Chapter 12 Notes

Marketing Channel: individuals and firms involved in the process of making a product or service
available for use or consumption by consumers or industrial users
-They make possible the flow of products and services from a producer, through intermediaries,
to a buyer
-intermediaries make possible the flow of products from producers to consumers
Types of Intermediaries:
Middleman: any intermediary between the manufacturer and end- user markets
Agent or broker: Any intermediary with legal authority to act on behalf of the manufacturer
Wholesaler: An intermediary who sells to other intermediaries, usually to retailers; term usually
applies to consumer markets
Retailer: An intermediary who sells to consumers
Distributor: Usually used to describe intermediaries who perform a variety of distribution
functions; including selling, maintaining inventories, extending credit, and so on; a more
common term in business markets but may also be used to refer to wholesalers
Dealer: Means the same as distributor, retailer, wholesaler etc.
Function of Intermediary:
1. Transactional
function

Activities
buying

Selling

Risk taking

2. Logistical function

Assorting

Storing

Sorting

Function
Purchasing products for
resale or as an agent for
supply of a product
Contacting potential
customers, promoting
products, seeking orders
Assuming business risks in
the ownership of inventory
that can become obsolete
or deteriorate
Creating product
assortments from several
sources to serve customers
Assembling and protecting
products at a convenient
location to offer better
customer service
Purchasing in large
quantities and breaking
into smaller amounts
desired by customers

Transporting

Physically moving a
product to customers

3. Facilitating Function
- Financing: extending credit to customers
- Grading: Inspecting, testing, or judging products and assigning them quality grades
- Marketing Information and research: providing information to customers and suppliers,
including competitive conditions and trends

In the transactional function, if the stock is unsold for any reason the intermediary suffers the
loss
Logistics of a transaction involve the details of preparing and getting a product to buyers
Logistical functions: gathering, sorting, and dispersing products
Facilitating functions: making a transaction easier for buyers
Marketing channels help create value for consumers through time utility, place utility, form
utility, and possession utility
As the number of intermediaries between a producer and buyer increase, the marketing channel
increases
Marketing Channel types:
Direct Channel: producer and consumer deal directly with each other
Example: insurance companies sell their services using a direct channel and branch sales offices
There are no intermediaries
Producer performs all 3 channel functions
Indirect Channel: Intermediaries are inserted between the producer and consumers
No wholesaler
Marketing Channels for Business Products & Services:
Business channels are shorter and rely on 1 intermediary or none at all
Electronic marketing channels: employ the Internet to make products and services available for
consumption or use by consumers or organizational buyers
-They combine electronic and traditional intermediaries to create time, place, form, and
possession utility for buyers
Electronic intermediaries can and do perform transactional and facilitating functions
effectively and at a relatively lower cost than traditional intermediaries
Direct marketing channels: allow consumers to buy products by interacting with various
advertising media without a face to face meeting with a salesperson
Example: mail order selling, catalog sales, telemarketing

Multichannel marketing: blending of different communication and delivery channels that are
mutually reinforcing in attracting, retaining, and building relationships with consumers who shop
and buy in traditional intermediaries and online
They seek to integrate a firms electronic marketing and delivery channels
Dual distribution: an arrangement whereby a firm reaches different buyers by employing two or
more different types of channels for the same basic product
Strategic channel alliances: one firms marketing channel is used to sell another firms products
Vertically marketing systems: professionally managed and centrally coordinated marketing
channels designed to achieve channel economies and maximum marketing impact
3 types of vertical marketing systems
1 Corporate system: combination of successive stages or production and distribution under a
single ownership
2 Contractual Systems: independent production and distribution firms integrate their efforts on a
contractual basis to obtain greater functional economies and marketing impact than they could
achieve alone
*most popular among the 3
3 variations with contractual systems:
Wholesaler sponsored voluntary chains: involve a wholesaler that develops a
contractual relationship with small independent retailers to standardize and coordinate buying
practices, merchandising programs, and inventory management
Retailer sponsored cooperatives: small independent retailers form an organization
that operates a wholesale facility cooperatively
Manufacturer- sponsored retail franchise systems: manufacturer deals to sell to
various sales and service conditions
3 Administered Systems: achieve coordination at successive stages of productions and
distribution by the size and influence of one channel member rather than through ownership
Density: number of stores in a geographical area
3 degrees of distribution density: intensive, exclusive, selective
Intensive: a firm tries to place its products and services in as many outlets as possible
Example: candy, fast food, newspapers, soft drinks
Exclusive: when only one retail outlet in a specific geographical area carries the firms products
Retailers and industrial distributors prefer this because:
1 limits head to head competition
2 provides a difference for a retailer or distributor
Selective: when a firm SELECTS A FEW retail outlets in a specific geographical area to carry
its products

Important Buyer requirements: information, convenience, variety, pre or postsale services

Information: buyers need knowledge or desire specific data about a product or service
Convenience: buyers need proximity or driving time to a retail outlet
Pre- or postsale services: products that require delivery, installation, and credit
How to manage marketing channel relationships? Through conflict and cooperation
Channel conflict: arises when one channel member believes another channel member is engaged
in behavior that prevents it from achieving its goal
2 types: vertical and horizontal conflict
Vertical: occurs between different levels in a marketing channel
Horizontal: occurs between intermediaries at the same level in a marketing
channel
Logistics: activities that focus on getting the right amount of the right products to the right place
at the right time at the lowest cost
To do this we use logistics management: practicing of organizing the cost effective flow of raw
materials, in-process inventory, finished goods, to point of origin to point of consumption to
satisfy customer requirements
Supply chain: various firms involved in performing the activities required to create and deliver a
product or service to consumers or industrial users
Objective of logistics management in supply chain: minimize total logistics costs while
delivering the appropriate level of customer service
Total logistics cost: expenses associated with transportation, materials handling and
warehousing, inventory, and return products handling
Customer service: ability to satisfy users in terms of time, dependability, communication, and
convenience