(Chapter 13: Marketing Channels)

What are the big ideas for Chp. 13?
What are marketing channels
What do they do
What do they look like
How do you decide which one to use
What is a Marketing Channel (Distribution channel)?
A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.
What are the functions of marketing channels?
1. Specialization and division of labor
2. Overcoming discrepancies in quantity, assortment, time, and space
3. Providing contact efficiency
Discrepancy of quantity
How doe marketing channels overcome?
The difference between the amount of product produced and the amount an end user wants to buy

Overcome by storing product and distributing it in appropriate amounts

Discrepancy of assortment
How do you overcome?
Occurs when a consumer does not have all the items needed to receive full satisfaction from a product

To overcome marketing channels assemble in one place many of the products necessary to complete a consumer’s needed assortment

Temporal Discrepancy
Overcome?
Created when a product is produced but a consumer is not ready to buy

To overcome, marketing channels maintain inventories in anticipation of demand

Spatial Discrepancy
Overcome?
Markets are usually scattered over large geographic regions

To overcome spatial discrepancy, marketing channels make products available in locations convenient to consumers

What do channel intermediaries do??
>Negotiate with one another to facilitate the change of ownership between buyers and sellers
>Physically move products from the manufacturer to the consumer
Who are the channel intermediaries?
1. Retailer:sells mainly to customers
2. Merchant/Wholesaler: a institution that buys goods from manufacturer, stores them, and resells and ships them
3. Agents and Brokers: Wholesaling intermediaries who facilitate the sale of a product by representing channel members
Whats is the biggest different in the roles of the intermediaries?
iggest difference in roles is if they take title to the product….do they own the product and control the terms of the sale??
What are the Channel Functions performed by Intermediaries?
1. Transactional Functions
2. Logistical Functions
3. Facilitating Functions
Transaction Functions
-Contacting Customers
-Promoting products
-Negotiating
-Risk Taking (Brokers have the LEAST risk)
Logistical Functions
-Physical distributing products (wholesaler/retailer)
-Storing product (w/r)
-Sorting product (w/r)
Facilitating Functions
-Researching: gathering information about the channel members e.g finding the best truck
-Financing: extending credit to facilitate flow of goods e.g wholesalers may finance a retailer expansion
Channel Structure for Consumer Products

note about price

1. Direct Channel: P->C
2. Retailer Channel: P->R->C
3. Wholesaler Channel: P->W->R->C
4. Agent/Broker Channel: P->A/B->W->R->C

The price of the product increases at age state-in this economy you want to shorten the supply chain

When managing Channel Strategy Decision must look at two sides
(1) Factors affecting channel choice
(2) Level of distribution intensity
What are the factors which affect channel choice?
Market Factors
Product Factors
Producer Factors
Market Factors that affect channel choices
-Customer profiles
-Consumer of Industrial Customer
-Size of market
-Geographic location
Product Factors that affect channel choice
-Product complexity (complex product: direct sales force)
-Product Price
-Product Standardization (standardized product: more Intermediaries)
-Product Life Cycle
-Product Delicacy
Producer Factors that affect channel choice
-Producer Resources: large firms have more control and resources, therefore a less need for intermediaries
-Number of Product Lines
-Desire for Channel Control
Levels of Distribution Intensity
1. Intensive: form of distribution aimed at having a product available in every outlet (coke)
2. Selective: form of distribution achieved by screening dealers to eliminate all but a few in any single area
3. Exclusive: A form of distribution that established one or a few dealers within a given area (luxury car)
Types of Channel Relationships
1. Arm’s Length Relationship
2. Cooperative Relationship
3. Integrated Relationship
Arm’s Length Relations
Benefit: Fulfills a one time or unique need; low involvement/risk
Hazard: Parties unable to develop relationship or; low trust level
Cooperative Relationship
Benefit:Formal contract without capital investment/long time commitment “happy medium”
Hazard: Some parties may need more relationship definition
Integrated Relationship
Benefit: closely bonded relationship which is explicitly defined
Vertical Integration-all related channel members are owned by a single legal entity and supply chains where several companies act as one
Hazard: High capital investment; any failure could affect every channel member
Why might channel conflict occur?
Conflict arises when channel members have conflicting goals, or when channel members fail to fulfill expectations of other channel members
Channel Partnering
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage

Can speed up inventory turnover, improve customer service, reduce total costs of the channel

Channel Distribution of SERVICES:
Differences between services and product
>Services are produced and consumed at the same time
>Benefits of a service are relatively intangible
Focus of Service Distribution
1. Minimize wait times
2. Managing service capacity
3. Improving service delivery (e.g buy online)