Marketing Channels by Louis W. Stern Adell El-Ansary
Manufacturers selling directly
Functions Performed by the Intermediaries A Flow is Identical to a “Function” Typical “Forward” Flow Physical Possession Ownership Promotion Typical “Backward” Flow Payment Ordering
Channel Flows P C P C
Channel flows Cont.
Complexity of Channel Flows W
You can eliminate channel members but you cannot eliminate channel functions.
Level means intermediary in the channel. Length of a channel refers to the number of intermediary levels
C P P P R W R C C C
Note: Impact of service characteristics on channels of distribution. In Banking: Branch Decisions Automatic Teller Hospitals: Macro-Location Decisions Micro-Outpatient Clinics
Need for Formal Channel Planning Process Majority of channels are not purposively designed but simply evolved over time (Lambert study of 18 consumer and industrial goods)
2 service output: Lot size, waiting time etc. 1
Organization of the mkg functions or flows 4 3
Control
( source: Louis Bucklin)
Channel Objectives Firms design channels to accomplish one or more of the following objectives:
Types of Intermediaries Number of Intermediaries The terms and responsibilities of each alternative
Types of Intermediaries example of cellular car phones
Evaluating the Major Channel Alternatives 1. Economic Criteria (Sales vs. Costs) 2. Control Criteria
manufacturer’s sales agency
FEEDBACK
The concept of power and when to use it to influence channel members’ behavior:
Incentives For Motivating Channel Members Established Products--buy back allowances
4. Incentives to improve customer service: Company-Sponsored Training Programs
A Conceptual Approach to the Problem of Channel Modification
Channel Dynamics VMS Systems
Vertical Marketing Systems (VMS)
Conventional Distribution Channel vs. Vertical Marketing Systems
Conventional Marketing Channels (CMC)
Types of vertical marketing systems
Contractual VMS Wholesalersponsored voluntary chains Franchise Systems Retailersponsored cooperatives (e. g. Assoc. Grocers)
Franchise Systems Man. retailer franchise system (e. g. Chrysler) Man. wholesaler franchise system (e. g. Coca-Cola) Service sponsretailer franch. system e. g. Holiday Inns)
1. Administered Systems Examples: Kraft Co. Sears, J. C. Penny
Contractual Systems Involving Backward Integration
Contractual systems involving voluntary forward integration Wholesaler-sponsored vole. groups Independent Grocers Alliance Pro, Liberty, Sentry (hardware), Western Auto
Franchise Systems Four Basic Types of Franchise Systems
Legal Contracts Carvel Ice Cream Chicken Delight and Paper Products
Types of Conflict
Sources of Conflict The amount of conflict is, to a large extent, a function of: Goal Incompatibility Domain Dissensus (from dissension) and differences in perception of reality. “Great dependence on mfg. ”
Conflict Level
How to Manage Channel Conflict? Exchange of Persons Cooperation Diplomacy Mediation Arbitration
Legal & Ethical Issues in Channel Relations
Review
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