1. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Chapter 10: Place and Development of Channel Systems

2. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill When you finish this chapter, you should 10-2 Chapter 10 Objectives 1. Understand what product classes suggest about Place objectives. 2. Understand why some firms use direct channel systems while others rely on intermediaries and indirect systems. 3. Understand how and why marketing specialists develop to make channel systems more effective. 4. Understand how to develop cooperative relationships— and avoid conflicts—in channel systems. 5. Know how channel members in vertical marketing systems shift and share functions—to meet customer needs. 6. Understand the differences between intensive, selective, and exclusive distribution. 7. Understand the important new terms.

3. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Strategy Decision Areas in Place Exhibit 10-1 10-3 Type of channel Type of physical distribution facilities needed How to manage channels Middlemen/ facilitators needed Degree of market exposure desired IndirectDirect Place objectives Customer service level desired

4. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Why a Firm May Want to Use Direct Channels Greater Control Lower Cost Value added subsequent to production process Value added subsequent to production process Direct contact with Customer Needs Direct contact with Customer Needs Quicker Response or Change in Marketing Mix Quicker Response or Change in Marketing Mix Suitable Middlemen Not Available Suitable Middlemen Not Available Some Reasons for Choosing Direct Channels Some Reasons for Choosing Direct Channels 10-4

5. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Manufacturer or producer Consumer Procter & Gamble Del Monte NissanCitibank Wholesaler Retailer Wholesaler Retailer 10-5 Exhibit 10-2 Four Examples of Basic Channels of Distribution for Consumer Products

6. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Accumulating Bulk- Breaking Bulk- Breaking Assorting Sorting Regrouping Activities 10-6

7. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Managing Channel Relationships Role of Channel Captain Common Objectives Conflict Handling Whole-Channel Product- Market Commitment Choosing the Type of Relationship Key Issues in Channel Management 10-7

8. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Vertical Marketing Systems Exhibit 10-3 10-8 Characteristics Type of channel Little or none Some to good Fairly good to good Complete None Economic power and leadership Contracts One company ownership Typical “inde- pendents” McDonald’sFlorsheim General Electric Amount of cooperation Traditional Vertical marketing systems AdministeredContractualCorporate Control maintained by Examples

9. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill = number of outlets Intensive Selective Exclusive What Market Exposure Fits the Marketing Objectives 10-9 Market Exposure

10. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 2000 Irwin/McGraw-Hill Place Channel of Distribution Direct Marketing Discrepancy of Quantity Discrepancy of Assortment Regrouping Activities Accumulating Bulk-Breaking Sorting Assorting Traditional Channel Systems Channel Captain Vertical Marketing Systems Corporate Systems Vertical Integration Administered Systems Contractual Systems Ideal Market Exposure Intensive Distribution Selective Distribution Exclusive Distribution Dual Distribution Reverse Channels Key Terms