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Chapter 7 : Marketing Channels

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Learning Outcomes

LO1 Explain what a marketing channel is and why


intermediaries are needed

LO2 Define the types of channel intermediaries and


describe their functions and activities

LO3 Describe the channel structures for consumer


and discuss alternative channel arrangements

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Learning Outcomes

LO4 Discuss the issues that influence channel


strategy

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Marketing Channels

LO1

Explain what a marketing


channel is and why
intermediaries are needed.

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Marketing Channels

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

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Marketing Channel Functions

Specialization and division of labor

Overcoming discrepancies

Providing contact efficiency

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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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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 full
of
satisfaction from a product or
Assortment
products.

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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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Providing Contact Efficiency

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LO1 Review Learning Outcome
Marketing Channels
Marketing
Channel

Providing Specialization
and Division of Labor

Overcoming
Discrepancies

Providing Contact
Efficiency
Supply
Chain
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Channel Intermediaries

LO2

Define the types of channel


intermediaries and describe
their functions and activities.

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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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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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Factors Suggesting Type of
Wholesaling Intermediary to Use

Product characteristics

Buyer considerations

Market characteristics

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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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Logistics

The efficient and cost-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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LO2 Review Learning Outcome
Channel Intermediaries and Functions

CHANNEL CHANNEL
INTERMEDIARIES FUNCTIONS

Perform
Retailers Transactional
Wholesalers Logistical
Agents and Brokers Facilitating

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Channel Structures

LO3

Describe the channel


structures for consumer
and discuss alternative
channel arrangements.

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Channels for Consumer Products

Direct Channel - A distribution


channel in which producers
sell directly to consumers.

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Channels for Consumer Products

Direct Retailer Wholesaler Agent/Broker


Channel Channel Channel Channel
Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

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LO3 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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Making Channel Strategy Decisions

LO4

Discuss the issues that


influence channel strategy.

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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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Market Factors

Customer profiles

Consumer or Industrial
Customer

Market Size of market


Factors
That Affect
Channel
Choices Geographic location

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Product Factors

Product Complexity

Product Price

Product Standardization

Product Product Life Cycle


Factors
That Affect
Channel Product Delicacy
Choices

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Producer Factors

Producer Resources

Number of Product Lines


Producer
Factors
That Affect
Channel Desire for Channel Control
Choices

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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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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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LO4 Review Learning Outcome
Issues Influencing Channel Strategy

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