Marketing Channel A set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer. Channel Members Negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller in the course of moving the product from the manufacturer into the hands of the final consumer. 1

Marketing channels exist to create utility for customers – Place utility Availability of a product or service in a location that is convenient to a potential customer – Time utility Availability of a product or service when desired by a customer – Form utility Availability of the product processed, prepared, in proper condition and/or ready to use – Information utility Availability of answers to questions and general communication about useful product features and benefits Channel Objectives

3 How Marketing Channels Reduce the Number of Required Transactions

4 Channel Intermediaries Merchant Wholesaler Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

5 Channel Intermediaries Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods

6 Factors Suggesting Type of Wholesaling Intermediary to Use Product characteristics Include such aspects of a product as standardization and customization, complexity, and gross margin. Buyer considerations Include purchase frequency and how long the buyer is willing to wait for a product. Market characteristics Include number of buyers and buyer concentration levels.

7 Channel Functions Performed by Intermediaries Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions Logistical Functions

8 Marketing Channels for Consumer Products

9 Channels for Business and Industrial Products

10 Alternative Channel Arrangements Dual or multiple distribution Two or more channels selected is called dual or multiple distribution. Nontraditional channels Include the Internet and mail-order channels, help differentiate a firm’s product from the competition. Strategic channel alliances Producers use another manufacturer’s already-established channel.

11 Market Factors Market Factors That Affect Channel Choices Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial Customer Consumer or Industrial Customer Size of market Geographic location

12 Product Factors Product Factors That Affect Channel Choices Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price

13 Producer Factors Producer Factors That Affect Channel Choices Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control Desire for Channel Control

14 Levels of Distribution Intensity Intensive Achieve mass market selling. Convenience goods. Many Selective Exclusive Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment. Several One Intensity Level Objective Number of Intermediaries

15 BenefitsHazards Arm’s Length Relationship Fulfills a one time or unique need; low involvement/risk Parties unable to develop relationship; low trust level Cooperative Relationship Formal contract without capital investment/long-term commitment; “happy medium” Some parties may need more relationship definition Integrated Relationship Closely bonded relationship; explicitly defined relationships High capital investment; any failure could affect every channel member Types of Channel Relationships

Co-opetition Co-opetition mixes elements of cooperation and competition between two partners. Two companies work together on some initiatives while still competing in other areas.

17 Social Influences in Channels Conflict Leadership Control Power

18 Channel Power, Control, and Leadership Channel Power Channel Power A channel member’s capacity to control or influence the behavior of other channel members. A channel member’s capacity to control or influence the behavior of other channel members. Channel Control Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior. A situation that occurs when one marketing channel member intentionally affects another member’s behavior. Channel Captain A member of a marketing channel that exercises authority and power over the activities of other members. A member of a marketing channel that exercises authority and power over the activities of other members.

Explain what marketing channels and channel intermediaries are, and describe their functions and activities Describe common channel structures and strategies, and the factors that influence their choice Discuss channel relationship types and roles, and their unique benefits and drawbacks LEARNING OUTCOMES

Discuss multichannel and omnichannel marketing in both B2B and B2C structures and explain why these concepts are important Discuss new developments in channel management and the effects on existing channel activities and structures Define the key terms listed in chapter prep 20 LEARNING OUTCOMES