Chapter 14-Marketing Channels and Retailing

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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


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