Shah Chapter 13 Marketing Channels

2. Learning Outcomes 2 LO1 LO2 LO3 Explain what a marketing channel is and why intermediaries are needed Define the types of channel intermediaries and describe their functions and activities Describe the channel structures for consumer and business products and discuss alternative channel arrangements Copyright 2010 by Cengage Learning Inc. All Rights Reserved 3. Learning Outcomes 3 Discuss the issues that influence channel strategy Describe the different channel relationship types and their unique costs and benefits Explain channel leadership, conflict, and partnering LO5 LO6 LO4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 4. Learning Outcomes 4 Discuss channels and distribution decisions in global markets Identify the special problems and opportunities associated with distribution in service organizations LO8 LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 5. 5 Marketing Channels Explain what a marketing channel is and why intermediaries are needed. LO1 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 6. 6 Marketing Channels A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 7. 7 Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency Copyright 2010 by Cengage Learning Inc. All Rights Reserved 8. 8 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 9. 9 Overcoming Discrepancies Discrepancy of Quantity Discrepancy of Assortment The difference between the amount of product produced and the amount an end user wants to buy. The lack of all the items a customer needs to receive full satisfaction from a product or products. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 10. 10 Overcoming Discrepancies Temporal Discrepancy Spatial Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 11. 11 Providing Contact Efficiency Copyright 2010 by Cengage Learning Inc. All Rights Reserved 12. 12 Review Learning Outcome Marketing Channels LO1 Providing Specialization and Division of Labor Overcoming Discrepancies Providing Contact Efficiency Marketing Channel Supply Chain Copyright 2010 by Cengage Learning Inc. All Rights Reserved 13. 13 Channel Intermediaries Define the types of channel intermediaries and describe their functions and activities. LO2 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 14. 14 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 from producer to end user by representing retailers, wholesalers, or manufacturers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 15. 15 Channel Intermediaries Retailers Merchant Wholesalers Agents and Brokers Take Title to Goods Take Title to Goods Do NOT Take Title to Goods Copyright 2010 by Cengage Learning Inc. All Rights Reserved 16. 16 Factors Suggesting Type of Wholesaling Intermediary to Use Product characteristics Buyer considerations Market characteristics Copyright 2010 by Cengage Learning Inc. All Rights Reserved 17. 17 Channel Functions Performed by Intermediaries Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions Copyright 2010 by Cengage Learning Inc. All Rights Reserved 18. 18 Logistics The efficient and cost-effective forward and reverse flow as well as storage of goods, services, and related information, into, through, and out of channel member companies. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 19. 19 Review Learning Outcome Channel Intermediaries and Functions LO2 CHANNEL INTERMEDIARIES Retailers Wholesalers Agents and Brokers CHANNEL FUNCTIONS Transactional Logistical Facilitating Perform Copyright 2010 by Cengage Learning Inc. All Rights Reserved 20. 20 Channel Structures Describe the channel structures for consumer and business products and discuss alternative channel arrangements. LO3 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 21. 21 Channels for Consumer Products Direct Channel - A distribution channel in which producers sell directly to consumers. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 22. 22 Producer Producer Producer Producer Consumers Consumers Consumers Consumers Retailers Retailers Retailers Wholesalers Wholesalers Agents or Brokers Wholesaler Channel Retailer Channel Direct Channel Agent/Broker Channel Channels for Consumer Products Copyright 2010 by Cengage Learning Inc. All Rights Reserved 23. 23 Channels for Business Products Producer Industrial User Direct Channel Producer Govt. Buyer Direct Channel Producer Producer Producer Industrial User Industrial User Industrial User Industrial Distributor Industrial Distributor Agents or Brokers Agents or Brokers Agent/Broker Channel Industrial Distributor Agent/Broker Industrial Channel Copyright 2010 by Cengage Learning Inc. All Rights Reserved 24. 24 Business Exchanges on the Internet Agents link buyers and sellers Companies drop the intermediary from the supply chain Private exchanges with select suppliers automate the supply chain Online http://www.sherwinwilliams.com Copyright 2010 by Cengage Learning Inc. All Rights Reserved 25. 25 Alternative Channel Arrangements Multiple channels Strategic channel alliances Nontraditional channels Copyright 2010 by Cengage Learning Inc. All Rights Reserved 26. 26 Review Learning Outcome Channel Structures LO3 CONSUMER CHANNELS Direct Retail Wholesaler Agent/broker BUSINESS CHANNELS Direct Industrial Agent/broker Agent/broker industrial ALTERNATIVE CHANNELS Multiple Nontraditional Strategic alliances Copyright 2010 by Cengage Learning Inc. All Rights Reserved 27. 27 Making Channel Strategy Decisions Discuss the issues that influence channel strategy. LO4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 28. 28 Channel Strategy Decisions Factors Affecting Channel Choice Producer Factors Product Factors Market Factors Exclusive Distribution Selective Distribution Intensive Distribution Level of Distribution Intensity Copyright 2010 by Cengage Learning Inc. All Rights Reserved 29. 29 Market Factors Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial Customer Size of market Geographic location Copyright 2010 by Cengage Learning Inc. All Rights Reserved 30. 30 Product Factors Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price Copyright 2010 by Cengage Learning Inc. All Rights Reserved 31. 31 Producer Factors Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control Copyright 2010 by Cengage Learning Inc. All Rights Reserved 32. 32 Levels of Distribution Intensity 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 33. 33 Levels of Distribution Intensity Intensive Achieve mass market selling. Convenience goods. Many Selective Exclusive Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment. Several One Intensity Level Objective Number of Intermediaries Copyright 2010 by Cengage Learning Inc. All Rights Reserved 34. Review Learning Outcome Issues Influencing Channel Strategy 34 LO4 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 35. 35 Types of Channel Relationships Describe the different channel relationship types and their unique costs and benefits. LO5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 36. 36 Types of Channel Relationships Cooperative Integrated Arms Length Copyright 2010 by Cengage Learning Inc. All Rights Reserved 37. 37 Arms Length and Integrated Relationships Arms Length Relationship- A relationship between companies that is loose, characterized by low Relational investment and trust, and usually taking the form of a series of discrete transactions with no/low expectation of future interaction or service. Integrated Relationship- A relationship between companies that is tightly connected, with linked processes across and between firm boundaries, and high levels of trust and inter-firm commitment. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 38. 38 Cooperative Relationships A relationship between companies that takes the form of informal partnership with moderate levels of trust and information sharing as needed to further each companys goals. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 39. 39 Review Learning Outcome Types of Channel Relationships LO5 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 40. 40 Managing Channel Relationships Explain channel leadership, conflicts, and partnering. LO6 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 41. 41 Managing Channel Relationships Partnering Conflict Leadership Control Power Copyright 2010 by Cengage Learning Inc. All Rights Reserved 42. 42 Channel Power, Control, and Leadership Channel Power The capacity of a particular marketing channel member to control or influence the behavior of other channel members Channel Control A situation that occurs when one marketing channel member intentionally affects another members behavior Channel Leader (channel captain) A member of a marketing channel that exercises authority/power over the activities of other members Copyright 2010 by Cengage Learning Inc. All Rights Reserved 43. 43 Channel Conflict and Partnering Channel Conflict A clash of goals and methods between distribution channel members. Channel Partnering (Channel Cooperation) The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. Copyright 2010 by Cengage Learning Inc. All Rights Reserved 44. 44 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 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 45. 45 Channel Partnering Supplier / Manufacturer Relationships Short-term Adversarial Independent Price important Long-term Cooperative Dependent Value-added services Number of Suppliers Many Few Transaction-Based Partnership-Based Information Sharing Minimal High Investment Required Minimal High Copyright 2010 by Cengage Learning Inc. All Rights Reserved 46. Review Learning Outcome Channel Leadership, Conflict, & Partnering 46 LO6 Channel Relationship Synergy Channel Conflict Horizontal Vertical Channel Power, Control, Leadership Channel Partnering Copyright 2010 by Cengage Learning Inc. All Rights Reserved 47. 47 Channels and Distribution Decisions for Global Markets Discuss channels and distribution decisions in global markets. LO7 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 48. 48 Channels and Distribution Decisions for Global Markets Global Channel Development Channel structure and type differ Gray marketing channels Copyright 2010 by Cengage Learning Inc. All Rights Reserved 49. Review Learning Outcome 49 LO7 Global Market Channel & Distribution Decisions Distribute directly or through foreign partners Different channel structures than in domestic markets Illegitimate gray marketing channels Legal and infrastructure differences Copyright 2010 by Cengage Learning Inc. All Rights Reserved 50. 50 Channels and Distribution Decisions for Services Identify the special problems and opportunities associated with distribution in service organizations LO8 Copyright 2010 by Cengage Learning Inc. All Rights Reserved 51. 51 Channels and Distribution Decisions for Services Minimizing wait times Managing service capacity Improving service delivery Copyright 2010 by Cengage Learning Inc. All Rights Reserved 52. Review Learning Outcome Distribution in Service Organizations 52 LO8 Copyright 2010 by Cengage Learning Inc. All Rights Reserved