Transcript The Nature of Marketing Channels

The Nature of Marketing Channels
• Distribution
–The activities that make products available to
customers when and where they want to purchase
them
• Marketing Channel
–A group of individuals and
organizations directing
products from producers
to customers
–Producer to
–Sams Club to
–Consumer
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14–1
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14–2
The Nature of Marketing Channels
(cont’d)
• Marketing Intermediary
–A middleman(person!) linking producers to other
middlemen(people!) or to ultimate consumers through
contractual arrangements or through the purchase and
resale of products
Producer
Direct Channel
Customer
Indirect Channel
Producer
Intermediary
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Customer
14–3
The Nature of Marketing Channels
(cont’d)
• Marketing Channels Create Utility
–Time utility: have products available when the
customer wants them (newspaper delivery).
–Place utility: making products available in locations
where the customers wish to purchase them
(convenience stores).
–Possession utility: the customer
has access to the product to use
or to store for future use (raincoats).
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14–4
The Nature of Marketing Channels
(cont’d)
• Marketing Channels Facilitate Exchange
Efficiencies
–Reduce the overall costs of market exchanges
• Is direct or intermediary cheaper? Hmmmm.
–Reduce search costs for customers
• Look at several laptops at Best Buy
–Maintain order in the marketplace
See next slide!
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14–5
Efficiency in
Exchanges
Provided
by an
Intermediary
FIGURE 14.1
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14–6
Marketing Channels Form a Supply Chain
• Supply Chain Management (big buzzword)
–Long-term partnerships among marketing channel
members that reduce inefficiencies, costs, and
redundancies and develop innovative approaches to
satisfy customers
–Table 14.2:
• Planning
• Sourcing
• Facilitating
• Relationship building
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14–7
Typical Marketing Channels for
Consumer Products
FIGURE 14.2
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14–8
Typical Marketing Channels for
Business Products
FIGURE 14.3
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14–9
Multiple Marketing Channels and Channel
Alliances
• Dual Distribution
–The use of two or more channels to distribute the same
product to the same target market
–Gateway computers direct to consumer
–Gateway to Gateway Country Stores to consumer
• Strategic Channel Alliance
–An agreement whereby the products of one
organization are distributed through the marketing
channels of another
–Distributing bottled water via soft drink channels
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14–10
Intensity of Market Coverage
• Intensive Distribution
–Using all available outlets to distribute a product.
• Convenience products with high replacement rates
–Provides availability and reduces search time
–Availability is more important than outlet type
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14–11
Intensity of Market Coverage (cont’d)
• Selective Distribution
–Using only some available outlets to distribute a
product
• Shopping products and durable goods with low
replacement rates
–High qualification requirements
for intermediaries to distribute,
sell, service, and support products
Tuscaloosa’s Only
Authorized Dealer
• Car dealerships
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14–12
Intensity of Market Coverage (cont’d)
• Exclusive Distribution
–Using a single outlet in a fairly large geographic area to
distribute a product
• Expensive, high-quality products purchased
infrequently
–Exclusive outlets provide an incentive to sellers in
limited markets.
–Dealers carry complete inventory and have trained staff
for sales and service.
• Harley Davidson
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14–13
Supply Chain Management:
Channel Leadership
• Channel Captain
–The dominant member (producer, wholesaler, or
retailer) of a marketing channel or supply chain
• Establishes channel policies and coordinates
development of the marketing mix
• Walmart (used to be P&G)
• Channel Power
–The ability of one channel member
to influence another member’s
goal achievement
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14–14
Supply Chain Management:
Channel Cooperation
• Benefits of Cooperation
–Speeds up inventory replacement
• Capitalize on fast-selling fashion trends
–Improves customer service
–Reduces distribution costs
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14–15
Supply Chain Management:
Channel Conflict
• Sources of Channel Conflict
–Disagreements arising among channel members
–Communication difficulties jeopardizing coordination
–Increased use of multiple distribution channels by
manufacturers creating conflicts with distributors and
retailers
• Wine distributors vs. direct!
–Intermediaries diversifying into and offering competing
products
–Producers attempting to circumvent intermediaries and
dealing directly with retailers
• Offering Goodyear tires at Sears
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14–16
Supply Chain Management:
Channel Integration
• Vertical Channel Integration
–Two or more stages of the marketing channel are under
one management.
• Sherwin-Williams
–Channel members coordinate their efforts to reach a
target market.
• Vertical Marketing System (VMS)
–A marketing channel managed by a single channel
member to achieve efficient, low-cost distribution
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14–17
Legal Issues in Channel Management
• Restricted Sales Territories
–Granting exclusive sales territory rights to distributors is
permissible if the rights do not restrain trade.
• Tying Arrangements
–Requiring a channel member to buy additional products
from the supplier in order to purchase a particular
product from the supplier
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14–18
Legal Issues in Channel Management
(cont’d)
• Full-Line Forcing
–Requiring a channel member to carry a supplier’s entire
product line to obtain any of the supplier’s products
• Exclusive Dealing
–Forbidding an intermediary to carry products of a
competing manufacturer
–Is anticompetitive if
• blocking competitors from 10% of the market
• sales revenues are sizable
• the manufacturer is larger than the dealer
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14–19