Part 1

1. Part 1 Marketing Channel Systems

2. Primer on “The Basics” What is Marketing?

3. Primer on “The Basics” What is Marketing? • Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. (Lusch and Marshall 2004) • Competition for a Differential Advantage(Alderson 1957)

4. Primer on “The Basics” What is the Marketing Concept? • A management philosophy which advocates that a business organization (or channel):

5. Primer on “The Basics” What is the Marketing Concept? • A management philosophy which advocates that a business organization (or channel): • Exists to identify and satisfy the needs of its customers (i.e., customer orientation) • That a customer orientation is accomplished through an integrative effort throughout the firm or channel (i.e., integrated effort) • That the firm’s (or channel’s) focus should be long-term and seek to provide a satisfactory return on owner’s investment (ROI) (i.e., long-term profit orientation)

6. Primer on “The Basics” What are the Eight (8) General Marketing Functions?

7. Primer on “The Basics” What are the Eight (8) General Marketing Functions? • Buying • Selling • Storing • Transporting • Sorting • Financing • Information Gathering • Risk Taking

8. Primer on “The Basics” What Purpose do Marketing Channels Perform?

9. Primer on “The Basics” What Purpose do Marketing Channels Perform? • Make products and services conveniently available to customers when, where, and how they want them in order to satisfy demand. • The farmer, egg, & grocery store example.

10. Chapter 1 Marketing Channel Concepts

11. Why the growing importance of marketing channels? Objective 1: 1 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs

12. The explosion of information technology and E-commerce 1. 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs 1 The prediction: Disintermediation — reduction of number of intermediaries Yahoo! eBay Amazon.com The reality: Reintermediation—evolution of a new type of intermediary E-commerce is more an evolution than a revolution in marketing.

13. The explosion of information technology and E-commerce 1. 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs 1

14. A greater difficulty in gaining a sustainable competitive advantage 1 1. The explosion of information technology and E- commerce 2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs Place(distribution), or Marketing Channel Strategy Sustainable competitive advantage Potential for gaining competitive advantage because place is more difficult for competitors to copy

15. The growing power of distributors 1 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. 4. The need to reduce distribution costs Power retailers as gatekeepers of consumer markets Act as buying agents for customers rather than as selling agents for manufacturers

16. The need to reduce distribution costs 1 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors 4. Marketing channels are the most recent target for reducing distribution costs. The focus is on channel structure and management.

17. Objective 2: 1 What is a marketing channel? Outside the firm Firm involved in negotiatory functions External contactual organization that management operates to achieve its distribution objectives Management’s involvement in the process Goals that change, causing variations in contactual organizations involved

18. 1 What is a channel manager? Anyone in a firm or organization who is involved in marketing channel decision making

19. Objective 3: 1 How does marketing channel strategy relate to the rest of the marketing mix?

20. 1 The change of focus to channel strategy • Creates competitive advantage with long-term viability • Builds strong relationships between manufacturers and channel members • Based on trust, confidence, and people power

21. Channel Strategy and Logistics Management 1 Parts of the “Place” or “Distribution” Variable • Concerned with entire process of starting and operating contactual organization • Formulated before logistics management Focused specifically on providing product availability at appropriate time & place

22. 5 Primary Marketing Channel Flows 1 Objective 4: Product Flow Negotiation Flow Ownership Flow Information Flow Promotion Flow

23. Product Flow 1 Manufacturer Transportation Company* Wholesalers Retailers Consumers

24. Negotiation Flow 1 Manufacturer Wholesalers Retailers Consumers

25. Ownership Flow 1 Manufacturer Wholesalers Retailers Consumers

26. Information Flow 1 Manufacturer Transportation Company Wholesalers Retailers Consumers

27. Promotion Flow 1 Manufacturer Advertising Agency Wholesalers Retailers Consumers

28. Distribution through intermediaries Objective 5: 1 Factors that determine the role of intermediaries Technology the Internet Economic Specialization & Considerations Division of Labor Contactual Efficiency

29. Channel Structure v. Ancillary Structure Objective 6: 1 Channel Structure The group of channel members to which a set of distribution tasks has been allocated Why are single-channel structures currently the exception? Ancillary Structure The group of institutions that assist channel members in performing distribution tasks Why is managing the ancillary structure most likely to be less complex than managing the channel structure?