Lamb, Hair, McDaniel 2012-2013

CHAPTER 13

Marketing Channels

© Christian Beirle González/Flickr/Getty Images

Copyright ©2013 by Cengage Learning Inc. All rights reserved 1
 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.

© 2013 by Cengage Learning Inc. All rights reserved

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 Marketing Channel Functions

Specialization
Specializationand
anddivision
division of
of labor
labor

Overcoming
Overcoming discrepancies
discrepancies

Providing
Providing contact
contact efficiency
efficiency

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 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

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 Overcoming Discrepancies

The
The difference
difference between
between the
the
Discrepancy
Discrepancy amount
amount of of product
product produced
produced
of
of and
and the
the amount
amount anan end
end user
user
Quantity
Quantity wants
wants to
to buy.
buy.

The
The lack
lack of
of all
all the
the items
items aa
Discrepancy
Discrepancy customer
customer needs
needs to to receive
receive full
full
of
of satisfaction
satisfaction from
from aa product
product oror
Assortment
Assortment products.
products.

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 Overcoming Discrepancies

AA situation
situation that
that occurs
occurs when
when aa
Temporal
Temporal product
product is
is produced
produced but
but aa
Discrepancy
Discrepancy customer
customer isis not
not ready
ready to
to buy
buy it.
it.

The
The difference
difference between
between the
the
Spatial
Spatial location
location of
of aa producer
producer and
and the
the
Discrepancy
Discrepancy location
location ofof widely
widely
scattered
scattered markets.
markets.

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 Exhibit 13.1
How Marketing Channels Reduce the Number
of Required Transactions

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 Channel Intermediaries
A
A channel
channel intermediary
intermediary that
that
Retailer
Retailer sells
sells mainly
mainly to
to customers.
customers.

An
An institution
institution that
that buys
buys goods
goods
Merchant
Merchant from
from manufacturers,
manufacturers, takes
takes title
title
Wholesaler
Wholesaler to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.

Wholesaling
Wholesaling intermediaries
intermediaries who
who
Agents
Agents and
and facilitate
facilitate the
the sale
sale of
of aa product
product by
by
Brokers
Brokers representing
representing channel
channel members.
members.

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 Channel Intermediaries

Retailers
Retailers Take
TakeTitle
Titleto
toGoods
Goods

Merchant
Merchant
Wholesalers Take
TakeTitle
Titleto
toGoods
Goods
Wholesalers

Agents
Agents
and
and Do
DoNOT
NOTTake
TakeTitle
Titleto
toGoods
Goods
Brokers
Brokers

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 Factors Suggesting Type of
Wholesaling Intermediary to Use

Product
Productcharacteristics
characteristics

Buyer
Buyerconsiderations
considerations

Market
Market characteristics
characteristics

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 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 time Longer lead time
receipt of shipment
Number of buyers Many Few
Concentration of buyers Dispersed Concentrated

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 Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Transactional Negotiating
Functions
Functions
Risk Taking

Physically distributing
Logistical
Logistical Storing
Functions
Functions
Sorting

Facilitating Researching
Facilitating
Functions
Functions Financing

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 Exhibit 13.3
Marketing Channels for Consumer Products

13 © 2013 by Cengage Learning Inc. All rights reserved

 Exhibit 13.4
Channels for Business and Industrial
Products

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 Channel Strategy Decisions

Factors
Factors Level
Level of
of
Affecting
Affecting Distribution
Distribution
Channel
Channel Intensity
Intensity
Choice
Choice

Market
Market Factors
Factors Intensive
Intensive Distribution
Distribution
Product
Product Factors
Factors Selective
Selective Distribution
Distribution
Producer
Producer Factors
Factors Exclusive
Exclusive Distribution
Distribution

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 Market Factors

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 Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Standardization
Standardization

Product
Product Product
Factors Product Life
Life Cycle
Cycle
Factors
That
That Affect
Affect
Channel
Channel Product
Product Delicacy
Delicacy
Choices
Choices

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 Producer Factors

Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines
Producer
Producer
Factors
Factors
That
That Affect
Affect
Channel Desire
Desire for
for Channel
Channel Control
Control
Channel
Choices
Choices

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 Levels of Distribution Intensity
AAform
formof
ofdistribution
distributionaimed
aimedatat
Intensive
Intensive having
havingaaproduct
productavailable
availablein
in
every
everyoutlet
outlet

AAform
formofofdistribution
distributionachieved
achieved
Selective
Selective by
byscreening
screeningdealers
dealersto
toeliminate
eliminate
all
allbut
butaafew
fewininany
anysingle
singlearea
area

AAform
formofofdistribution
distributionthat
that
Exclusive
Exclusive established
establishedone
oneororaafew
few
dealers
dealerswithin
withinaagiven
givenarea
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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 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 without Some parties may

Relationship capital need more relationship
investment/long-term definition
commitment; “happy
medium”
Integrated Closely bonded High capital
Relationship relationship; explicitly investment; any failure
defined relationships could affect every
channel member

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 Social Dimensions of Channels
Power
Power

Control
Control

Leadership
Leadership

Conflict
Conflict

Partnering
Partnering

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 Channel Power, Control,
and Leadership
Channel
Channel AAchannel
channelmember’s
member’scapacity
capacitytotocontrol
controlor
or
Power
Power influence the behavior of other channel members
influence the behavior of other channel members

AAsituation
situationthat
thatoccurs
occurswhen
whenone
onemarketing
marketing
Channel
Channel channel
channelmember
memberintentionally
intentionallyaffects
affectsanother
another
Control
Control member’s
member’sbehavior
behavior

Channel
Channel AAmember
memberof ofaamarketing
marketingchannel
channelthat
thatexercises
exercises
Leader
Leader authority/power
authority/powerover
overthe
theactivities
activitiesof
ofother
othermembers
members

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 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

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 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.

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 Channels and Distribution
Decisions for Global Markets

Channel
Channelstructure
structure
and
andtype
typediffer
differ
Global
GlobalChannel
Channel
Development
Development
Gray
Graymarketing
marketingchannels
channels

Distribute directly or through foreign partners

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 Channels and Distribution
Decisions for Services

Identify the special problems

and opportunities associated
with distribution in service
organizations

8
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 Distribution in Service Organizations
Minimizing wait times is a key factor in maintaining
service quality.

Managing service capability is critical to

successful service distribution.

Improving service delivery makes it easier and

more convenient for consumers to use the service.

Standardizing services across regions gives

customers quality service wherever that service is
consumed.

© 2013 by Cengage Learning Inc. All rights reserved

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 Chapter 13 Video
Taza Chocolate
Taza, a premium chocolate, sells its chocolate in
boutiques and premium grocery stores. The
various channels depend largely on personal
selling, working with retailers, and strong
relationships with wholesalers who are willing to
distribute the premium, delicate product.
http://www.cengage.com/marketing/book_content/
9781133190110_lamb/videos/ch13.html

© 2013 by Cengage Learning Inc. All rights reserved

30
 Learning Outcomes

1
Explain what a marketing channel is and why
intermediaries are needed

2
Define the types of channel intermediaries and describe
their functions and activities
Describe the channel structures for consumer and
3 business products and discuss alternative channel
arrangements
4 Discuss the issues that influence channel strategy

31 © 2013 by Cengage Learning Inc. All rights reserved

 Learning Outcomes

5 Describe the different channel relationship types and their

unique costs and benefits
6 Explain channel leadership, conflict, and partnering

7 Discuss channels and distribution decisions in global

markets

8 Identify the special problems and opportunities associated

with distribution in service organizations

32 © 2013 by Cengage Learning Inc. All rights reserved

 Marketing Channels

Explain what a
marketing channel is
and why intermediaries
are needed

1
© 2013 by Cengage Learning Inc. All rights reserved 33
Channel Intermediaries and Their
Functions

Define the types of

channel intermediaries
and describe their
functions and activities

2
© 2013 by Cengage Learning Inc. All rights reserved 34
 Channel Structures

Describe the channel

structures for consumer
and business products
and discuss alternative
channel arrangements

3
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Making Channel Strategy Decisions

Discuss the issues

that influence
channel strategy

4
© 2013 by Cengage Learning Inc. All rights reserved 36
Types of Channel Relationships

Describe the different

channel relationship
types and their unique
costs and benefits

5
© 2013 by Cengage Learning Inc. All rights reserved 37
Managing Channel Relationships

Explain channel
leadership, conflict,
and partnering

6
© 2013 by Cengage Learning Inc. All rights reserved 38
 Channels and Distribution
Decisions for Global Markets

Discuss channels and

distribution decisions
in global markets

7
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 Logistics

Logistics
The efficient and cost-effective
forward and reverse flow and
storage of goods, services,
and related information, into
through, and out of channel
member companies.

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 Business-to-Business
Exchanges on the Internet
The Internet has forced traditional
distributors to expand their model.

Companies
Companiesdrop
dropthe
theintermediary
intermediary
from
fromthe
thesupply
supply chain
chain

“Private
“Privateexchanges”
exchanges”with
withselect
select
suppliers
suppliersautomate
automatethe
thesupply
supplychain
chain

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 Channels for Consumer
Products

Direct
Direct
Channel
Channel

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 Channel Intermediaries and
Functions

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

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 Alternative Channel
Arrangements

Multiple channels

Nontraditional channels

Strategic channel alliances

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