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Chapter 11: Place and Development of Channel Systems

Chapter 11: Place and Development of Channel Systems. Place Decisions. Place - making goods and services available in the right quantities and locations when customers want them.

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Chapter 11: Place and Development of Channel Systems

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  1. Chapter 11: Place and Development of Channel Systems

  2. Place Decisions • Place - making goods and services available in the right quantities and locations when customers want them. • Channel of distribution - any series of firms or individuals who participate in the flow of product from producer to final user or consumer.

  3. Place objectives Customer service level desired Type of channel Direct Indirect Type of physical distribution facilities needed Degree of market exposure desired Middlemen/ facilitators needed How to manage channels Strategy Decision Areas in Place Exhibit 11-1 11-3

  4. “Place” Issues • Place decisions: • are aided by knowing about the product classes. • may require several strategies - no one best place decision exists. • may focus on the selection and use of middlemen and facilitators. • may focus on the location of retail stores and wholesale facilities. • are harder to change than product, promotion or price decisions.

  5. Direct vs Indirect Channels • Direct channel - the producer sells directly to the final customer or consumer. • Indirect channel - use middlemen to reach the final customer or consumer.

  6. Greater Control Why a Firm May Want to Use Direct Channels Lower Cost Some Reasons for Choosing Direct Channels Value added subsequent to production process Direct contact with Customer Needs Quicker Response or Change in Marketing Mix Suitable Middlemen Not Available 11-4

  7. Established buying patterns Why a Firm May Want to Use Indirect Channels Consumers want convenience Some Reasons for Choosing Indirect Channels Reduces inventory costs Reduces credit risk 11-4

  8. Bulk- Breaking Accumulating Sorting Assorting Regrouping Activities 11-5

  9. Choosing the Type of Relationship - traditional vs vertical Whole-Channel Product-Market Commitment Key Issues in Channel Management Conflict Handling Common Objectives Role of Channel Captain Managing Channel Relationships 11-6

  10. Traditional vs Vertical Marketing Systems • Traditional channel system - various channel members make little or no effort to cooperate with each other. • Vertical marketing system - channel system in which the whole channel focuses on the same target market at the end of the channel (the most common system in the U.S.).

  11. Characteristics Type of channel Traditional Vertical marketing systems Administered Contractual Corporate Amount of cooperation Little or none Some to good Fairly good to good Complete Control maintained by None Economic power and leadership Contracts One company ownership Examples Typical “inde-pendents” General Electric McDonald’s Florsheim Traditional vs Vertical Marketing Systems Exhibit 11-3 11-7

  12. Intensive Selective Exclusive Market Exposure What Market Exposure Fits the Marketing Objectives = number of outlets 11-8

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