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© 2005 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin
CHAPTER ELEVEN
Place and Development of Channel Systems
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Place Decisions Are an Important Part of Marketing Strategy
Exhibit 11-1
Key
Issues
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Place Decisions Are Guided by “Ideal” Place Objectives
Product
Classes
Suggest
Objectives
Place
System
Is Not
Automatic
Decisions
Have
Long-run Effects
Internet Makes Direct
Distribution Easier
Internet Makes Direct
Distribution Easier
Greater Control
Lower Cost
Direct Contact with
Customer Needs
Quicker Response or
Change in Marketing Mix
Greater Control
Lower Cost
Direct Contact with
Customer Needs
Quicker Response or
Change in Marketing Mix
Suitable Middlemen
Not Available
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Channel System May Be Direct or Indirect
Some
Reasons
For Choosing
Direct Channels
Sorting Sorting
Bulk-Breaking Bulk-Breaking Accumulating Accumulating
Channel Specialists Adjust Discrepancies with Regrouping Activities
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Assorting
Common Objectives Common Objectives
Conflict Handling Conflict Handling
Whole-Channel Product-
Market Commitment
Whole-Channel Product-
Market Commitment
Choosing the Type of
Relationship
Choosing the Type of
Relationship
Channel Relationship Must Be Managed
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Role of Channel Captain
Key
Issues In
Channel
Management
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Producers or Middlemen May Be Channel Captains Exhibit 11-2
Intensive
Selective
Intensive
Selective
The Best Channel System Should Achieve Ideal Market Exposure
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
= number of outlets Exclusive
Market
Exposure
Strategies
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
The Best Channel System Should Achieve Ideal Market Exposure
»Intensive distribution means “sell it where they buy it.”
»Selective distribution means “sell it where it sells best.”
»Selective distribution can reduce costs and get better partners.
»Selective distribution often moves to intensive as the market grows.
•Exclusive distribution means selling through only one middleman in a
particular geographic area.
Retailer Retailer Retailer
Horizontal Arrangements
Are Illegal
Limiting Market Exposure
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Retailer Retailer
Producer
Vertical
Arrangements
May Be Legal Wholesaler
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Limiting Market Exposure
•Horizontal arrangements among competitors are illegal.
»These arrangements exist among the firms at one level of the channel.
»
»They are considered to be collusion that reduces competition and harms
customers.
Vertical Marketing Systems Focus on Final Customers
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Fairly good to good
Contracts
McDonald’s
Complete
One company
ownership
Florsheim
Some to good
Economic power and leadership
General Electric
Characteristics
Type of channel
Little or none
None
Typical “inde-
pendents”
Amount of cooperation
Traditional Vertical marketing systems
Administered Contractual Corporate
Control maintained by
Examples
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Channel Systems Can Be Complex Exhibit 11-4
