Marketing Channels

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What is a Channel of Distribution? : 

What is a Channel of Distribution? “Process including the physical handling and distribution of goods, the passage of ownership (title) and the buying and selling negotiations between producers and middlemen and between middlemen and customers.” A channel of distribution comprises a set of institutions which perform all of the activities utilised to move a product and its title from production to consumption *Bucklin - Theory of Distribution Channel Structure (1966)

What is an International Marketing Channel? : 

What is an International Marketing Channel? Middlemen in the process between Manufacturer & Final International Consumer who may or may not Physically handle & distribute the goods Assume title to goods Negotiate buying and selling Middlemen used when the can perform functions more efficiently than manufacturers can

Marketing Channels for Consumer Goods and Services : 

Marketing Channels for Consumer Goods and Services Producer Producer Producer Producer Agents Wholesaler Retailer Consumer Consumer Consumer Consumer Retailer Retailer Wholesaler A B C D

Marketing Channels for Industrial Goods and Services : 

Marketing Channels for Industrial Goods and Services Producer Producer Producer Producer Agent Wholesaler Industrial Buyer Industrial Buyer Industrial Buyer Industrial Buyer Wholesaler Agent A B C D

Channel intermediaries - Wholesalers : 

Channel intermediaries - Wholesalers Break down ‘bulk’ buys from producers and sell small quantities to retailers Provides storage facilities reduces contact cost between producer and consumer Wholesaler takes some of the marketing responsibility e.g sales force, promotions

Channel intermediaries - Agents : 

Channel intermediaries - Agents Mainly used in international markets Commission agent - does not take title of the goods. Secures orders. Stockist agent - hold ‘consignment’ stock Control is difficult due to cultural differences Training, motivation, etc are expensive

Channel intermediaries - Retailer : 

Channel intermediaries - Retailer Much stronger personal relationship with the consumer Hold a variety of products Offer consumers credit Promote and merchandise products Price the final product Build retailer ‘brand’ in the high street

Channel intermediaries - Internet : 

Channel intermediaries - Internet Sell to a geographically disperse market Able to target and focus on specific segments Relatively low set-up costs Use of e-commerce technology (for payment, shopping software, etc) Paradigm shift in commerce and consumption

Six basic channel decisions : 

Six basic channel decisions Direct or indirect channels Single or multiple channels Length of channel Types of intermediaries Number of intermediaries at each level Which intermediaries? Avoid intrachannel conflict

Selection consideration : 

Selection consideration Market segment - must know the specific segment and target customer Changes during plc - different channels are exploited at various stages of plc Producer-distributor fit - their policies, strategies and image Qualification assessment - experience and track record must be established Distributor training and support

Channel Decisions When Entering New Country : 

Channel Decisions When Entering New Country Whether to Use Established Channels or Build Own Channels? Whether to Use Home-country (located in producing firm’s country) or Host-country (located in foreign country) middlemen? Which intermediaries? How many intermediaries? Exclusive – one or a select few Selective – more than a few, less than all Intensive – as many outlets as possible

Examples of Home-Country Middlemen(1) Global Retailers : 

Examples of Home-Country Middlemen(1) Global Retailers Global Retailers

Examples of Home-Country Middlemen(2) Export Management Company : 

Examples of Home-Country Middlemen(2) Export Management Company Export Management Companies – Independent firm which acts as the exclusive export sales department for non-competing firms; Typically represent smaller companies in specialized industries Ranges in size from 1 to 100 employees and handles 10% of exported manufactured goods

Examples of Home-Country Middlemen(3) Export Trading Company : 

Examples of Home-Country Middlemen(3) Export Trading Company Export Trading Companies – Larger companies that specialize in providing intermediary services, risk reduction, financial assistance, etc.

Examples of Home-Country Middlemen(4) Agents/Brokers : 

Examples of Home-Country Middlemen(4) Agents/Brokers Home country agents/brokers Do not take title; Shorter term relationship; Specialize in certain products

Home-country or Host-country Middlemen? : 

Home-country or Host-country Middlemen? Use Home-country or Host-country middlemen Select Home-country middlemen if you do not wish to enter or do not have capability to enter foreign market Select Host-country middlemen if you seek greater control over marketing mix; have a presence in the foreign country

Selecting Marketing Channels : 

Selecting Marketing Channels Marketing channel decisions are among the most complex & challenging facing the firm Each channel creates different level of sales & costs Firm usually committed to decision for long time

Marketing Channels Differ Around The World in : 

Marketing Channels Differ Around The World in Services they perform Breadth of lines they carry Costs and trade margins Length of channel - long vs. short

How Do you Select Channel? : 

How Do you Select Channel? Cost – Transporting & storing goods Capital Requirements Control Coverage Character – Does it fit the character of the company and the market? Continuity – Can you foster loyalty among members?

Why has the marketing channel emphasized recently? : 

Why has the marketing channel emphasized recently? Greater difficulty of gaining a sustainable competitive advantage Growing power of distributors (retailers) The need to reduce distribution costs The new stress on growth The increasing role of technology