Ch 13/15 Objectives

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Ch 13/15 Objectives

• Recognize the importance of marketing channels
  and distribution
• Understand marketing channels in terms of
  creating time, place, and possession utilities
• Understand some of the complexity of physical
  distribution

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What is a Distribution Channel?

• A distribution channel consists of the set of
  people and firms involved in transfer of title to
  a product as it moves from producer to ultimate
  consumer or business user.
• Every firm wants to have a distribution channel
  that meets customer's needs and also provides a
  competitive advantage.

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Common Marketing Channels for Consumer Products
Producer
Producer
Producer
Wholesaler Channel
Retailer Channel
Direct Channel

Wholesalers
Retailers
Retailers
Consumers
Consumers
Consumers
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Determining Intensity of Distribution

• A firm must decide on the appropriate intensity
  of distribution for its product.
• Intensity is actually a continuum, but three
  categories are normally used
• Intensive
• Selective
• Exclusive

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Intensity-of- Distribution Continuum
INTENSIVE
SELECTIVE
EXCLUSIVE
Distribution through every reasonable outlet in a
market
Distribution through multiple, but not
all, reasonable outlets in a market
Distribution through a single wholesaling middlema
n and/or retailer in a market
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Terms Used for Marketing Intermediaries

• TERM DESCRIPTION
• Middleman Any intermediary between manufacturer
  and end-
• user markets
• Agent or Any intermediary with legal authority to
  act on
• Broker behalf of the manufacturer
• Wholesaler An intermediary who sells to other
  intermediaries,
• usually to retailers usually applies to
  consumer
• markets
• Retailer An intermediary who sells to consumers

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How Intermediaries Minimize Transactions
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Marketing Channel Functions Performed by
Intermediaries
-Buying. Purchasing products for resale or as an
agent for supply of a product -Selling.
Contracting potential customers, promoting
products, and soliciting orders -Risk Taking.
Assuming business risks in the ownership of
inventory that can become obsolete or deteriorate.
Transactional Function
Logistical Function
Facilitating Function
Look through this on your own!
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Channel Terms

• Disintermediation
• What is Disintermediation?

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Terms

• Disintermediation
• The removal of organizations or business process
  layers responsible for certain intermediary steps
  in a given value chain
• Show channel delayering graphs

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Rationale for Middlemen

• You can eliminate the middleman, but you cant
  eliminate the middlemans function
• Benefit both Producers and Retailers

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Direct Distribution

• What is it?
• For what types of products does it seem to work?
• Doesnt work for all products...

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2-Step Dist. Is Extremely Efficient!!!
PRODUCERS
A
B
C
D
WHOLESALING MIDDLEMAN
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5
4
3
2
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RETAILERS
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Marketing Channel Management...
Formulating channel strategy

Set distribution objectives
Design channel structure
Specify tasks to be performed by the channel
Select channel members
Motivate channel members
Consider alternative structures
Coordinate with marketing mix
Choose optimal structure
Evaluate member performance
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Channel Conflict
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Conflict in Marketing Channels

• 1. Vertical Conflict
• 2. Horizontal Conflict
• Dont worry about this distinction
• Conflict is conflict.

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Channel Conflict An Internet Example

• Go to the clinique web site
• www.clinique.com

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Vertical Marketing Systems

• Vertical marketing systems are professionally
  managed and centrally coordinated marketing
  channels designed to achieve channel economies
  and maximum marketing impact.
• Major types of vertical marketing systems
• corporate
• contractual
• administered

Look at this stuff on your own...
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Definition of a Supply Chain
A Supply Chain is . . . .
a sequence of firms that perform activities
required to create and deliver a good or service
to consumers or industrial users.
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The Supply Chain

• A supply chain differs from a marketing channel
  in terms of membership.
• A supply chain includes suppliers who
  provide raw material inputs to a manufacturer as
  well as the wholesalers and retailers who deliver
  finished goods.

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PP17-2 The Automotive Supply Chain
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Types Of Wholesaling Intermediaries
Merchant Wholesalers
MerchantWholesalers
Full Service
Limited Service

• General Wholesalers

• Cash And Carry Wholesalers

• Limited Line Wholesalers

• Truck Jobbers

• Specialty Line Wholesalers

• Drop Shippers

• Industrial Distributors

• Mail-order Wholesalers

• Rack Jobbers