marketing channals

Chapter 13 Marketing Channels : 

Professor Jason C. H. Chen, Ph.D. School of Business Administration Gonzaga University Spokane, WA 99223 chen@jepson.gonzaga.edu Chapter 13 Marketing Channels

After studying this chapter, you should be able to: : 

After studying this chapter, you should be able to: Explain the functions and key activities of marketing channels. Discuss the role of intermediaries in marketing channels. Distinguish between direct and indirect marketing channels.

Slide 3: 

Illustrate how some firms use multiple channels successfully. See how marketing-channel decisions are related to other key marketing decision variables. Understand how power, conflict, and cooperation affect the operation of a marketing channel. Give examples of ethical and legal issues encountered in the operations of marketing channels. After studying this chapter, you should be able to:

Slide 4: 

Overview of Marketing Strategy Planning Process External Market Environment Technologies Political and Legal Cultural and Social Economic Narrowing down to focused strategy with quantitative and qualitative screening criteria Customers Needs and other Segmenting Dimensions Company Objectives & Resources Competitors Current & Prospective Segmentation & Positioning Segmentation & Targeting S. W. O. T.

Consumer and Business-to-Business Marketing Channels : 

Consumer and Business-to-Business Marketing Channels

Consumer and Business-to-Business Marketing Channels : 

Consumer and Business-to-Business Marketing Channels Exhibit 13-1 Consumer and business-to-business marketing channels Consumer channels

Slide 7: 

Exhibit 13-1 Consumer and business-to-business marketing channels Business-to-business channels P P P P BB W BB A BB A W BB Consumer and Business-to-Business Marketing Channels

Place Decisions in the Marketing Mix : 

Place Decisions in the Marketing Mix Making products available in the right quantities and locations—when customers want them Channels of distribution Focus on institutions involved in getting product to the customer Logistics Focus on the physical flow of the product Facilities needed for storing and transporting Customer service levels to satisfy customers

Slide 9: 

Strategy Decision Areas in Place Place Objectives Type of channel Customer services level desired Direct Indirect Degree of market Exposure desired (intensive, selective, or exclusive) Middlemen / facilitator needed (many types, Chapters 12-13) How to manage Channel relationships Inventory level Transportation Arrangements Facilities needed Information technology needed

Channel Specialists Adjust Discrepancy of Quantity : 

Channel Specialists Adjust Discrepancy of Quantity

Slide 11: 

Marketing channels determine how and where customers buy. The Importance of Marketing Channels

Key Functions Performed in Marketing Channels : 

Key Functions Performed in Marketing Channels Marketing Communications Advertising the Product Providing P-O-P Displays Providing a salesforce that offers information & service to customers Inventory Management Ordering appropriate merchandise assortment Maintaining adequate stock to meet customer demand Storing merchandise in an appropriate facility Physical Distribution Delivering products Coordinating delivery schedules to meet customer expectations Arranging for the return of defective merchandise

Key Functions Performed in Marketing Channels : 

Key Functions Performed in Marketing Channels Market Feedback Serving on manufacturer advisory boards Informing other channel members of competitive activity Participating in test market evaluations Financial Risk Offering credit Managing risks related to product loss or deterioration Managing risks related to product safety and liability

Contributions of Intermediaries : 

Contributions of Intermediaries Provide Economic Value Provide Social Value Provide Marketing Support Impact Supply-chain Management Add Value to the Market Offering

Types of Marketing Channels : 

Types of Marketing Channels Direct Channels Indirect Channels Single Marketing Channels Multiple Marketing Channels Vertical Marketing Systems

Companies Using Direct Marketing Channels : 

Companies Using Direct Marketing Channels Producer: Cummins Engine Co. (International market) Diesel engine Producer: Munder Capital Man- agement (International market) Mutual Fund Producer: Dell Computer Corp. (International market) Personal computers Personal selling Telemarketing, direct response advertising Toll-free phone/fax ordering, internet Business buyer: Truck manufacturers Consumer Consumer Exhibit 13-3 Companies using direct marketing channels

Companies Using Indirect Marketing Channels : 

Companies Using Indirect Marketing Channels Producer: Thousands of manufacturers Examples: Black & Decker, Stanley Tools, 3M, Weedeater Producer: Beecham Products Examples: Aqua-Fresh toothpaste, Mennen aftershave, Sucrets lozenges Wholesaler: Orgill Brothers, one of the world’s largest hardware Wholesalers, located in Memphis, Tennessee Retailers: Thousands of hardware stores Ultimate consumers: Millions of people in the United Stated, Mexico, South & Central America Retailers: Thousands of drug, grocery & discount stores Examples: Wal-mart, Kroger, Eckerd Drugs, Walgreens Ultimate consumers: Millions of people around the world A B Exhibit 13-4 Examples of indirect channels

Companies Using Vertical Marketing Systems : 

Corporate Forward integration: Polo, Laura Ashley, Gulf States Paper Corp. Backward integration: Winn-Dixie grocery chain Description One channel member owns one or more other channel members Contractual Wholesaler-sponsored voluntary groups: Ace Hardware, Western Auto Retailer-sponsored cooperative groups: Affiliated Grocers, Cotter & Company (True Value Hardware) Franchise system: McDonald’s, Holiday Inns, Personnel Pool of America Description Channel members operate according to contractual agreement Administered Abbott Labs, General Electric, Rolex Description Channel members operate according to agreed-upon plan Channel systems Exhibit 13-5 Types of vertical marketing systems Companies Using Vertical Marketing Systems

Vertical Marketing Systems : 

Vertical Marketing Systems Whole channel focuses on the same target market at the end of the channel Corporate channel systems corporate ownership all along the channel often involves vertical integration Administered channel systems informal agreements among channel members Contractual channel systems legal contracts among channel members Alliances are also popular Usually short term, and may involve a whole network of firms

Slide 20: 

Type of Channel Vertical marketing Systems Characteristics Traditional Administered Contractual Corporate Amount of cooperation Control Maintained by Examples Little or none None Typical Channel Of “ inde- pendents” Some to good Economic Power and leadership General Electric, Miller Beer, O.M. Scott & Sons (lawn Products) Fairly good to good Contracts McDonald s, Holiday Inn, IGA, Ace Hardware, Super Valu, Coca-Cola, Chevrolet Complete Ownership By one company Florsheim Shoes, Sherwin- Williams, Mothers Work Characteristics of Traditional and Vertical Marketing Systems

Factors Related to the Use of Direct Distribution : 

Factors Related to the Use of Direct Distribution Direct (producer to customer) distribution is more common when: the customer is a business or organization (rather than a final consumer) an aggressive personal selling effort is required and/or when customers need special technical service the product is primarily a service rather than a physical good when working with middlemen would make it difficult to maintain control of the marketing mix the producer can perform marketing functions more efficiently (economically) by itself Internet websites are making direct distribution easier and more common

Managing Marketing Channels : 

Managing Marketing Channels Develop channel strategy & Objectives Buyer preferences Relationship orientation Degree of market coverage Evaluate channel alternatives Capabilities & costs Internal Intermediaries Collaborators/ strategic allies Compatibility Product considerations Pricing considerations Marketing communications considerations Availability Determine channel structure Direct versus indirect channel Single versus multiple channels Vertical marketing system Implement channel strategy Trial period & thereafter Set performance expectations Create communications network Evaluate channel performance Financial performance Working relationships Ethical & legal issues Future considerations Formulate firm’s marketing objectives & strategy Exhibit 13-7 Managing marketing channels

Formulating Marketing Objectives and Strategies : 

Formulating Marketing Objectives and Strategies Marketing channel objectives and strategies must be compatible with overall marketing strategy.

Developing Channel Objectives and Strategy : 

Developing Channel Objectives and Strategy The development of channel strategies requires decisions in three key areas: Buyer Preferences Relationship Orientation Degree of Market Coverage

Evaluating Channel Alternatives : 

Evaluating Channel Alternatives Evaluation of Capabilities and Costs Evaluation of Channel Compatibility: Product Considerations Pricing Considerations Marketing Communications Considerations Evaluation of Availability

Determining Channel Structure : 

Determining Channel Structure The key question is “What channel structure is best for us to use?” Direct of Indirect Channels? Single or Multiple Channels? Vertical Marketing Systems?

Implementing Channel Strategy : 

Implementing Channel Strategy Run a Trial Period Set Performance Expectations Create Communication Networks

Channel Captain : 

Channel Captain A manager who helps direct the activities of the whole channel Tries to develop cooperation and avoid or resolve conflicts May be either a producer or middleman Big retail chains increasingly taking this role Guides the whole channel to compete better with other channels Effective allocation of functions A common product-market commitment

Evaluating Channel Performance : 

Evaluating Channel Performance Financial Evaluation Evaluate Working Relationships Evaluate Legal and Ethical Issues

Financial Evaluation : 

Financial Evaluation In the short run channel members will accept low levels of financial performance In the long run channel members must have positive financial results to sustain channel relationships

Slide 31: 

How Channel Functions May Be Shifted and Shared in Different Channel Systems. A. How strategy decisions are handled in a producer-led channel, and B. How strategy decisions are handled in a retailer-led channel

A Continuum of Distribution Intensity : 

A Continuum of Distribution Intensity Selective Distribution PepsiCo Soft Drinks Wrigley Chewing Gum Florsheim Shoes Maytag Appliances Steinway Pianos Stride Rite (Kids & Baby Smart) At Target

Level of Market Exposure : 

Level of Market Exposure Intensive selling through all responsible and suitable wholesalers and retailers who will stock and/or sell the product Selective selling through only those middlemen who will give the product special attention Exclusive selling through only one middleman in a particular geographic region

Selective Distribution : 

Selective Distribution Sell only through middlemen who give the product special attention Avoids dealing with middlemen who: have poor credit standing make too many returns require too much service place only small orders can't or won't do a satisfactory job Becoming more popular less expensive than intensive distribution better cooperation among channel members

Cooperative Arrangements in Exclusive Distribution : 

Cooperative Arrangements in Exclusive Distribution

Slide 36: 

An Example of Dual Distribution by a Publisher of Computer Books

Reverse Channels of Distribution : 

Reverse Channels of Distribution Reverse channels are channels used to retrieve products that customers no longer want Examples of situations: recall of unsafe products return of products from incorrectly filled order return of products under warranty return of products customer orders in error return of products customer orders online return of products to be recycled (bottles, etc.)

Evaluating Working Relationships : 

Evaluating Working Relationships Channel Power Reward Power Legitimate Power Expert Power Referent Power Coercive Power Channel Leader Power Channel Conflict Channel Cooperation

Evaluate Legal and Ethical Issues : 

Evaluate Legal and Ethical Issues Are any laws being violated? Are any exclusive territories set up? Are any exclusive dealing arrangements being made? Are resellers being bound to tying contracts?

Future Considerations for Channel Management : 

Future Considerations for Channel Management Firms must always ask “How well can this channel be expected to perform in the future?” Companies will be forced to alter their channels because of: Changing consumer preferences Intense competition Innovation in information technology