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Marketing Channels:

Marketing Channels:. Retailing and Wholesaling Chapter 11. Previewing the Concepts. Explain why companies use marketing channels, and describe the functions channels perform Explain how channels are organized, designed, and managed

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Marketing Channels:

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  1. Marketing Channels: Retailing and Wholesaling Chapter 11

  2. Previewing the Concepts Explain why companies use marketing channels, and describe the functions channels perform Explain how channels are organized, designed, and managed Define retailing and the major types of retailers, and explain the role of retailers in the distribution channel Describe the major types of wholesalers and their marketing decisions Discuss the nature and importance of marketing logistics and integrated supply chain management

  3. Marketing Channels and Supply Chain • Producing and making products available to buyers requires building relationships with supply chain partners: • Upstream: Firms that supply the raw materials, components, parts, and other elements necessary to create a good • Downstream: Marketing channel partners that link the firm to the customer

  4. Marketing Channels and Supply Chain • Value delivery network: • Comprised of the company, suppliers, distributors, and customers who “partner” with each other to improve the performance of the entire system in delivering customer value • Marketing channels represent the downstream side of the value delivery network

  5. Nature and Importance of Marketing Channels • Marketing (or distribution) channel: • A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business users • Channel decisions affect other marketing decisions • Channel decisions can lead to competitive advantage

  6. Nature and Importance of Marketing Channels • How channel members add value: • Intermediaries create greater efficiency in making goods available to target markets • Channel members offer the firm more than it can achieve on its own in terms of: • Contacts • Experience • Specialization • Scale of operation

  7. Nature and Importance of Marketing Channels Functions performed by channel members: Transaction fulfillment: Physical distribution Financing Risk taking • Transaction completion: • Information • Promotion • Contact • Matching • Negotiation

  8. Nature and Importance of Marketing Channels • Channel levels: • The number of intermediary levels indicates the length of a channel • Direct marketing channels • Indirect marketing channels • All channel institutions are connected by several types of flows

  9. Channel Behavior and Organization • The channel will be most effective when: • Each member assumes tasks it can do best • Members co-operate to attain channel goals • Channel conflict can occur: • Horizontally among firms at the same channel level (e.g., retailer to retailer) • Vertically between different levels of the same channel (e.g., wholesaler to retailer) • Some conflict can be healthy competition

  10. Channel Behavior and Organization Goodyear created channel conflict by selling through mass-merchant retailers:

  11. Channel Behavior and Organization Conventional distribution channel compared to vertical marketing system:

  12. Channel Behavior and Organization • Types of vertical marketing systems: • Corporate VMS • Contractual VMS • Administered VMS

  13. Channel Behavior and Organization • Corporate VMS: • Combines successive stages of production and distribution under single ownership • Contractual VMS: • Independent firms at different levels of production/distribution contract together to obtain more economies of scale than each could alone

  14. Channel Behavior and Organization • Franchise organizations are a common form of contractual VMS • Types of franchise organizations: • Manufacturer-sponsored retailer franchise • Manufacturer-sponsored wholesaler franchise • Service-firm sponsored retailer franchise

  15. Channel Behavior and Organization • Administered VMS: • Leadership is assumed through the size and power of one or a few dominant channel members • Manufacturers of a top brand can obtain strong co-operation from resellers

  16. Channel Behavior and Organization • Horizontal marketing systems: • Two or more companies at one level join together to follow a new marketing opportunity • Multichannel distribution system: • A single firm sets up two or more marketing channels to reach one or more customer groups • Also called hybrid marketing channel system • Offers many advantages

  17. Channel Behavior and Organization • Changing channel organization: • Disintermediation occurs when product and service producers cut out traditional intermediaries or displace resellers with radical new types of intermediaries • E.g., Airline firms sell tickets directly to consumers cutting out travel agents • Disintermediation presents problems and opportunities for producers and resellers

  18. Channel Design Decisions • Marketing channel design: • Intensive: stocking the product in as many outlets as possible • Selective: the use of more than one, but fewer than all of the intermediaries who are willing to carry the company’s product • Exclusive: very limited number of dealers with exclusive distribution within their territory

  19. Retailing • Retailing: • All activities involved in selling products or services directly to final consumers for their personal, non-business use • Most retailing is done by retailers • Retailing plays an important role in most marketing channels

  20. Types of Retailers • Major types of retailers: • Specialty stores • Department stores • Supermarkets • Convenience stores • Discount stores • Off-price retailers • Superstores

  21. Types of Retailers • Retailers can be classified by the amount of service they offer: • Self-service retailers • Limited-service retailers • Full-service retailers

  22. Types of Retailers • Retailers can be classified by product line: • Specialty stores • Department stores • Supermarkets • Convenience stores • Superstores

  23. Types of Retailers • Retailers can be classified by the prices they charge: • Low price retailers include: • Discount stores • Off-price retailers • Factory outlets • Warehouse clubs

  24. Types of Retailers • Retailers can be classified by type of organization: • Corporate chain stores • Voluntary chain stores • Retailer co-operatives • Franchise organizations

  25. Retail Trends and Developments • New retail forms, but shorter retail life cycles • Innovations explained by the wheel of retailing • Slowed economy and consumer spending • Growth of online retailing • Retail technologies providing competitive tools

  26. Retail Trends and Developments The wheel of retailing:

  27. Wholesaling • Wholesaling: • All activities involved in selling goods and services to those buying for resale or business use • Wholesalers add value for producers by performing one or more channel functions

  28. Wholesaling • Functions performed by wholesalers: • Market information • Sales and promotion • Assortment building and bulk-breaking • Warehousing • Absorb risk • Transportation and delivery • Financing and management services

  29. Types of Wholesalers • Merchant wholesaler: • An independent wholesaler business that takes title to the merchandise it handles • Largest group of wholesalers accounting for 50% of all wholesaling • Two broad categories: • Full-service wholesalers • Limited-service wholesalers

  30. Types of Wholesalers • Brokers and agents: • Do not take title to goods • Perform only a few functions • Specialize by product line or customer type • Brokers bring buyers and sellers together • Agents represent buyers on a more permanent basis • Manufacturers’ agents are the most common type of agent wholesaler

  31. Wholesaler Marketing Decisions • Wholesaler strategy: • Segmentation, targeting, differentiation, and positioning • Wholesaler marketing mix: • Product assortment and services • Price • Promotion • Distribution (location)

  32. Marketing Logistics and Supply Chain Management • Marketing logistics (physical distribution): • Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit • Involves supply chain management

  33. Marketing Logistics and Supply Chain Management • Supply chain management:

  34. Marketing Logistics and Supply Chain Management • Goals of the logistics system: • Deliver a targeted level of customer service at the least cost • Major logistics functions: • Warehousing • Inventory management • Transportation • Logistics information management

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