Marketing Channels

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Marketing Channels

• David Forlani
• University of Colorado at Denver and Health
  Sciences Center

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Overview

• Marketing Distribution Channels
• Channel Functions
• Strategic Issues
• Conflict Collaboration
• Channel Trends
• Legal and Ethical Issues

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Channels

• The channel is a products path to market
• It provides customers with time and place utility
• To justify its place in the channel, each channel
  member should be able to perform its functions
  more effectively and efficiently than any other
  channel member

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Typical Marketing Channels for Consumer Goods and
Services
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Typical Marketing Channels for Industrial Goods
and Services
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Marketing Distribution Channels

• Marketing Channels
• An organized system of marketing institutions
  through which products, resources, information,
  funds, and/or product ownership flow from the
  point of production to the final user.
• Physical Distribution
• Coordinating the flow of information and
  products among members of the channel to ensure
  that products are available in the right places,
  in the right quantities, at the right times, and
  in a cost-efficient manner.

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Marketing Channel Functions

• Physical Distribution
• Ownership
• Promotion
• Negotiation
• Financing
• Risking
• Ordering
• Payment

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Eliminating the Middleman

• What does the advertising slogan, we eliminate
  the middleman mean?
• Does a channel with fewer members always deliver
  products to customers at lower prices?
• What about service levels? When the middleman is
  eliminated who performs the 8-functions?

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Strategic Issues in Channels of Distribution (1
of 2)

• Channel Length is a function of the service
  levels demanded
• More service requires longer channels (Bucklin)
• Channel Structure reflects the needs of the
  product and market
• Exclusive Distribution
• Selective Distribution
• Intensive Distribution

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Strategic Issues in Channels of Distribution (2
of 2)

• Channel Relationships range from contractual to
  mutually dependent
• The nature of these relationships determines the
  channels climate
• Channel Relationships are characterized by the
  levels of conflict, cooperation and collaboration
  that exist among its members

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Conflict and Collaboration

• Conflict arises because of differences in
• Goals (self interest seeking),
• Violations of expectations, and
• Varying sources, degrees and uses of power
• By default Conflict, not Collaboration, will
  pervade channel relationships

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Collaborative Relationships Involve
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How Power Creates Conflict and Collaboration in
Channels

• Emersons 5 types of power
• Legitimate Power (vested in the position)
• Reward Power (ability to help)
• Coercive Power (ability to hurt)
• Expert Power (vested in knowledge, past
  accomplishments)
• Referent Power (star/fame effect)

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Channel Trends 1 of 3

• The Power in Channels is shifting to
• Discount mass merchandise retailers
• Wal-Mart, Kmart, and Target
• Category focused retailers (category killers)
• Toys R Us, Lowes, Office Depot, AutoZone, and
  Best Buy
• What gives them the power?
• Is the Wheel of Retailing about to Roll again?

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Channel Trends 2 of 3

• Outsourcing Channel Functions
• International Outsourcing is growing rapidly
• Why outsource?
• From a strategic perspective, what channel
  functions should, and should not, be outsourced?

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The Trend in Outsourcing
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Channel Trends 3 of 3

• Advancing Technology
• Growth of Internet and e-commerce
• Radio frequency identification (RFID)
• Direct Distribution, Dual Distribution and
  Non-store Channels are growing
• Examples of Nonstore Channels
• Catalog and Direct Marketing
• E-Commerce
• Home Shopping Networks
• Vending
• Direct Response Advertising

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Legal and Ethical Issues

• Plural Distribution Using direct and indirect
  channels simultaneously
• Exclusive Channel Arrangements Restricts
  territories and products sold
• Cannot significantly impede competition
• Tying Arrangements When the availability of a
  desirable product is tied to carrying undesirable
  ones
• Counterfeit Products Whats the harm?