available in every outlet Selective A form of distribution achieved by screening dealers to eliminate all but a few in any single area Exclusive A form of distribution that established one or a few dealers within a given area

Levels of Distribution Intensity Level Objective Number of Intermediaries Intensive Achieve mass market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One

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 Relationship Fulfills a one time or unique need; low involvement/risk Parties unable to develop relationship; low trust level Cooperative Relationship Formal contract Some parties may without capital need more investment/long-term relationship definition commitment; “happy medium” Integrated Relationship Closely bonded High capital relationship; explicitly investment; any defined relationships failure could affect every channel member

Managing Channel Relationships Explain channel leadership, conflict, and partnering

Social Dimensions of Channels Power Control Leadership Conflict Partnering

Channel Power, Control, and Leadership Channel Power A channel member’s capacity to control or influence the behavior of other channel members Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior Channel Leader A member of a marketing channel that exercises authority/power over the activities of other members

Channel Conflict A clash of goals and methods between distribution channel members

Channel Conflicts may occur if channel members: u Have conflicting goals u Fail to fulfill expectations of other channel members u Have ideological differences u Have different perceptions of reality

Channel Partnering (Channel Cooperation) is… the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage. By COOPERATING, channel members can speed up inventory replenishment, improve customer service, and reduce the total costs of the marketing channel.

Channels and Distribution Decisions for Global Markets Discuss channels and distribution decisions in global markets

Channels and Distribution Decisions for Global Markets Channel structure and type differ Global Channel Development Gray marketing channels Distribute directly or through foreign partners

Channels and Distribution Decisions for Services Identify the special problems and opportunities associated with distribution in service organizations

Distribution in Service Organizations

Chapter 13 Videos Beyond the Book Sephora – Marketing Channels Discuss Sephora’s marketing channel for consumer products. http: //www. cengage. com/marketing/boo k_content/1439039429_lamb/company_c lips/ch 13. html