CHAPTER 12 MARK101

MARKETING CHANNELS: DELIVERING Samuel Lee

CUSTOMER VALUE
LEARNING OBJECTIVES
1. Explain why companies use marketing channels and discuss
the functions these channels perform.
2. Discuss how channel members interact and how they
organize to perform the work of the channel.
3. Identify the major channel alternatives open to a company.

4. Explain how companies select, motivate, and evaluate

channel members.
5. Discuss the nature and importance of marketing logistics and
integrated supply chain management.

2
LEARNING OBJECTIVE 1

Explain why companies use marketing channels and

discuss the functions these channels perform.
­ Supply Chains and the Value Delivery Network
­ The Nature and Importance of Marketing Channels

3
SUPPLY CHAINS AND THE VALUE
DELIVERY NETWORK
v Upstream partners are firms that supply raw
materials, components, parts, information, finances,
and expertise needed to create a product or service.
v Downstream partners include the marketing channels
or distribution channels that look toward the customer,
including retailers and wholesalers.
v Value delivery network is composed of the company,
suppliers, distributors, and customers who partner with
each other to improve the performance of the entire
system.

4
THE NATURE AND IMPORTANCE OF
MARKETING CHANNELS
Marketing channel (distribution channel) is a set of
interdependent organizations that help make a
product or service available for use or consumption
by the consumer or business user.

5
THE NATURE AND IMPORTANCE OF
MARKETING CHANNELS
How Channel Members Add Value

v Transform the assortment

of products into
assortments wanted by
consumers

v Bridge the major time,

place, and possession
gaps that separate goods
and services from users

6
 HOW A DISTRIBUTOR REDUCES THE
NUMBER OF CHANNEL TRANSACTIONS?
Marketing channel intermediaries make buying a lot easier for
consumer. How would you go about buying a few cans of Coke or any
of the hundreds of other items that you drop into your shopping cart?

7
HOW CHANNEL MEMBERS ADD VALUE
1. Information: Gathering and distributing marketing
research and intelligence information about actors and
forces in the marketing environment needed for planning
and aiding exchange.
2. Promotion: Developing and spreading persuasive
communications about an offer.
3. Contact: Finding and communicating with prospective
buyers.
4. Matching: Shaping and fitting the offer to the buyer’s
needs, including activities such as manufacturing,
grading, assembling, and packaging.

8
HOW CHANNEL MEMBERS ADD VALUE

5. Negotiation: Reaching an agreement on price and other

terms of the offer so that ownership or possession can be
transferred.
6. Physical distribution: Transporting and storing goods.
7. Financing: Acquiring and using funds to cover the costs of
the channel work.
8. Risk taking: Assuming the risks of carrying out the channel
work

9
LEARNING OBJECTIVE 2

Discuss how channel members interact and how they

organize to perform the work of the channel.
­ Channel Behavior and Organization

10
CHANNEL BEHAVIOR AND ORGANIZATION

v Marketing channels consist of firms that have

partnered for their common good with each
member playing a specialized role.
v Channel conflict refers to disagreement among
channel members over goals, roles, and rewards.
• Horizontal conflict
• Vertical conflict

11
CONVENTIONAL MARKETING CHANNEL

Conventional distribution systems consist of one or

more independent producers, wholesalers, and
retailers
v each separate business seeking to maximize its
own profits
v perhaps even at the expense of profits for the
system as a whole.

12
VERTICAL MARKETING SYSTEMS

Vertical marketing systems (VMSs) provide channel

leadership and consist of producers, wholesalers, and
retailers acting as a unified system.
v Corporate marketing systems
v Contractual marketing systems
v Administered marketing systems

13
VERTICAL MARKETING SYSTEMS:
CORPORATE VMS
Corporate vertical marketing systems combine
successive stages of production and distribution under
single ownership.

14
VERTICAL MARKETING SYSTEMS:
CONTRACTUAL VMS
Contractual vertical marketing
systems consist of independent firms
at different levels of production
and distribution who join together
through contracts.
­ Franchise organization is a contractual
vertical marketing system in which a
channel member, called a franchisor,
links several stages in the production-
distribution process.
15
VERTICAL MARKETING SYSTEM:
ADMINISTERED VMS
An administered vertical
marketing system is a
VMS that coordinates
successive stages of
production and
distribution through the
size and power of one
of the parties.

16
COMPARISON OF CONVENTIONAL
DISTRIBUTION CHANNEL WITH VERTICAL
MARKETING SYSTEMS

17
HORIZONTAL MARKETING SYSTEMS

Horizontal marketing system is a channel arrangement

in which two or more companies at one level join
together to follow a new marketing opportunity.

18
MULTICHANNEL DISTRIBUTION SYSTEMS

19
 Disintermediation
is the cutting out
of marketing
channel
intermediaries by
producers or the
displacement of
traditional
resellers by new
intermediaries.
DISINTERMEDIATION
20
LEARNING OBJECTIVE 3

Identify the major channel alternatives open to a

company.
­ Channel Design Decisions

Copyright © 2016 Pearson Education, Inc. 2112-31

CHANNEL DESIGN DECISIONS

Analyzing Setting
consumer channel
needs objectives

Identifying Evaluating
channel channel
alternatives alternatives

22
1. ANALYZING CONSUMER NEEDS

• Find out what target consumers want from the

channel
• Identify market segments
• Determine the best channels to use
• Minimize the cost of meeting customer service
requirements

23
2. SETTING CHANNEL OBJECTIVES

• Determine targeted levels of customer service

• Balance consumer needs against costs and
customer price preferences

24
3. IDENTIFYING CHANNEL ALTERNATIVES

Types of intermediaries refers to channel members

available to carry out channel work. Most companies
face many channel member choices.

25
4. EVALUATE CHANNEL ALTERNATIVES

Intensive distribution
Number of
Marketing
Intermediaries Exclusive distribution

Selective distribution

26
LEARNING OBJECTIVE 4

Explain how companies select, motivate, and evaluate

channel members.
­ Channel Management Decisions
­ Public Policy and Distribution Decisions

27
CHANNEL MANAGEMENT DECISIONS

Selecting Managing Motivating Evaluating

channel channel channel channel
members members members members

28
PUBLIC POLICY AND DISTRIBUTION
DECISIONS
1. Exclusive distribution is when the producer gives only a
limited number of dealers the exclusive right to
distribute its products in their territories.
2. Exclusive dealing is when the seller requires that the
exclusive distribution sellers not handle competitor’s
products.
3. Exclusive territorial agreements are where producer or
seller limit territory.
4. Tying agreements are agreements where the dealer
must take most or all of the line.

29
LEARNING OBJECTIVE 5

Discuss the nature and importance of marketing

logistics and integrated supply chain management.
­ Marketing Logistics and Supply Chain Management

30
NATURE AND IMPORTANCE OF
MARKETING LOGISTICS
Marketing logistics (physical
distribution) involves
planning, implementing, and
controlling the physical flow
of goods, services, and
related information from
points of origin to points of
consumption to meet
consumer requirements at a
profit.

31
MARKETING LOGISTICS AND SUPPLY
CHAIN MANAGEMENT
Nature and Importance of Marketing Logistics

32
NATURE AND IMPORTANCE OF
MARKETING LOGISTICS
Supply chain management involves managing
upstream and downstream value-added flows of
materials, final goods, and related information
among suppliers, the company, resellers, and final
consumers.
Goal of marketing logistics should be to provide a
targeted level of customer service at the least cost.

33