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  • 1. 13 Marketing Channel Professor Close
  • 2. 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 Learning Outcomes
  • 3. 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 Learning Outcomes
  • 4. Explain what a marketing channel is and why intermediaries are needed Marketing Channels
  • 5. Marketing Channels a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer. A Marketing Channel is…
  • 6. Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency LO1
  • 7. Specialization and Division of Labor Creates greater efficiency Provides lower production costs Achieves economies of scale Aids producers who lack resources to market directly Builds good relationships with customers
  • 8. 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.
  • 9. 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.
  • 10. Exhibit 13.1 How Marketing Channels Reduce the Number of Required Transactions
  • 11. Define the types of channel intermediaries and describe their functions and activities Channel Intermediaries and Their Functions
  • 12. 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.
  • 13. Channel Intermediaries Retailers Merchant Wholesalers Agents and Brokers Take Title to Goods Take Title to Goods Do NOT Take Title to Goods LO2
  • 14. 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 Complexity of product Simple Complex 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 buyers Many Few Concentration of buyers Dispersed Concentrated
  • 16. Channel Functions Performed by Intermediaries Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions
  • 17. Logistics Logistics The efficient and cost- effective forward and reverse flow and storage of goods, services, and related information, into through, and out of channel member companies.
  • 18. Channel Intermediaries and Functions CHANNEL INTERMEDIARIES Retailers Wholesalers Agents and Brokers CHANNEL FUNCTIONS Transactional Logistical Facilitating Perform
  • 19. Describe the channel structures for consumer and business products and discuss alternative channel arrangements Channel Structures
  • 20. LO3 Exhibit 13.3 Marketing Channels for Consumer Products
  • 21. Channels for Consumer Products Direct Channel A distribution channel in which producers sell directly to consumers. ©APPhoto/MattSlocum
  • 22. Exhibit 13.4 Channels for Business and Industrial Products
  • 23. Business-to-Business Exchanges on the Internet Companies drop the intermediary from the supply chain “Private exchanges” with select suppliers automate the supply chain The Internet has forced traditional distributors to expand their model.
  • 24. Alternative Channel Arrangements Multiple channels Strategic channel alliances Nontraditional channels
  • 25. Discuss the issues that influence channel strategy Making Channel Strategy Decisions
  • 26. Channel Strategy Decisions Factors Affecting Channel Choice Producer Factors Product Factors Market Factors Exclusive Distribution Selective Distribution Intensive Distribution Level of Distribution Intensity
  • 27. Market Factors Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial Customer Size of market Geographic location
  • 28. Product Factors Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price
  • 29. Producer Factors Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control
  • 30. 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
  • 31. 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
  • 32. Types of Channel Relationships Describe the different channel relationship types and their unique costs and benefits
  • 33. 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 Types of Channel Relationships
  • 34. Explain channel leadership, conflict, and partnering Managing Channel Relationships
  • 35. Social Dimensions of Channels Partnering Conflict Leadership Control Power
  • 36. 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
  • 37. Channel Conflict Channel Conflict A clash of goals and methods between distribution channel members
  • 38. 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
  • 39. Channel Partnering By COOPERATING, channel members can speed up inventory replenishment, improve customer service, and reduce the total costs of the marketing channel. the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage. Channel Partnering (Channel Cooperation) is…
  • 40. Discuss channels and distribution decisions in global markets Channels and Distribution Decisions for Global Markets
  • 41. Channels and Distribution Decisions for Global Markets Global Channel Development Channel structure and type differ Gray marketing channels Distribute directly or through foreign partners
  • 42. Identify the special problems and opportunities associated with distribution in service organizations Channels and Distribution Decisions for Services
  • 43. Distribution in Service Organizations
  • 44. BeyondtheBook Chapter 13 Videos Sephora – Marketing Channels Discuss Sephora’s marketing channel for consumer products. http://www.cengage.com/marketing/boo k_content/1439039429_lamb/company_c lips/ch13.html