13

Marketing Channel

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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

 Learning Outcomes

LO 5 Describe the different channel relationship types and their

unique costs and benefits

LO 6 Explain channel leadership, conflict, and partnering

LO 7 Discuss channels and distribution decisions in global

markets

LO 8 Identify the special problems and opportunities associated

with distribution in service organizations
Marketing Channels

Explain what a
marketing channel is
and why intermediaries
are needed
 Marketing Channels

A Marketing Channel is…

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

Specialization and division of labor

Overcoming discrepancies

Providing contact efficiency

LO1
 Specialization and
Division of Labor
 Creates greater efficiency
 Provides lower production costs
 Achieves economies of scale
 Aids producers who lack
resources to market directly
 Builds good relationships with
customers
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.
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.
Exhibit 13.1
How Marketing Channels Reduce the
Number of Required Transactions
Channel Intermediaries and
Their Functions

Define the types of

channel intermediaries
and describe their
functions and activities
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

Agents and
facilitate the sale of a product by
Brokers representing channel members.
 Channel Intermediaries

Retailers Take Title to Goods

Merchant
Wholesalers Take Title to Goods

Agents
and Do NOT Take Title to Goods
Brokers

LO2
 Factors Suggesting Type of
Wholesaling Intermediary to Use

Product characteristics

Buyer considerations

Market characteristics

LO2
 Factors Suggesting Type of
Wholesaling Intermediary to Use
Factor Merchant Agents/ Brokers
Wholesalers
Nature of product Standard Nonstandard,
custom
Complexity of product Simple Complex
Product’s gross margin High Low
Frequency of ordering Frequent Infrequent
Time between order and Shorter lead Longer lead
receipt of shipment time time
Number of buyers Many Few
Concentration of buyers Dispersed Concentrated
 Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Negotiating
Functions
Risk Taking

Physically distributing
Logistical Storing
Functions
Sorting

Facilitating Researching
Functions Financing
 Logistics

The efficient and cost-

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

CHANNEL CHANNEL
INTERMEDIARIES FUNCTIONS

Perform
Retailers Transactional
Wholesalers Logistical
Agents and Brokers Facilitating
Channel Structures

Describe the channel

structures for
consumer and
business products
and discuss
alternative channel
arrangements
 Exhibit 13.3
Marketing Channels for Consumer
Products

LO3
 Channels for Consumer
Products

Direct
Channel A distribution channel in
which producers sell
directly to consumers.
© AP Photo/Matt Slocum
Exhibit 13.4
Channels for Business
and Industrial Products
 Business-to-Business
Exchanges on the Internet
The Internet has forced traditional
distributors to expand their model.

Companies drop the intermediary

from the supply chain

“Private exchanges” with select

suppliers automate the supply chain
Alternative Channel
Arrangements

Multiple channels

Nontraditional channels

Strategic channel alliances

 Making Channel
Strategy Decisions

Discuss the issues

that influence
channel strategy
Channel Strategy
Decisions
Factors
Level of
Affecting
Distribution
Channel
Intensity
Choice

Market Factors Intensive Distribution

Product Factors Selective Distribution

Producer Factors Exclusive Distribution

 Market Factors
Customer profiles

Consumer or Industrial
Customer

Market Size of market

Factors
That Affect
Channel
Choices Geographic location
 Product Factors
Product Complexity

Product Price

Product Standardization

Product Product Life Cycle

Factors
That Affect
Channel Product Delicacy
Choices
 Producer Factors

Producer Resources

Number of Product Lines

Producer
Factors
That Affect
Channel Desire for Channel Control
Choices
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

Exclusive established one or a few
dealers within a given area
 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.
Types of Channel Relationships

Describe the
different channel
relationship types
and their unique
costs and benefits
 Types of Channel
Relationships
Benefits Hazards

Arm’s Length Fulfills a one time or Parties unable to

Relationship unique need; low develop relationship;
involvement/risk low trust level

Cooperative Formal contract Some parties may

Relationship without capital need more
investment/long-term relationship
commitment; “happy definition
medium”
Integrated Closely bonded High capital
Relationship relationship; investment; any
explicitly defined failure could affect
relationships every channel
member
Managing Channel
Relationships

Explain channel
leadership, conflict,
and partnering
Social Dimensions of
Channels
Power

Control

Leadership

Conflict

Partnering
Channel Power, Control,
and Leadership

Channel A channel member’s capacity to control or

Power influence the behavior of other channel members

A situation that occurs when one marketing

Channel
channel member intentionally affects another
Control member’s behavior

Channel A member of a marketing channel that exercises

Leader authority/power over the activities of other members
 Channel Conflict

A clash of goals and methods

Channel
between distribution channel
Conflict
members
 Channel Conflict

Conflicts may occur if channel members:

 Have conflicting goals

 Fail to fulfill expectations of other channel

members

 Have ideological differences

 Have different perceptions of reality

 Channel Partnering
Channel Partnering (Channel
Cooperation) is…
the joint effort of all channel members to
create a channel that serves
customers and creates a competitive
advantage.
By COOPERATING, channel members can
speed up inventory replenishment, improve
customer service, and reduce the total costs of
the marketing channel.
 Channels and Distribution
Decisions for Global Markets

Discuss channels
and
distribution decisions
in global markets
 Channels and Distribution
Decisions for Global Markets
Channel structure
and type differ
Global Channel
Development
Gray marketing channels

Distribute directly or through foreign partners

Channels and Distribution
Decisions for Services

Identify the special

problems and
opportunities associated
with distribution in
service organizations
Distribution in Service
Organizations
 Chapter 13 Videos

Sephora – Marketing Channels

Beyond the Book

Discuss Sephora’s marketing channel for

consumer products.

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