CHAPTER ELEVEN

Place and
Development of
Channel Systems

For use only with
Perreault and McCarthy
texts.
© 2005 McGraw-Hi...
Exhibit 11-1
Place Decisions Are an Important Part of Marketing Strategy

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/...
Place Decisions Are Guided by “Ideal” Place Objectives

Product
Classes
Suggest
Objectives

Key
Issues

Decisions
Have
Lon...
Channel System May Be Direct or Indirect
Greater Control
Lower Cost

Internet Makes Direct
Distribution Easier

Some
Reaso...
Channel Specialists Adjust Discrepancies
with Regrouping Activities

Accumulating

Bulk-Breaking

Assorting

Sorting
© 200...
Channel Relationship Must Be Managed
Choosing the Type of
Relationship

Key
Issues In
Channel
Management

Whole-Channel Pr...
Exhibit 11-2
Producers or Middlemen May Be Channel Captains

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
The Best Channel System Should Achieve
Ideal Market Exposure

Intensive

Market
Exposure
Strategies
Selective

Exclusive

...
The Best Channel System Should Achieve Ideal
Market Exposure
»Intensive distribution means “sell it where they buy it.”

»...
Limiting Market Exposure
Producer

Vertical
Arrangements
May Be Legal

Wholesaler

Retailer

Retailer

Horizontal Arrangem...
Limiting Market Exposure

•Horizontal arrangements among competitors are illegal.

»These arrangements exist among the fir...
Vertical Marketing Systems Focus
on Final Customers
Type of channel
Characteristics

Vertical marketing systems
Traditiona...
Exhibit 11-4
Channel Systems Can Be Complex

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
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Place and Development of Channel Systems

  1. 1. CHAPTER ELEVEN Place and Development of Channel Systems For use only with Perreault and McCarthy texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin www.mhhe.com/fourps
  2. 2. Exhibit 11-1 Place Decisions Are an Important Part of Marketing Strategy © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  3. 3. Place Decisions Are Guided by “Ideal” Place Objectives Product Classes Suggest Objectives Key Issues Decisions Have Long-run Effects © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Place System Is Not Automatic
  4. 4. Channel System May Be Direct or Indirect Greater Control Lower Cost Internet Makes Direct Distribution Easier Some Reasons For Choosing Direct Channels Direct Contact with Customer Needs Quicker Response or Change in Marketing Mix Suitable Middlemen Not Available © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  5. 5. Channel Specialists Adjust Discrepancies with Regrouping Activities Accumulating Bulk-Breaking Assorting Sorting © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  6. 6. Channel Relationship Must Be Managed Choosing the Type of Relationship Key Issues In Channel Management Whole-Channel ProductMarket Commitment Conflict Handling Common Objectives Role of Channel Captain © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  7. 7. Exhibit 11-2 Producers or Middlemen May Be Channel Captains © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  8. 8. The Best Channel System Should Achieve Ideal Market Exposure Intensive Market Exposure Strategies Selective Exclusive = number of outlets © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  9. 9. 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. © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  10. 10. Limiting Market Exposure Producer Vertical Arrangements May Be Legal Wholesaler Retailer Retailer Horizontal Arrangements Are Illegal © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Retailer
  11. 11. 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. © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  12. 12. Vertical Marketing Systems Focus on Final Customers Type of channel Characteristics Vertical marketing systems Traditional Administered Contractual Corporate Little or none Some to good Fairly good to good Complete Control maintained by None Economic power and leadership Contracts One company ownership Examples Typical “independents” General Electric McDonald’s Florsheim Amount of cooperation © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  13. 13. Exhibit 11-4 Channel Systems Can Be Complex © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
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