Chapter 12 Marketing

Selective

Between intensive and exclusive distribution lies selective distribution— the use of more than one but fewer than all of the intermediaries who are willing to carry a company's products. Most consumer electronics, furniture, and home appliance brands are distributed in this manner.

Exclusive Distribution

By contrast, some producers purposely limit the number of intermediar- ies handling their products. The extreme form of this practice is exclusive distribution, in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Exclusive distribu- tion is often found in the distribution of luxury brands.

Channel Level

Each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer is a

How Channel Members Add Value

In making products and services available to consumers, channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who use them. Information. Gathering and distributing information about consumers, producers, and other actors and forces in the marketing environment needed for planning and aiding exchange.Promotion. Developing and spreading persuasive communications about an offer. Contact. Finding and engaging customers and prospective buyers. Matching. Shaping offers to meet the buyer's needs, including activities such as manu- facturing, grading, assembling, and packaging.Negotiation. Reaching an agreement on price and other terms so that ownership or pos- session can be transferred. Others help to fulfill the completed transactions: Physical distribution. Transporting and storing goods. Financing. Acquiring and using funds to cover the costs of the channel work. Risk taking. Assuming the risks of carrying out the channel work.

Multichannel Distribution Systems

Such multi- channel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments. With each new channel, the company expands its sales and market coverage and gains opportunities to tailor its products and services to the specific needs of diverse customer segments. But such multichannel systems are harder to control, and they can generate conflict as more channels compete for customers and sales.

Several Types of Flows

These include the physical flow of products, the flow of ownership, the payment flow, the information flow, and the promotion flow. These flows can make even channels with only one or a few levels very complex.

Disintermediation

a big term with a clear message and important consequences. Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers or when radically new types of channel intermediaries displace traditional ones.

Marketing Channel

a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Intensive Distribution

a strategy in which they stock their products in as many outlets as possible. These products must be available where and when consumers want them. For example, toothpaste, candy, and other similar items are sold in millions of outlets to pro- vide maximum brand exposure and consumer convenience.

Marketing Channel Design

calls for analyzing consumer needs, setting channel objectives, identifying major channel alternatives, and evaluating the alternatives.

Vertical Conflict

conflict between different levels of the same channel, is even more common. For example, if the toy manufacturer discovers its products are arriving at retail stores later than scheduled, a conflict might develop between the manufacturer and the wholesaler responsible for shipping to retailers.

Contractual VMS

consists of independent firms at different levels of production and distribution that join together through contracts to obtain more economies or sales impact than each could achieve alone. Channel members coordinate their activities and manage conflict through contractual agreements.

Vertical Marketing System

consists of producers, wholesalers, and retailers acting as a unified system. One channel member owns the others, has con- tracts with them, or wields so much power that they must all cooperate. The VMS can be dominated by the producer, the wholesaler, or the retailer.

Indirect Marketing Channels

containing one or more intermediaries.

Direct Marketing Channel

has no intermediary levels—the company sells directly to consumers

Corporate VMS

integrates successive stages of production and distribution under single ownership.

Channel Conflict

lthough channel members depend on one another, they often act alone in their own short-run best interests. They often disagree on who should do what and for what rewards. Such disagreements over goals, roles, and rewards gener- ate

Value Delivery Network

is made up of the company, suppliers, distributors, and, ultimately, customers who "partner" with each other to improve the performance of the entire system.

Administered VMS

leadership is assumed not through common owner- ship or contractual ties but through the size and power of one or a few dominant channel members. Manufacturers of a top brand can obtain strong trade coop- eration and support from resellers.

Horizontal Conflict

occurs among firms at the same level of the channel. For instance, some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories. Or Holiday Inn franchisees might complain about other Holiday Inn operators overcharging guests or giv- ing poor service, hurting the overall Holiday Inn image.