Chapter 14: Marketing Channels Key Concepts/Notes
Product Factors
-Complexity: More complex, more direct -Price: Higher price, more direct -Customization: more direct -Life Cycle: Earlier, more direct -Delicacy: more direct Products that are more complex, customized, and expensive benefit from shorter and more direct marketing channels and through a direct sales force. Standardized products can be sold through longer distribution channels with greater numbers of intermediaries. The choice of channel may change over the life of the product. As products become more common, producers turn from a direct channel to more alternative channels. Perishable items and fragile products require fairly short marketing channels and a minimum amount of handling.
Market Factors
-Customer nuances: Who are the potential customers? What/where/when/how do they buy? -Distinction between consumer or industrial customers. Consumers buy in small quantities and don't require much service, whereas industrial customers purchase in larger quantities and require more customer service. -If the target market is concentrated in specific areas, direct selling is appropriate. If widely dispersed, intermediaries would be less expensive. -In general, a large market requires more intermediaries.
Producer Factors
-Resources: More Resources, more direct -Number of Product Lines: More, More Direct -Desire for Channel Control Producers with larger financial, managerial, and marketing resources are able to use more direct channels. These producers can maintain their own sales force, warehouse their own goods, and extend credit to customers. Producers with several products in a related area choose channels that are more direct, and sales expenses can be spread over more products. A producer's desire to control pricing, positioning, brand image, and customer support may avoid channels in which discount retailers are present. Furthermore, manufacturers of upscale products may sell only in expensive stores to maintain an image of exclusivity.
Channel Strategy Decisions: Level of Distribution Intensity #) Intensity Level -Objective -Number of Intermediaries (retailers, merchants, wholesalers, agents and brokers)
1) Intensive Distribution -Achieve mass market selling. Convenience goods. -Many 2) Selective Distribution -Work with selected intermediaries. Shopping and some specialty goods. -Several 3) Exclusive Distribution -Work with single intermediary. Specialty goods and industrial equipment. -One
Channel Strategy Decisions: Factors Affecting Channel Choices
1)Market Factors 2)Product Factors 3)Producer Factors *Before choosing a marketing channel, supply chain managers must analyze several factors, which often interact. These factors can be grouped as market factors, product factors, and producer factors
Explain what marketing channels and channel intermediaries are, and describe their functions and activities
A marketing channel is a business structure of interdependent organizations that reach from the point of production to the consumer. Intermediaries negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller. Retailers are those firms in the channel that sell directly to consumers.
Marketing Channels for Consumer Products
Direct Channel: (Producer) -> (Consumers) Retailer Channel: (Producer) -> (Retailers) -> (Consumers) Wholesaler Channel: (Producer) -> (Wholesalers) -> (Retailers) -> (Consumers) Agent/Broker Channel: (Producer) -> (Agents or Brokers) -> (Wholesalers) -> (Retailers) -> (Consumers) Notes: Direct channel is used to sell products directly to consumers. No intermediaries are used. Examples are telemarketing, catalog shopping, on-line shopping, and television shopping networks. At the other end of the spectrum, an agent/broker channel may be 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. Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.
Marketing Channels for Business/Industrial Products
Direct Channel: (Producer) -> (Industrial User) Direct Channel: (Producer) -> (Government Buyer) Industrial Distributor: (Producer) -> (Industrial Distributor) -> (Industrial User) Agent/Broker Channel: (Producer) -> (Agents or Brokers) -> (Industrial User) Agent/Broker-Industrial Distributor: (Producer)-> (Agents or Brokers) -> (Industrial Distributor) -> (Industrial User)
Distribution in Service Organizations
Focuses in Four Main Areas 1) Minimizing wait times 2) Managing service capability and capacity 3) Improving service delivery 4) Standardizing services across regions
Discuss multichannel and omnichannel marketing in both B2B and B2C structures and explain why these concepts are important.
Many companies have begun employing multichannel marketing strategies, whereby customers are offered information, goods, services, and/or support through one or more synchronized channels. While it can promote better consumer behavior, the multichannel design also creates redundancy and complexity in the firm's distribution system. Selling through multiple channels is typified by multiple parallel supply chains, each with its own inventory, processes, and performance metrics. Many companies are transitioning to omnichannel distribution operations that support their multichannel retail operations and unify their retail interfaces. With omnichannel operations, every customer receives equally efficient service.
Discuss channel relationship types and roles, and their unique benefits and drawbacks.
Marketing managers should carefully consider the types of relationships they choose to foster between their company and other companies (integrated, cooperative, arm's-length, co-opetition). Manufacturers and retailers can be arranged into four basic channel configurations: a bilateral monopoly, a retailer monopoly, a manufacturer monopoly, and multiple manufacturers and retailers working together and competing with one another for customers. In addition to considering the multiple different types of channel relationships and their costs and benefits, managers must also be aware of the social dimensions that are constantly affecting their relationships.
Channel Intermediaries
Retailers: Take Title to Goods Merchant Wholesalers: Take Title to Goods Agents and Brokers: DO NOT TAKE TITLE TO GOODS *Taking title means they own the merchandise and control the terms of the sale.
Describe common channel structures and strategies, and the factors that influence their choice.
When possible, producers use the direct channel to sell directly to consumers. When one or more channel members are small companies, an agent/broker channel may be the best solution. Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel. Dual distribution may be used to distribute the same product to target markets, and companies often form strategic channel alliances to use already-established channels. Managers must decide what role distribution will play in the overall marketing strategy. In addition, they must be sure that the channel strategy chosen is consistent with product, promotion, and pricing strategies. Organizations have three options for intensity of distribution: intensive distribution, selective distribution, or exclusive distribution.
Discuss new developments in channel marketing and the effects on existing channel activities and structures.
With technology changing rapidly, there are always new trends developing in channel management. M-commerce enables consumers using wireless mobile devices to connect to the Internet and shop. The use of m-commerce has become increasingly important as users grow in both number and purchasing power. Firms are also using social media to connect with customers. On the demand management side, facial recognition technology allows market researchers to record consumers' nonverbal reactions to products and advertisements, giving them more information about customer preferences.