Transcript Chapter 1
Lamb, Hair, McDaniel 2010-2011 CHAPTER 13 Marketing Channels 1 Learning Outcomes LO 1 Explain what a marketing channel is and why intermediaries are needed LO 2 Define the types of channel intermediaries and describe their functions and activities LO 3 Describe the channel structures for consumer and business products and discuss alternative channel arrangements LO 4 Discuss the issues that influence channel strategy 2 Learning Outcomes LO 5 Describe the different channel relationship types and their unique costs and benefits LO 6 Explain channel leadership, conflict, and partnering LO 7 Discuss channels and distribution decisions in global markets LO 8 Identify the special problems and opportunities associated with distribution in service organizations 3 Marketing Channels Explain what a marketing channel is and why intermediaries are needed LO1 4 Marketing Channels Marketing Channel: A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. LO1 5 Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency LO1 6 Specialization and Division of Labor Creates greater efficiency Provides lower costs Achieves economies of scale Aids producers who lack resources to market directly Builds good relationships with customers LO1 7 Overcoming Discrepancies Discrepancy of Quantity The difference between the amount of product produced and the amount an end user wants to buy. Discrepancy of Assortment The lack of all the items a customer needs to receive full satisfaction from a product or products. LO1 8 Overcoming Discrepancies Temporal Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. Spatial Discrepancy The difference between the location of a producer and the location of widely scattered markets. LO1 9 Providing Contact Efficiency LO1 10 Channel Intermediaries Define the types of channel intermediaries and describe their functions and activities LO2 11 Channel Intermediaries Retailer A channel intermediary that sells mainly to customers. Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel members. LO2 12 Channel Intermediaries Retailers Take Title to Goods Merchant Wholesalers Take Title to Goods Agents and Brokers Do NOT Take Title to Goods LO2 13 Sysco: Merchant Wholesaler Chefs, like any retailer, need large amounts of product inexpensively. Enter Sysco: with more than 400,000 items in their catalogue, Sysco inexpensively provides chefs what they need. From frozen prepared food to regionally grown produce, Sysco supplies fast food and high end hotels, and many restaurants between. Compare a 25 lb bag of Uncle Ben’s Converted Rice for $20.95 (84 cents/lb) to Amazon grocery’s $2.09 for a pound of the same rice, and it’s easy to see why Sysco dominates as the food wholesaler. http://www.youtube.com/watch?v=oAvQcYcvyaw&NR=1 Source: Boser, Ulrich. “Every Bite You Take: How Sysco came to monopolize mos of what you eat,” Slate.com, February 21, 2007. http://www.youtube.com/watch?v=pEyASBCDLrY&feature= 14 LO2related Factors Suggesting Type of Wholesaling Intermediary to Use Product characteristics Buyer considerations Market characteristics LO2 15 Factors Suggesting Type of Wholesaling Intermediary to Use Factor Merchant Wholesalers Agents/ Brokers Nature of product Standard Nonstandard, custom Technicality of product Complex Simple Product’s gross margin High Low Frequency of ordering Frequent Infrequent Time between order and receipt of shipment Shorter lead time Longer lead time Number of customers Many Few Concentration of customers Dispersed Concentrated LO2 16 Channel Functions Performed by Intermediaries Contacting/Promotion Transactional Functions Negotiating Risk Taking Physically distributing Logistical Functions Storing Sorting LO2 Facilitating Functions Researching Financing 17 Logistics Logistics LO2 The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption. 18 Channel Intermediaries and Functions CHANNEL INTERMEDIARIES CHANNEL FUNCTIONS Perform LO2 Retailers Transactional Wholesalers Logistical Agents and Brokers Facilitating 19 Channel Structures Describe the channel structures for consumer and business products and discuss alternative channel arrangements LO3 20 Channels for Consumer Products Direct Channel Retailer Channel Wholesaler Channel Agent/Broker Channel Producer Producer Producer Producer Agents or Brokers LO3 Consumers Wholesalers Wholesalers Retailers Retailers Retailers Consumers Consumers Consumers 21 Channels for Consumer Products Direct Channel A distribution channel in which producers sell directly to consumers. LO3 22 Channels for Business Products Direct Channel Direct Channel Producer Producer Agent/Broker Industrial Agent/Broker Industrial Distributor Channel Channel Producer Producer Producer Agents or Brokers Agents or Brokers Industrial Distributor Industrial Distributor Industrial User LO3 Govt. Buyer Industrial User Industrial User Industrial User 23 Business-to-Business Exchanges on the Internet The Internet has forced traditional distributors to expand their model. Companies drop the intermediary from the supply chain “Private exchanges” with select suppliers automate the supply chain http://www.sherwinwilliams.com Online LO3 24 Alternative Channel Arrangements Multiple channels Nontraditional channels Strategic channel alliances LO3 25 REVIEW LEARNING OUTCOME Channel Structures CONSUMER CHANNELS BUSINESS CHANNELS ALTERNATIVE CHANNELS Direct Direct Multiple Retail Industrial Nontraditional Wholesaler Agent/broker Agent/broker Agent/broker industrial Strategic alliances LO3 26 Making Channel Strategy Decisions Discuss the issues that influence channel strategy LO4 27 Channel Strategy Decisions LO4 Factors Affecting Channel Choice Level of Distribution Intensity Market Factors Intensive Distribution Product Factors Selective Distribution Producer Factors Exclusive Distribution 28 Market Factors Customer profiles Consumer or Industrial Customer Market Factors That Affect Channel Choices LO4 Size of market Geographic location 29 Product Factors Product Complexity Product Price Product Standardization Product Factors That Affect Channel Choices LO4 Product Life Cycle Product Delicacy 30 Producer Factors Producer Resources Number of Product Lines Producer Factors That Affect Channel Choices LO4 Desire for Channel Control 31 Levels of Distribution Intensity LO4 Intensive A form of distribution aimed at having a product available in every outlet Selective A form of distribution achieved by screening dealers to eliminate all but a few in any single area Exclusive A form of distribution that established one or a few dealers within a given area 32 Levels of Distribution Intensity Intensity Level Objective Intensive Achieve mass market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. LO4 Number of Intermediaries One 33 Types of Channel Relationships Describe the different channel relationship types and their unique costs and benefits LO5 34 Types of Channel Relationships Benefits Hazards Arm’s Length Relationship Fulfills a one time or unique need; low involvement/risk Parties unable to develop relationship; low trust level Cooperative Relationship Formal contract without capital investment/long-term commitment; “happy medium” Some parties may need more relationship definition Integrated Relationship Closely bonded relationship; explicitly defined relationships High capital investment; any failure could affect every channel member LO5 35 Managing Channel Relationships Explain channel leadership, conflict, and partnering LO6 36 Social Dimensions of Channels Power Control Leadership Conflict Partnering LO6 37 Channel Power, Control, and Leadership Channel Power A channel member’s capacity to control or influence the behavior of other channel members Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior Channel Leader A member of a marketing channel that exercises authority/power over the activities of other members LO6 38 Channel Conflict and Partnering Channel Conflict Channel Partnering LO6 A clash of goals and methods between distribution channel members The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage 39 Channel Conflict Conflicts may occur if channel members: Have conflicting goals Fail to fulfill expectations of other channel members Have ideological differences Have different perceptions of reality LO6 40 Channel Partnering Transaction-Based Partnership-Based Supplier / Manufacturer Relationships Short-term Adversarial Independent Price important Long-term Cooperative Dependent Value-added services Number of Suppliers Many Few Information Sharing Minimal High Investment Required Minimal High LO6 41 Channels and Distribution Decisions for Global Markets Discuss channels and distribution decisions in global markets LO7 42 Channels and Distribution Decisions for Global Markets Channel structure and type differ Global Channel Development Gray marketing channels Distribute directly or through foreign partners Legal and infrastructure differences LO7 43 Channels and Distribution Decisions for Services Identify the special problems and opportunities associated with distribution in service organizations LO8 44 Distribution in Service Organizations LO8 45