MKT 350-07 Ch.10 "Place and Development of Channel Systems" Smartbook

A selective policy might be used to avoid selling to wholesalers or retailers that ...

1. Place orders that are too small to justify making calls 2. Make too many returns or request too much service 3. Have a poor credit rating OR 4. are not in a position to do a satisfactory job

Horizontal Arrangement

among competing retailers, wholesalers, or producers-limit sales by customers or territory have consistently have been ruled illegal by SC

Channel of Distribution

any series of firms or individuals who participate in the flow of products from producer to final user or consumer

A company that has limited financial resources or wants to retain flexibility may want to (do what?)

avoid that investment by working with established intermediaries

corporate channel systems

corporate ownership all along the channel; we might say the firm is going "direct", but actually, the firm may be handling manufacturing, wholesaling, and retailing, so it's more accurate to think of the firm as a vertical marketing system

For the company to obtain similar information may require (what?)

costly marketing research, which may also take longer to acquire

What can opening case makes it clear that new Place arrangements?

Dramatically change the competition in a product-market

What result in greater conflict and less total profits for the whole channel?

In a traditional system, each member of the channel focuses on its own interests-typically maximizing its own profits without paying much attention to others in the channel

Why is direct business is understandable?

In business markets there are fewer transactions, orders are larger, and customers may be concentrated in one geographic area

Although each channel system should act as a unit, some firms are

in a better position to take the lead in the relationship and in coordinating the whole channel effort

Sometimes wholesalers or retailers take the lead. They are closer to the final user or consumer and are (what?)

in an ideal position to assume the channel captain role.

Homogeneous shopping goods favor (what?)

low-cost retailers as customers focus mostly on low prices

Ideal Market Exposure

makes a product available widely enough to satisfy target customers' needs but not exceed them; too much exposure only increases the total cost of marketing

Place

making goods and services available in the right quantities and locations, when customers want them

Business product classes reflect what buyers think about (what?)

products and how they are used

Exclusive distribution is just an extreme case of (what?)

selective distribution. Beside the various advantages of selective distribution, producers may want to use exclusive distribution to help control prices and the service offered in a channel

Intensive Distribution

selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product

Exclusive Distribution

selling through only one intermediary in a particular geographic area

Selective Distribution

selling through only those intermediaries who will give the product special attention

Marketing managers need to keep the future in mind when (what?)

they develop Place objectives

Specialists develop strategies to adjust separations and discrepancies if (what?)

they need to be adjusted. For example, many office workers in big cities don't have tome to run out to a restaurant for lunch every day

Many firms that thought they could quickly establish effective websites for direct online sales, but (what?)

- It can take even longer and cost more to develop effective working relationships with others in the channel - Legal contracts with channel partners may limit changes - It's hard to move retail stores and wholesale facilities once they are set up - it took several years and millions of dollars to work out the kinks

There are four regrouping activites:

1. Accumulating 2. Bulk-breaking 3. Sorting 4. Assorting When one or more of these activities is needed, a marketing specialist may develop them to fill this need

What two trends reflect the growing number of consumer products are being sold directly to consumer?

1. Growth of website-based e-commerce systems and delivery services (FedEx, etc...: many firms direct access to customers whom it would have been impossible to reach in the past); new option lowers the cost for direct distribution 2. Consumers have grown increasingly comfortable purchasing product online. Many customers no longer feel the need to see, touch, and feel a product before purchase. Trust in online reviews and guarantees of free returns have lowered the risk of buying before trying

When different target markets have different needs?

A number of Place variations may be required

What are some products and transportation/distribution requirements?

Accessory equipment & Maintenance, Repair, and Operating (MRO) supplies: requireing widespread distribution Raw Materials: Have special transportation needs that much be considered Reliable delivery is critical for component parts and materials Professional services are usually delivered in person, so location matters

The most important reason for using an indirect channel of distribution is when (what?)

An intermediary help producers serve customer needs better and at lower cost

Deciding whether to sell directly, indirectly, or both requires (what?)

An understanding of discrepancies and separations

Intermediaries who are close to their customers are often able to (what?)

Anticipate customer needs and forecast demand more accurately

Exclusive distribution in an area considered under US (what?) laws

Antimonopoly

Intermediaries stock what they believe their customers want to (What?). Adding (What?) goods can be (what?)

Buy; Unproven; Risky; Even major consumer product companies (Nestle) cannot necessarily expect Walmart (or others) to stock their new products.

Many business products are sold (what?) to customer. Some example?

Direct; Alcan sells aluminum to GM, Woodward produces pump and fuel nozzles sells to Aircraft maker such as Boeing, etc...,

When may a firm go to direct?

If suitable intermediaries are not available or will not cooperate; sometimes intermediaries that have the best contacts with the target market are hesitant to add unproven vendors or new products

What are three types of vertical marketing systems?

Corporate, Administered. and Contractual

Why the higher cost of widespread distribution may not be needed?

Customers will search for specialty goods

Another strategy managers conflict by offering (what?)

Different products through each channel

Why vertical marketing systems make sense?

If the final customer doesn't buy the product, the whole channel suffers.

Marketing managers should carefully evaluate (what?) and determine (what?)

Each target market's needs; Customers' willingness to pay

What are Intermediaries are expected to do while "producer has selected the target market and developed (what?)"?

Finish the promotion job in their respective places

The challenge can be even (lesser/greater) for less well-known brands. A firm must demonstrate (what?) for its products. Sometime that can be achieved by using direct distribution

Greater; Demand

One of the most basic Place decisions producers must make is whether to (what?)

Handle the whole distribution job themselves-perhaps by replying on direct-to-customer e-commerce selling or opening their own stores-or use wholesalers, retailers, and other specialists

Why in business today that new Place arrangements is important?

Information technology, including websites and e-commerce because makes it easier for firms to work together more efficiently and also to reach customers directly

Heterogeneous shopping goods should have outlets that provide information-knowledgeable salespeople who can provide (what?)

Insights about different brands and models and online stores with videos or information

One reason a producer chooses direct distribution is

It wants to maintain control of the marketing mix (Direct distribution maintains control)

What does an intermediary may choose to keep information to (what?), perhaps feeling (what?).

Itself; feeling it give them some power and control

Comparing Levels of Market Exposure

Level of Market Exposure: Intensive, Selective, Exclusive Number of Outlets: Many, Some-a few in each geographic area, Few-one per geographic area Used when...: Convenience product, business supplies, and higher sales volume offset higher distribution costs; widespread coverage is needed, but also special attention from intermediaries; Fewer customers so support needed from intermediaries or when franchisees demand protected markets Example: Coca-cola; Goodyear tires; Audi cars

Where does unsought products should be sold at?

Locations where other related products are available

Legality of Vertical Arrangement

Look at competition between whole channels rather than just focusing on competition at one level of distribution

You may think that all marketing managers want their products to have maximum exposure to potential customers. This isn't true. Some product classes require (what?)

Much less market exposure than others

The marketing manager must also consider Place objectives in relation to the product life cycle

Place decision often have long-run effects; Usually harder to change than Product, Promotion, and Price decisions

How strategy decision are handled in a retailer-led channel?

Producer's part of the job: Product, Price Intermediary's part of the job: Product, Price, Place, Promotion

How strategy decision are handled in a producer-led channel?

Producer's part of the job: Product, Price, Place, Promotion Intermediary's part of the job: Promotion & Place (?)

All of the members of a channel system should have a shared product-market commitment (what is it?) Why is it good? Why is it overlook?

Product-market commitment: With all members focusing on the same target market at the end of the channel and sharing the various marketing functions in appropriate ways They are better able to compete effectively for the customer's business Many marketing managers overlook this idea because it's not the way their firms have traditionally handled channel relationships

Which firms often use direct channels? If the service must be produced in the presence of (whom?), there may be little need for (whom?)

Service; Customers; Intermediaries; Some example, accounting and consulting services sold directly to customer. Small business like hairstylists, landscapers, and cleaning services don't utilize intermediaries usually.

Success by (doing what?) from retailers and wholesalers, but many new products (what?) fail because...

Slowly building support; fails; the producer can't find willing channel partners and doesn't have the resources to handle direct distribution

What if customers want to compare shopping products?

Some distribution channels can make that process easier. For example, online sellers often carry a broad assortment of products to make this easier, and some physical stores offer similar advantages

Here the producer has selected the target market and developed (what?)

The product, set the Price structure, invest in consumer and channel Promotion, and developed the Place setup.; of course retailer-dominated channel system, the marketing jobs would be handled in a different way

What does companies with a direct-to-customer e-commerce channel have ready to access?

To how customers behave on their websites

Characteristics of Traditional and Vertical Marketing Systems

Type of Channel: Traditional, Administered, Contractual, and Corporate Characteristics: Amt of Cooperation: Little or none, some to good, fairly good to good, complete Data and info sharing: Little or none, some, moderate, extensive Control maintained by: None, economic power and leadership, contracts, ownership by one company Examples: Typical channel of "independents", GE, McDonald, Sherwin-Williams

What lead to a producers take it in channel relations?

Typically this occurs when the producer is large, dominates a category, or wields a powerful brand name

Intensive distribution is commonly needed for (what?)

convenience products and business supplies

What does intermediaries do when producers take the lead in channel relations?

Usually take a back seat and support the producer They often negotiate a situation that is profitable for both parties, but the producer usually has a stronger hand

Two different types of channel conflict:

Vertical Conflict: Producer and Retailer; producer maximize units sold and retailer seek maximize profits Horizontal conflict: Retailer 1 and 2; between firms at the same level in a distribution channel

Customers won't spend much time shopping for convenience products; thus (what?)

Widespread distribution is needed to make products available when the need strikes

Channel Captain

a manager who helps direct the activities of a whole channel and tries to avoid or solve channel conflicts

Vertical Integration

acquiring firms at different levels of channel activity

Regrouping Activities

adjust the quantities or assortments of products handled at each level in a channel of distribution

Yet, as product mature, they typically need (what?)

broader distribution to reach different target customers

Firms can often gain the advantages of vertical integration without

building a costly corporate channel; A manager can develop administered or contractual channel systems instead

Vertical Marketing System

channel system in which the whole channel focuses on the same target market at the end of the channel; to achieve these goals, there must be higher levels of coordination and cooperation among the members of the channel

Selective distribution

covers the broad area of market exposure between intensive and exclusive distribution; it may be suitable for all categories of products

Some level of conflict may be inevitable- or even useful if that is what it takes for (what?)

customers at the end of the channel to receive better value. However, most marketing managers try to avoid conflicts that harm relationships with channel partners; Often different channels serve different target markets-and this alone minimizes conflict; Example 711 and Costco both sell coke one cold other hot

Several different product classes may be involved if (what?)

different market segments view a product in different ways; thus, marketing managers may need to develop several strategies, each with its own Place arrangements

Direct Marketing

direct communication between a seller and an individual customer using a promotion method other than face-to-face personal selling

What is another benefit to direct distribution is that it puts a firm in (what?)

direct contract with its customers; by working directly with customers, the company generates data, information, and knowledge about its market

Sometimes direct marketing promotion is coupled with (what?)

direct distribution from a producer to consumers; However, many firms that use direct marketing promotion distribute their products through intermediaries. Example: Logitech uses email to communicate directly with customers who purchase Logitech products through retailers

Marketing mixes may be customized to each customer. Further, once relationships are established, e-commerce systems can (what?)

efficiently handle orders

Intermediaries find that the ability to (what?)

gather, analyze, and interpret data generates insights about customer needs. They can then seek out producers who can meet these needs with products at reasonable prices like Walmart dominate channel system for many products

What products do they buy? Which pages or messages attract the most attention? How do customers respond to price changes? All of these data can turned into (what?)

information that can be used to change, adapt, or fine-tune a marketing mix

Adjusting for this discrepancy usually requires (what?)

intermediaries-wholesalers and retailers

Sometimes customers prefer to buy from (whom?), or the (whom?) performs necessary activities more effectively or for a lower cost

intermediaries; intermediary

"Characteristics of Traditional and Vertical Marketing Systems" represents the most tightly integrated type of vertical marketing system. Some firms developed their own vertical marketing systems by (what?)

internal expansion or by buying other firms, or both; one company owns the whole channel system

Accumulating

involves collecting products from many small producers; Important with professional services because they often involve the combined work of a number of individuals, each of whom is a specialized producer

Bulk-Breaking

involves dividing larger quantities into smaller quantities as product get closer to the final market; Wholesalers may sell smaller quantities to other wholesalers or directly to retailers

Assorting

means putting together a variety of products to give a target market what it wants; Usually is done by those closest to the final consumer or user-retailers or wholesalers who try to supply wide assortment of products for the convenience of their customers

Sorting

means separating products into grades and qualities desired by different target markets; Example: An investment firm might offer its customers shares in a mutual fund made up only of stocks for companies that pay regular dividends

Channel Conflict

occurs between firms at different levels in the channel of distribution

Companies commonly use selective distribution to gain some (what?)

of the advantages exclusive distribution-while still achieving fairly widespread market coverage

Selective distribution is becoming more popular than intensive distribution as firms see that they don't need 100% coverage of a market to support national advertising. Interested customers without a local store can (what?)

often buy online.

Intermediaries can be (what?) who provide information to bring (whom together?)

specialists; buyers and sellers together; Example: Most consumers don't know much about the wide variety of home and auto insurance policies available

Contractual Channel Systems

the channel members agree by contract to cooperate with each other; Example, Ford and dealers

Administered Channel Systems

the channel members informally agree to cooperate with each other; they can agree to routinize ordering, share inventory and sales info over computer networks, standardize accounting, and coordinate promotion efforts; Example, Target

Discrepancy of Assortment

the difference between the lines a typical producer makes and the assortment final consumers or users want; For example, golfers need more than golf ball

Discrepancy of Quantity

the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want. For example, most manufacturers of gold balls produce large quantities in a given time period

Traditional Channel Systems

the various channel members make little or no effort to cooperate with each other; they buy and sell from one another and that the only extent; Each channel member does only what it considers to be in its own best interest; doesn't worry about the other members of the channel

Selling direct or indirect is not necessarily an either/or decision. When a company services multiple target markets, it may choose (what?)

to sell direct and through intermediaries. For example, a company uses direct channels to sell its spark plugs to automaker like Ford, but also sells to consumer through intermediaries

The concept of a single channel captain is logical, but the most

traditional channels don't have a recognized captain. The various firms don't act as a coordinated system.

In the early part of the life cycle of a new unsought good, a producer may have to (what?)

use selective distribution. Well-known wholesalers and retailers may have the power to get such a product introduced, but that often means limiting the number of competing wholesalers and retailers

Many firms prefer to distribute directly to the final customer or consumer because they

want to control the whole marketing job

Multichannel Distribution

when a producer uses several competing channels to reach the same target market--perhaps using several intermediaries in addition to selling directly.