1. Marketing Channels and Distribution

2. LEARNING OBJECTIVES
Understand how marketing channels add time, place, and possession utilities for final customer and how channel structure evolves to provide these utilities effectively and efficiently.
Identify the five major flows in marketing channels and how each contributes to making products conveniently available to many millions of customers.
Understand how marketing channels add time, place, and possession utilities for final customer and how channel structure evolves to provide these utilities effectively and efficiently
Identify the five major flows in marketing channels and how each contributes to making products conveniently available to many millions of customers

3. LEARNING OBJECTIVES
Realize that marketing channels are not only economic systems, but also social systems, in which power and conflict play an important role
Recognize and explain all six decision areas of channel management and be familiar with the main issues associated with each of those decisions
Appreciate the crucial role played by logistics in the creation and operation of high- performance marketing channels
Realize that marketing channels are not only economic systems, but also social systems, in which power and conflict play an important role.
Recognize and explain all six decision areas of channel management and be familiar with the main issues associated with each of those decisions.
Appreciate the crucial role played by logistics in the creation and operation of high-performance marketing channels.

4. MARKETING CHANNEL DEFINED
Marketing channel is the network of organizations that creates time, place, and possession utilities.

5. Utilities Form Utility – created by manufacturing
Time Utility – having products available for use when consumers want them.
Place Utility – having products where consumers want them.
Possession Utility – having the ability to take possession of products.

6. MARKETING CHANNEL STRUCTURE
Channel structure consists of all the businesses and institutions (including producers or manufacturers and final customers) who are involved in performing the functions of buying, selling, or transferring title.

7. MARKETING CHANNEL STRUCTURE
Three Dimensions
Length of channel
Intensity at various levels
Types of intermediaries

8. MARKETING CHANNEL STRUCTURE
Length of marketing channel
2 level
3 level
4 level
5 level
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Agent
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer

9. MARKETING CHANNEL STRUCTURE
Intensity at various levels
Exclusive Distribution
Selective Distribution
Intensive Distribution

10. MARKETING CHANNEL STRUCTURE
Intensity at various levels
Exclusive Distribution
Practiced when a manufacturer restricts product distribution to a single retailer in a particular market or just a relatively few retailers
Products that are expensive, infrequently purchased, are sought after by consumers (i.e. specialty goods), or which require considerable after-sale servicing are the most likely candidates for exclusive distribution

11. MARKETING CHANNEL STRUCTURE
Intensity at various levels
Selective Distribution
Selectively distributed brands are available in multiple retail outlets in a particular market
Shopping products, or those that consumers seek out, are sold through selective distribution

12. MARKETING CHANNEL STRUCTURE
Intensity at various levels
Intensive Distribution
Used when convenience products are sold through virtually every available retail outlet in a particular market, e.g. soft drinks, candy, gum, cigarettes

13. MARKETING CHANNEL STRUCTURE
Types of Intermediaries – include the different kinds of intermediary institutions that can be used at the various levels of the channel.

14. DETERMINANTS OF CHANNEL STRUCTURE
Determinants of channel structure include:
Distribution tasks
Economics of distribution tasks
Management's desire for distribution control

15. Distribution Tasks
Discrepancies in quantity – buffer mass produced goods.
Discrepancies in assortment – allow producers to focus while providing customer selection.

16. Distribution Tasks Discrepancies in time – hold goods until ready.
Discrepancies in place – connects producers and consumers.

17. The Economics of Performing Distribution Tasks
Economics of distribution tasks
Transaction efficiency
Mfg. A
Mfg. B
Mfg. C
Without intermediaries 1 2 3 4 5 6 7 8

18. The Economics of Performing Distribution Tasks
Economics of distribution tasks
Transaction efficiency
Mfg. A
Mfg. B
Mfg. C
With intermediaries
Intermediary 1 2 3 4 5 6 7 8

19. Management’s Desire for Control of Distribution
The shorter the channel structure the higher the control
Needed when a manufacturer must protect product image, etc.

20. FLOWS IN MARKETING CHANNELS
Product Flow
The movement of the product from manufacturer through all parties who take physical possession
Negotiation Flow
Interplay of buying/selling tasks associated with title transfer

21. FLOWS IN MARKETING CHANNELS
Ownership Flow
Movement of title of the product
Information Flow
Information to and from the manufacturer
Promotion Flow
Flow of persuasive communication (advertising, personal selling, etc.)

22. FLOWS IN MARKETING CHANNELS

23. MARKETING CHANNELS AS SOCIAL SYSTEMS
Power in Marketing Channels – the capacity of one channel member to influence the behavior of another channel member.
Conflict in Marketing Channels – when one channel member believes that another channel member is impeding the attainment of its goals.

24. MARKETING CHANNEL MANAGEMENT
Marketing channel management – the analysis, planning, organizing, and controlling of a firm’s marketing channels.
Interorganizational context – channel management that extends beyond a firm’s own organization into independent businesses.

25. PERSPECTIVES FOR CHANNEL MANAGEMENT
Down the channel toward the product
Up the channel toward the manufacturer

26. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Realize only the place ‘P’ provides protection from imitation
Distribution strategies can provide sustainable competitive advantage
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

27. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Set distribution objectives
Design
channel structure
Specify tasks to be performed by the channel
Select channel members
Motivate channel members
Consider alternative structures
Coordinate with marketing mix
Choose optimal structure
Evaluate member performance

28. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Optimal structure identified by considering:
Market variables
Product variables
Company variables
Intermediary variables
Behavioral variables
External environment variables
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

29. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Develop selection criteria
Size
Credit and
Financial
Condition
Design channel structure
Attitude
Sales
Strength
Select channel members
Prospective channel member
Management
Ability
Product
Lines
Motivate channel members
Management
succession
Coordinate with marketing mix
Reputation
Sales
Performance
Market
Coverage
Evaluate member performance

30. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Find prospective channel members
Evaluate prospective channel members
Convert prospectives into actual channel members
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

31. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Learn about the needs and problems of channel members
Advisory committees
Offer support
Informal support
Strategic alliances, partnerships
Provide ongoing leadership
Continuing focus
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

32. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Product and Channel
Retailers (a channel member) play an important role in product positioning
Display fixtures
Personal selling
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

33. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Pricing and Channel
Relevant to channel members:
Profit margins available to channel members
Pricing policies
Incentives
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

34. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Promotion and Channel
Promotions interface with channel members
Point-of-purchase displays
Inventory levels
Sales person training
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

35. DECISION AREAS OF CHANNEL MANAGEMENT
Formulating channel strategy
Assessment of success of channel members in implementing strategies
Requires good information flows between members
Point-of-sale systems, EDI
Design channel structure
Select channel members
Motivate channel members
Coordinate with marketing mix
Evaluate member performance

36. LOGISTICS IN MARKETING CHANNELS
Logistics make products available to customers
Also called physical distribution (PD)
Supply chain management (SCM) are logistical systems that facilitate close cooperation among firms in a channel

37. LOGISTICS IN MARKETING CHANNELS
Total Cost Approach and Systems Concept
Systems Concept
Transportation
Materials Handling
Management
views logistics as
a system of
interrelated
components
Management
tries to reduce
cost of using the
components
as a whole
Order Processing
Inventory Control
Warehousing
Packaging
Total Cost
Approach

38. LOGISTICS IN MARKETING CHANNELS
INSERT Table 10.1

39. Marketing Channel Logistics
Almost all products must be moved
Generally one of the highest percentage costs
Use in-house transport or common carriers?
What rates are available?
What are competitors doing?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

40. Marketing Channel Logistics
Growing use of cross-docking
How to minimize distances?
What equipment should be used?
How to use labor efficiently?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

41. Marketing Channel Logistics
Order cycle time (time between order and delivery)
How to reduce errors in order processing?
How to develop standards for different product types?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

42. Marketing Channel Logistics
Economic order quantity (EOQ) is the lowest total cost (inventory carry cost + ordering costs)
How to balance inventory levels with order sizes?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

43. Marketing Channel Logistics
Growth of single item shipments
Where to locate a warehouse?
Number of warehousing units and size of units?
Ownership question?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

44. Marketing Channel Logistics
Effective packaging can help control inventory carry costs and help logistics efficiency
What type of package is required (sturdiness, etc.)?
Transportation
Materials Handling
Order Processing
Inventory Control
Warehousing
Packaging

45. OUTPUT OF THE LOGISTICS SYSTEM
Customer service is the output of logistics systems

46. Supplemental Material

47. Types of intermediaries
Channel Structure
Types of intermediaries
Merchant Middlemen
Functional
Middlemen

48. Types of intermediaries
Channel Structure
Types of intermediaries
Do not take title to products; they simply facilitate the exchange process by performing buying and/or selling functions.
Functional
Middlemen

49. Types of intermediaries
Channel Structure
Types of intermediaries
Take title to products and resell them.
Merchant Middlemen

50. Social Aspects of Marketing Channels
Marketing channel power
The influence one channel member has over other members’ behaviors
Marketing channel conflict
Goal impeding behavior by one or more channel members
Territorial encroachment

51. Determinants of Power Reward Power Coercive Power Legitimate Power
Ability to offer an award (e.g. granting of exclusive distribution)
Coercive Power
Legitimate Power
Expert Power
Referent Power

52. Determinants of Power Reward Power Coercive Power Legitimate Power
Threat of punishment (e.g. a manufacturer might threaten a retailer with loss of exclusive distribution)
Coercive Power
Legitimate Power
Expert Power
Referent Power

53. Determinants of Power Reward Power Coercive Power Legitimate Power
Power from contract agreement or organizational relationships
Coercive Power
Legitimate Power
Expert Power
Referent Power

54. Determinants of Power
Reward Power
Power resulting from technological expertise or proprietary reasons
Coercive Power
Legitimate Power
Expert Power
Referent Power

55. Determinants of Power
Reward Power
Power resulting from ability to influence further action
Coercive Power
Legitimate Power
Expert Power
Referent Power

56. Vertical Marketing Systems
Administered VMS
Corporate Systems
Contractual Systems
Conventional channel with one channel member (a manufacturer, wholesaler, or retailer) informally acting as the channel leader.

57. Vertical Marketing Systems
Administered VMS
Corporate Systems
Contractual Systems
Combines all levels of the marketing channel under one company’s ownership

58. Vertical Marketing Systems
Administered VMS
Corporate Systems
Contractual Systems
Are integrated via contractual agreement
Franchising is the major form of contractual VMS. Others include voluntary chains and cooperatives