Chapter 15: Channels

logistical function

- assorting: creating a product assortment from several sources to serve customers - Storing: assembling and protecting products at a convenient location to offer better customer service - sorting: purchasing in large quantities and breaking into smaller amounts desired by customers - Transporting: physically moving a product to customers

transactional

- buying: purchasing products for resale or as an agent for supply of a product - selling: contacting potential customers, promotional products and seeking orders - risk taking: assuming business risks in the ownership of inventory that can become obsolete or deterriorate

Facilitating function

- financing: extending credit to customers - Grading: inspecting, testing or judging products, and assigning them quality grades - marketing information and research: providing information to customers and suppliers, including competitive conditions and trends

satisfying buyer requirement

1. Information: important when buyers have limited knowledge or desire specific data about an offering - communicate with buyers through in store displays, demonstrations, and personal selling 2. Convenience: proximity, driving time, minimal time and hassle 3. variety: having many competing and complementary items to choose from. evident in both the breadth and depth of products and brands carried 4. Attendant services: important buying requirement for products such as large household appliances that require delivery, installation, and credit

Marketing channels for consumer goods and services

1. direct channel 2. indirect channel

Target market coverage: distribution density

1. intensive distribution: the firm's offerings are sold through as many retail outlets as possible 2. selective distribution: the firm selects a few retail outlets in a specific area to carry its offerings 3. Exclusive distribution: one retail outlet in a geographic area or one retail chain sells the firm's offerings - is the defined trade area of the retailer - some retailers sign exclusive distribution agreements with manufacturers

terms used for marketing intermediaries

1. middleman: any intermediary between manufacturer and end-user markets 2. agent or broker: any intermediary with legal authority to act on behalf of the manufacturer 3. Wholesaler: An intermediary who sells to other intermediaries, usually to retailers; term usually applies to consumer markets 4. Retailer: an intermediary who sells to consumers 5. Distributor: usually used to describe intermediaries who perform many distribution functions: selling, maintaining inventories, extending credit. (more common term in business markets but may also be used to refer to wholesalers) 6. Dealer: a more imprecise term than distributor that can mean the same as distributor, retailer, wholesaler.

Gaining access to distribution channels

1. piggybacking: another company that sells to the same consumer segments takes on the new products 2. joint ventures: partnership typically between local firm with market access with a foreign firm with no local access 3. acquisitions: purchasing a local company with existing distribution system

marketing channel intermediaries perform three function

1. transactional function 2. logistical function 3. facilitating function

Analyzing channels cont

Channel alignment and leadership - the structure of the chosen channel members to achieve a unified strategy - especially important in international contexts Channel captain: a dominant member of the channel who frequently dictates terms of: - pricing - delivery - product design - usually are manufacturers and retailers in the US; wholesales in Japan

analyzing channels

Channel length: the number of intermediaries involved in bringing a given product from the firm to the consumer Influenced by 3 factors: 1. product's distribution density = extensive distribution requires longer channels 2. average order quantity = small order quantities require longer channels 3. availability of channel members = japan has the longest channels leading to higher prices compared to US

Profitability

Determined by the: 1. trade margins for each channel member 2. extent to which channel members share costs - channel costs include distribution, advertising, and selling expenses associated with different types of marketing channels

Factors influencing the selection of channel members

Product and product line: 1. perishables: shorter channel necessary. 2. technical product: direct sales or highly technical channel partner 3. Broader product line: easier to justify a more direct channel Control: who will control 4 P's (better control through direct sales)

Gaining Access to distribution channels

The locked up channel (international contexts) - occurs when a newcomer cannot easily convince any channel member to participate - distributors may have exclusive agreements (contractual or informal) - distributors may be unwilling to take the risk of pioneering an unknown product - kodak had a similar experience in Japan

exclusive distribution and selective distribution

These limited distribution strategies are chosen when: 1. the offering requires personal selling at the point of purchase ex) shopping and specialty goods

strategic channel alliances

a practice where one firm's marketing channel is used to sell another firm's products Nestle -> cheerios

intensive distribution

chosen when: 1. the offering is purchased frequently 2. buyers wish to expend little effort buying it ex) convenience goods

dual distribution

involves an arrange whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product