CHAPTER 7

MARKETING CHANNELS

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 LEARNING OUTCOMES
LO 1 Explain what a marketing channel is and
why intermediaries are needed
LO 2 Define the types of channel intermediaries
and describe their functions and activities
LO 3 Describe the channel structures for
consumer and business products and
discuss alternative channel arrangements
LO 4 Discuss the issues that influence channel
strategy
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 LO 1

MARKETING CHANNELS

A set of interdependent
Marketing
Channel organizations that ease
the transfer of ownership
as products move from
producer to business
user or consumer.

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 LO 1

MARKETING CHANNEL FUNCTIONS

WHY INTERMEDIARIES ARE NEEDED ?

Specialization and division of labor

Overcoming discrepancies

Providing contact efficiency

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 LO 1
SPECIALIZATION AND DIVISION
OF LABOR

§ Creates greater efficiency

§ Provides lower costs
§ Achieves economies of scale
§ Aids producers who lack resources
to market directly
§ Builds good relationships with
customers

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 LO 1

OVERCOMING DISCREPANCIES

The difference between the

Discrepancy
amount of product produced
of
and the amount an end user
Quantity
wants to buy.

The lack of all the items a

Discrepancy
customer needs to receive
of
full satisfaction from a
Assortment
product or products.

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 LO 1

OVERCOMING DISCREPANCIES

A situation that occurs when a

Temporal
product is produced but a
Discrepancy
customer is not ready to buy it.

The difference between the

Spatial location of a producer and the
Discrepancy location of widely
scattered markets.

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 LO 1

PROVIDING CONTACT EFFICIENCY

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 LO 1
REVIEW LEARNING OUTCOME
Marketing Channels
Marketing
Channel

Providing Specialization
and Division of Labor

Overcoming
Discrepancies

Providing Contact
Efficiency
Supply
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 LO 2

CHANNEL INTERMEDIARIES

A channel intermediary that

Retailer
sells mainly to customers.

An institution that buys goods

Merchant from manufacturers, takes title
Wholesaler to goods, stores them,
and resells and ships them.

Wholesaling intermediaries who

facilitate the sale of a product from
Agents and
producer to end user by representing
Brokers retailers, wholesalers, or
manufacturers.
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 LO 2

CHANNEL INTERMEDIARIES

Retailers Take Title to Goods

Merchant
Wholesalers Take Title to Goods

Agents
and Do NOT Take Title to Goods
Brokers

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 LO 2
Factors Suggesting Type of
Wholesaling Intermediary to Use

Product
characteristics

Buyer
considerations

Market
characteristics

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 LO 2
CHANNEL FUNCTIONS PERFORMED
BY INTERMEDIARIES
Contacting/Promotion
Transactional
Negotiating
Functions
Risk Taking

Physically distributing
Logistical Storing
Functions
Sorting

Facilitating Researching
Functions Financing
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 LO 2

LOGISTICS

The efficient and cost-

Logistics effective forward and
reverse flow as well as
storage of goods, services,
and related information,
into, through, and out of
channel member companies.

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 LO 2
REVIEW LEARNING OUTCOME
Channel Intermediaries and Functions

CHANNEL CHANNEL
INTERMEDIARIES FUNCTIONS
Perform
Retailers Transactional
Wholesalers Logistical
Agents and Brokers Facilitating

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 LO 3
CHANNELS FOR CONSUMER
PRODUCTS

DIRECT A distribution channel

CHANNEL in which producers sell
directly to consumers.

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 LO 3
CHANNELS FOR CONSUMER PRODUCTS

Direct Retailer Wholesal Agent/Broker

Channel Channel er Channel
Producer Producer Channel
Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

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 LO 3
CHANNELS FOR BUSINESS PRODUCTS

Direct Direct Industrial Agent/Broker Agent/Broker

Channel Channel Distributor Channel Industrial
Channel
Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers

Industrial Industrial
Distributor Distributor

Industrial Govt. Industrial Industrial Industrial

User Buyer User User User

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 LO 3
BUSINESS-TO-BUSINESS
EXCHANGES ON THE INTERNET

Agents link buyers and sellers

Companies drop the intermediary from

the supply chain

“Private exchanges” with select suppliers

automate the supply chain

http://www.sherwinwilliams.com

Online
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 LO 3
ALTERNATIVE CHANNEL
ARRANGEMENTS
Multiple Producer selects 2 or more channels to
Channels distribute the same product to target
market.

Nontraditional Internet, mail order channel,

Channels infomercials, vending machines

Strategic A cooperative agreement between

Channel business firms to use the other’s
Alliances already established distribution channel.

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REVIEW LEARNING OUTCOME
Channel Structures

CONSUMER BUSINESS ALTERNATIVE

CHANNELS CHANNELS CHANNELS

§Direct §Direct §Multiple

§Retail §Industrial §Nontraditional
§Wholesaler §Agent/broker §Strategic
§Agent/broker §Agent/broker alliances
industrial

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 LO 4

CHANNEL STRATEGY DECISIONS

Factors
Level of
Affecting
Distribution
Channel
Intensity
Choice

Market Factors Intensive Distribution

Product Factors Selective Distribution

Producer Factors Exclusive Distribution

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 LO 4

MARKET FACTORS

Customer profiles

Consumer or Industrial
Customer

Market Size of market

Factors
That Affect
Channel
Choices Geographic location

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 LO 4

PRODUCT FACTORS

Product Complexity

Product Price

Product Standardization

Product Product Life Cycle

Factors
That Affect
Channel Product Delicacy
Choices

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 LO 4

PRODUCER FACTORS

Producer Resources

Number of Product Lines

Producer
Factors
That Affect
Channel Desire for Channel Control
Choices

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 LO 4

LEVELS OF DISTRIBUTION INTENSITY

A form of distribution aimed at

Intensive having a product available
in every outlet

A form of distribution achieved

Selective by screening dealers to eliminate
all but a few in any single area

A form of distribution that

established one or a few
Exclusive dealers within a given area

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 LO 4

LEVELS OF DISTRIBUTION INTENSITY

Intensity Number of
Objective
Level Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Shopping and some
Several
specialty goods.

Work with single

intermediary. Specialty
Exclusive goods and industrial
One
equipment.

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 LO 4
REVIEW LEARNING OUTCOME
Issues Influencing Channel Strategy

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