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Chapter 2

Chapter 2. The Channel Participants. Objective 1:. 2. Major Participants in the Marketing Channel. * Commercial Channel. * Target Markets. Why shift distribution tasks to intermediaries?. Objective 2:. 1. Producers & Manufacturers. Intermediaries. • lack expertise

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Chapter 2

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  1. Chapter 2 The Channel Participants

  2. Objective 1: 2 Major Participants in the Marketing Channel * Commercial Channel * Target Markets

  3. Why shift distribution tasks to intermediaries? Objective 2: 1 Producers & Manufacturers Intermediaries • lack expertise • lack economies of scale • spread high fixed costs over large quantities of diverse products • achieve economies of scope and economies of scale

  4. 2 Example:Distribution of Crayons Manufacturer direct to customers • Huge order processing facility • Huge inventory • Several warehouse locations • Transportation of product to consumers = cost prohibitive

  5. Objective 3: 2 Major Types of Wholesalers

  6. Merchant Wholesalers 2 Buy Take title to Store Handle Large quantities of products Resell to Industrial, commercial, or institutional concerns other Wholesalers Retailers

  7. Agents, Brokers, & Commission Merchants 2 Involved in buying & selling while acting on behalf of clients Commissions on sales or purchases

  8. 2 Manufacturers’ Sales Branches & Offices Separated from manufacturing plants Distribute manufacturer’s products at wholesale Owned & operated by manufacturers Some wholesale allied & supplementary products purchased from other manufacturers.

  9. Major Trends in Wholesale Structure Objective 4: 2 1987—1997 69.7% Manufacturer’s sales branches & offices 60.8% Wholesale trade 57.8% Merchant wholesalers 50.0% Agents, brokers, & commission merchants

  10. 2 Trends in Size & Concentration

  11. Merchant Wholesalers Specialize in Performance Distribution Tasks Objective 5: 2  Provide market coverage  Make sales contacts  Hold inventory  Process orders  Gather market information  Offer customer support • Operate at high levels of effectiveness and efficiency • Average cost curves lower than those for their suppliers

  12. Merchant Wholesalers’ Distribution Tasks Serve Customers 2  Assure product availability  Provide customer service  Extend credit & financial assistance  Offer assortment convenience  Break bulk  Help customers with advice & technical support

  13. Agent Wholesalers’ Distribution Tasks 2 Manufacturers’ Agents Market coverage Sales contacts

  14. Agent Wholesalers’ Distribution Tasks 2 Selling agents Market coverage Sales contacts Order processing Marketing information Product availability Customer services

  15. Agent Wholesalers’ Distribution Tasks 2 Brokers Market coverage Sales contacts Order processing Marketing information Product availability Customer services

  16. Agent Wholesalers’ Distribution Tasks 2 Commission Merchant Market coverage Sales contacts Order processing Breaking bulk Credit Holding inventory

  17. By Ownership of Establishment By Kind of Business (Merchandise Handled) By Size of Establishment By Degree of Vertical Integration By Type of Relationship with other Business Organizations By Method of Consumer Contact By Type of Location By Type of Service Rendered By Legal Form of Organization By Management Organizations or Operational Technique Objective 6: 2 Retail Structure Alternative Bases for Classifying Retailers

  18. Motor vehicle & parts dealers Furniture & home furnishings stores Electronics & appliance stores Building material & garden equip. & supply dealers Food & beverage stores Health & personal care stores Gasoline stations Clothing & clothing accessories stores Sporting goods, hobby, book, & music stores General merchandise stores Miscellaneous store retailers Nonstore retailers 2 Kind-of-Business Classifications Retail Trade

  19. Retail Structure Trends Objective 7: 1 Decreasing number of establishments Increasing sales = increase in size of retail establishments measured by average sales volume per store

  20. Concentration in Retailing 1 In 1997 4% of all retail firms accounted for nearly 80% of total sales!!

  21. Distribution Tasks Performed by Retailers Objective 8: 2 The role of the retailer in the distribution channel, regardless of his size or type, is to interpret the demands of his customers and to find and stock the goods these customers want, when they want them, and in the way they want them. This adds up to having the right assortments at the time customers are ready to buy. — Charles Y. Lazarus

  22. 2 Distribution Tasks Performed by Retailers • Offer manpower & physical facilities close to consumers’ residences • Provide personal assistance to help sell products • Interpret and relay consumer demand • Divide large quantities into consumer-sized lots • Offer storage • Remove risk by ordering in advance of the season

  23. Objective 9: 2 Retailers’ Growing Power in Marketing Channels

  24. Objective 10: 2 Facilitating Agencies in Marketing Channels • Transportation agencies • Storage agencies • Order processing agencies • Advertising agencies • Financial agencies • Insurance companies • Marketing research firms

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