MKTG 181 – Ch. 15

Marketing Channel
Consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users
Middleman
Any intermediary between the manufacturer and end-user markets
Agent or Broker
Any intermediary with legal authority to act on behalf of the manufacturer
Wholesaler
An intermediary who sells to other intermediaries, usually to retailers; term usually applies to consumer markets
Retailer
Any intermediary who sells to consumers
Distributor
An imprecise term, usually used to describe intermediaries who perform a variety of distribution functions; a more common term in business markets but may also be used to refer to wholesalers
Dealer
Can mean the same as distributor, retailer, wholesaler, etc.
Three Fundamental Functions of Intermediaries
1. Transactional function
2. Logistical function
3. Facilitating function
Transactional Functions of Intermediaries
Buying, selling, risk taking
Logistical Functions of Intermediaries
Assorting, storing, sorting, transporting
Facilitating Functions of Intermediaries
Financing, grading, marketing information and research
Consumer Benefits of Intermediaries
Four Utilities (Form, Place, Possession, Time)
Direct Channel
A marketing channel in which the producer and the purchasing organization/ultimate consumers deal directly with each other
Indirect Channel
A marketing channel in which intermediaries are inserted between the producer and the purchasing organizations/consumers and perform numerous channel functions
Multichannel Marketing
The blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining and building relationships with consumers who shop and buy in traditional intermediaries and online
Internet Marketing Channels
Employ the Internet to make products and services available for consumption or use by consumers or organizational buyers
Dual Distribution
An arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product
Strategic Channel Alliances
When one firm’s marketing channel is used to sell another firm’s products
Vertical Marketing Systems
Other channel arrangements that exist for the purpose of improving efficiency in performing channel functions and achieving great marketing effectiveness
Corporate Vertical Marketing System
The combination of successive stages of production and distribution under a single ownership
Forward Integration
When a producer owns the intermediary at the next level down in the channel
Backward Integration
When a retailer owns a manufacturing operation
Contractual Vertical Marketing System
When independent production and distribution firms integrate their efforts on a contractual basis to obtain greater functional economies and marketing impact than they could achieve alone
Wholesaler-Sponsored Voluntary Chains
Involve a wholesalers that develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandising programs and inventory management efforts
Retailer-Sponsored Cooperatives
When small, independent retailers form an organization that operates a wholesale facility cooperatively
Administered Vertical Marketing System
Achieves coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership
Intensive Distribution
When a firm tries to place its products and services in as many outlets as possible
Exclusive Distribution
The extreme opposite of intensive distribution, in which only one retailer in a specified geographical area carries the firm’s products
Selective Distribution
When a firm selects a few retailers in a specific geographical area to carry its products
Four Categories of Buyer Requirements
1. Information
2. Convenience
3. Variety
4. Pre- or Postsale services
Factors Affecting Channel Choice and Management
1. Target Market Coverage
2. Buyer Requirements
3. Profitability