Transcript Chapter 13 - Austin Community College

13
C H A P T E R
Marketing
Channels
McGraw-Hill/Irwin
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After studying this chapter, you should be able to:







Explain the functions and key activities of marketing
channels.
Discuss the role of intermediaries in marketing channels.
Distinguish between direct and indirect marketing
channels.
Illustrate how some firms use multiple channels
successfully.
See how marketing channel decisions are related to other
key marketing decision variables.
Understand how power, conflict, and cooperation affect the
operation of a marketing channel.
Give examples of ethical and legal issues encountered in
the operations of marketing channels.
Bearden Marketing 5th Ed
13-2
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Timbuk 2
Timbuk2, a San Francisco–based
manufacturer of urban shoulder bags,
iPod holsters, tote bags, and yoga mat
carriers, has learned that having the
right channels for distributing its
products is every bit as important for
success as having cutting-edge
products.
When CompUSA agreed to carry
Timbuk2 bags, CEO Mark Dwight
thought his company had hit the
jackpot. Four months later, Timbuk2
was hard pressed to keep up with the
high volume demand and remain
profitable given its low selling price to
CompUSA.
Bearden Marketing 5th Ed
13-3
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Consumer and B2B Channels
The marketing channel is a combination of
organizations and individuals who perform the required
activities to link producers of products to users of those
products to accomplish marketing objectives.
Exhibit 13-1
Bearden Marketing 5th Ed
13-4
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Functions of Marketing Channels
By performing five critical functions, marketing channels
play an important role in accomplishing the key
marketing activities.
Exhibit 13-2
Bearden Marketing 5th Ed
13-5
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Direct Marketing Channels
A direct channel describes movement of the product
from the producer to the user without intermediaries.
Exhibit 13-3
Bearden Marketing 5th Ed
13-6
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Indirect Marketing Channels
An indirect channel requires intermediaries between
the originator and the user to perform some functions
related to buying or selling.
Exhibit 13-4
Bearden Marketing 5th Ed
13-7
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Vertical Marketing Systems
Exhibit 13-5
Vertical marketing systems.
are centrally coordinated,
highly integrated operations
that work together to serve the
ultimate consumer.
The word vertical refers to the
flow of the product from the
producer to the customer. This
flow is “down the channel” or
“downstream,” meaning that
the product flows down from
the producer to the customer.
Bearden Marketing 5th Ed
13-8
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Corporate Channel Systems
Forward
Integration
A corporate channel system in which
one channel member owns one or
more of its buyers downstream is
called forward integration.
Backward
Integration
Backward Integration aims to
improve the efficiency and
effectiveness of marketing channels
through ownership of one or more of
their suppliers, not their buyers.
Bearden Marketing 5th Ed
13-9
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Contractual Channel Systems
Wholesaler-sponsored voluntary groups consist of
independent retailers that operate under the name of a
sponsoring wholesaler.
Retailer-owned cooperative groups operate like
wholesaler-sponsored voluntary groups, but the retailers
actually own the wholesaler.
The third type of contractual channel system is the
franchise system. One party, the franchisor, grants
another party, the franchisee, the right to distribute and
sell specified goods and services.
Bearden Marketing 5th Ed
13-10
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Franchise Channels
Exhibit 13-6
Bearden Marketing 5th Ed
13-11
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Exhibit 13-7
Bearden Marketing 5th Ed
13-12
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Develop
Strategy
Evaluate
Alternatives
Determine
Structure
Implement
Strategy
Evaluate
Performance
Channel objectives should be specifically stated,
measurable, and consistent with the firm’s marketing
objectives.
Channel strategy is an expression of a general action
plan and guidelines for allocating resources to achieve
the channel objectives.
Buyer
Preferences
Bearden Marketing 5th Ed
Relationship
Orientation
Degree of
Market
Coverage
13-13
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Develop
Strategy
Evaluate
Alternatives
Determine
Structure
Implement
Strategy
Evaluate
Performance
1. Evaluation of Capabilities and Costs
2. Evaluation of Channel Compatibility:



Product Considerations
Pricing Considerations
Marketing Communications Considerations
3. Evaluation of Availability
Bearden Marketing 5th Ed
13-14
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Develop
Strategy
Evaluate
Alternatives
Determine
Structure
Implement
Strategy
Evaluate
Performance
The key question is “What channel structure is best
for us to use?”



Direct or Indirect Channels
Single or Multiple Channels
Vertical Marketing Systems
Bearden Marketing 5th Ed
13-15
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Develop
Strategy
Evaluate
Alternatives
Determine
Structure
Implement
Strategy
Evaluate
Performance
1. Run a Trial Period
2. Set Performance Expectations
3. Create Communication Networks
Bearden Marketing 5th Ed
13-16
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Managing Marketing Channels
Develop
Strategy
Evaluate
Alternatives
Determine
Structure
Implement
Strategy
Evaluate
Performance
Channel Power






1. Financial Evaluation
2. Evaluate Working
Relationship
3. Ethical and Legal
Issues
Reward Power
Legitimate Power
Expert Power
Referent Power
Coercive Power
Channel Leader Power
Channel Conflict
Channel Cooperation
Bearden Marketing 5th Ed
13-17
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Ethical Problems in Marketing Channels
Bearden Marketing 5th Ed
13-18
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Channel Conflict
It is inevitable that channel members experience conflict
with one another. Channel conflict may result from poor
communications, a struggle over power in the channel,
or incompatible objectives.
Bearden Marketing 5th Ed
13-19
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Summary
After studying this chapter, you should be able to:







Explain the functions and key activities of marketing
channels.
Discuss the role of intermediaries in marketing channels.
Distinguish between direct and indirect marketing channels.
Illustrate how some firms use multiple channels
successfully.
See how marketing channel decisions are related to other
key marketing decision variables.
Understand how power, conflict, and cooperation affect the
operation of a marketing channel.
Give examples of ethical and legal issues encountered in
the operations of marketing channels.
Bearden Marketing 5th Ed
13-20
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.