© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin MANAGING MARKETING CHANNELS AND WHOLESALING

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Defining Marketing Channels of DistributionMarketing Channels You can eliminate the middleman but you can not eliminate its functions

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing intermediaries

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Value Created by Intermediaries NATURE AND IMPORTANCE OF MARKETING CHANNELS

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin How intermediaries minimize transactions

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing channel functions performed by intermediaries

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Marketing Channels for Consumer Goods and Services  Direct channel Direct channel  Indirect channels Indirect channels CHANNEL STRUCTURE AND ORGANIZATION

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Common marketing channels for consumer marketing

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Common marketing channels for business marketing

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Representative electronic marketing channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Direct Marketing Channels Multiple Channels and Strategic Alliances  Dual distribution Dual distribution  Strategic channel alliances Strategic channel alliances CHANNEL STRUCTURE AND ORGANIZATION

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Nestlé and General Mills Food industry’s first strategic alliance

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A Closer Look at Channel Intermediaries Merchant Wholesalers Agents and Brokers  Manufacturer’s agents Manufacturer’s agents  Selling agents Selling agents  Brokers Brokers Manufacturer’s Branches and Offices CHANNEL STRUCTURE AND ORGANIZATION

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Vertical Marketing Systems and Channel PartnershipsVertical Marketing Systems CHANNEL STRUCTURE AND ORGANIZATION

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Types of vertical marketing systems

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Vertical Marketing Systems and Channel PartnershipsVertical Marketing Systems Corporate Systems Contractual Systems  Franchising Franchising Administered Systems Channel Partnerships CHANNEL STRUCTURE AND ORGANIZATION

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Factors Affecting Channel Choice and Management Environmental Factors Consumer Factors Product Factors Company Factors CHANNEL CHOICE AND MANAGEMENT

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Channel Design Considerations Target Market Coverage  Intensive distribution Intensive distribution  Exclusive distribution Exclusive distribution  Selective distribution Selective distribution Satisfying Buyer Requirements Profitability Global Dimensions of Marketing Channels CHANNEL CHOICE AND MANAGEMENT

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Channel Relationships: Conflict, Cooperation, and Law Conflict in Marketing Channels  Disintermediation Disintermediation Cooperation in Marketing Channels  Channel captain Channel captain Legal Considerations CHANNEL CHOICE AND MANAGEMENT

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Channel strategies and practices affected by legal restrictions

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. Marketing Channel

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A marketing channel where a producer and ultimate consumer deal directly with each other. Direct Channel

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A marketing channel where intermediaries are inserted between the producer and consumers and perform numerous channel functions. Indirect Channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Performs a variety of marketing channel functions, including selling, stocking, delivering a full product assortment, and financing. Industrial Distributor

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Employ the Internet to make goods and services available for consumption or sue by consumers or industrial buyers. Electronic Marketing Channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Allow consumers to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson. Direct Marketing Channels

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An arrangement by which a firm reaches buyers by employing two or more different types of channels for the same basic product. Dual Distribution

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A practice whereby one firm’s marketing channel is used to sell another firm’s products. Strategic Channel Alliances

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Independently owned firms that take title to the merchandise they handle. Merchant Wholesalers

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory. Manufacturer’s Agents

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Represents a single producer and is responsible for the entire marketing function of that product. Selling Agents

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Independent firms or individuals whose principal function is to bring buyers and sellers together to make sales. Brokers

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact. Vertical Marketing Systems

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchise to operate a certain type of business under an established name and according to specific rules. Franchising

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Agreements and procedures among channel members for ordering and physically distributing a producers product through the channel to the ultimate consumer. Channel Partnership

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A firm tries to place its products or services in as many outlets as possible. Intensive Distribution

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Only one retail outlet in a specific geographical area carries the firm’s products. Exclusive Distribution

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A firm selects a few retail outlets in a specific geographical area to carry its products. Selective Distribution

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Arises when one channel member believes another channel member is engaged in behavior that prevents it from meeting its goals. Channel Conflict

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Channel conflict that arises when a channel member bypasses another member and sells or buys products direct. Disintermediation

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A marketing channel member that coordinates, directs, and supports other channel members; may be a producer, wholesaler, or retailer. Channel Captain