Chapter 14-Marketing Channels and Retailing
Retailer
A channel intermediary that sells mainly to customers
Channel Power
A channel member's capacity to control or influence the behavior of other channel members
Channel Conflict
A clash of goals and methods between distribution channel members Horizontal vs. Vertical Conflict
Channel Leader (Captain)
A member of a marketing channel that exercises authority/power over the activities of other members
Channel Control
A situation that occurs when one marketing channel member intentionally affects another member's behavior
Retailing
All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
Merchant Wholesalers
An institution that buys goods from manufacturers, takes title to goods, stores them and resells and ships them
Nonstore Retailing
Automatic Vending. Direct Retailing. Direct Marketing: -Telemarketing -Direct Mail -Catalogs and Mail Order -Shop-at-Home Television Networks -Online Retailing / E-tailing
Integrated Relationship
Benefits: Closely bonded relationship; explicitly defined relationships. Hazards: High capital investment; any failure could affect every channel member
Cooperative Relationship
Benefits: Formal contract without capital investment/long-term commitment; "happy medium" Hazards: Some parties may need more relationship definition
Arm's Length Relationship
Benefits: Fulfills a one time or unique need; low involvement/risk. Hazards: Parties unable to develop relationship; low trust level.
Chain Stores
Chain stores are owned and operated as a group by a single organization, with many administrative tasks being handled by the home office for the entire chain.
Transactional Functions
Contacting/Promotion
Specialization and Division of Labor
Creates efficiency. Provides lower production costs Create time, place, form and exchange utility. Specialized expertise of channel members enhances the overall performance of the channel.
Marketing Channels for Consumer Products
Direct channel: -Consumers Retailer: -Retailers, Consumers Wholesaler: -Wholesalers, Retailers, Consumers Agent/broker: -Agent or brokers, Wholesalers, Retailers, Consumers
How Marketing Channels Reduce the number of Required Transactions
Exhibit 14.1 demonstrates the purchase of a television set by four consumers. Without a retail intermediary like Best Buy, the individual television manufacturers would have to make four contacts to reach the four buyers. With Best Buy as an intermediary, each producer only has to make one contact, and the consumer buys from one retailer instead of five producers.
Franchises
Franchises are owned and operated by individuals, but are licensed by a larger supporting organization. With franchising, the advantages of both independent ownership and the chain store organization are combined.
Independent Retailers
Independent retailers are retailers owned by a single person or partnership. Around the world, most retailers are independent, operating one or a few stores in their community. Not part of a larger retail institution
Level of Distribution Intensity
Intensive Distribution Selective Exclusive
Channel Intermediaries
Intermediaries in a channel negotiate with one another, facilitate the change of ownership between buyers and sellers, and physically move products from the manufacturer to the final consumer.
Factors Affecting Channel Choice
Market Factors Product Factors Producer Factors
Direct Channels
No intermediaries are used. Examples are telemarketing, catalog shopping, on-line shopping, and television shopping networks Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.
Logistical Funtions
Transporting Storing Sorting Facilit
Ten Largest U.S Retailers
Walmart $328.7b Kroger $92.2b Target 72 Costco 71 HomeDepot 66 Walgreens 65 CVS 63 Lowes 49 Safeway 37.5 McDonalds 35.6 Costco Sales growth highest at over 10%
Agents and Brokers
Wholesaling intermediaries who facilitate the sale of a product by representing channel members
A Marketing Channel (or Channel of Distribution) is ....
a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer.
Exchange Utility
channel members (usually retailers) swap the product for money.
Form utility
channel members transform raw materials into a consumable form for customers.
Time and place utility
created when a transport company moves boxes from the place of manufacture to the store near customers.
Agents/Broker Channel
used in markets with small manufacturers/retailers that lack the resources to find each other. The agents or brokers bring the manufacturers and wholesalers together for negotiations, but they do not take title to merchandise.
Exhibit 14.4
Study
Exhibit 14.6
Study
Channel Partnering (Cooperation)
The joint effort of all channel members to create a channel that serves customers and creates a competitive advantage Channel members can speed up inventory replenishment, improve customer service, and reduce the total costs of the marketing channel.
Facilitating Funtions
Researching Financing