The Environment of Marketing

Channels
 Marketing Channel and the
Environment
• Marketing channels develop and operate in a
complex environment that is continually
changing.

• Channel managers must therefore have an

understanding of the environment and how it
can influence channel management in order
to plan effective marketing channel strategies
for meeting these changes successfully.
 Major Environment
• Economic environment
• Competitive environment
• Sociocultural environment
• Technological environment
• Legal environment
Impact of Environment in a Marketing
Channel Context
Producers and
manufacturers
Locus of channel
Member management
participants
Environment: Intermediaries
1.Economic
2.Sociocultural
3.Competitive
4.Legal
5.Technological Target markets

Nonmember
participants Facilitating
agencies

Channel manager’s analysis of environmental impact must include all channel participants
 1. Economic Environment
• The most obvious category of variables affecting all members
and participants in the channel.
• In a channel management context, economic factors are a
critical determinant of channel member behavior and
performance. The channel manager must therefore be aware
of the influence of economic variables on the participants in
the channels of distribution.
• Recession:
• Inflation
• Deflation
 1. Economic Environment
Major economic phenomena:
• Recession: 2 consecutive quarters of decline
in the Gross Domestic Product (GDP), any
period in which the GDP is stagnant or
increasing very slowly is often referred to as
‘recessionary” or at least and “economic
slowdown.”
 1. Economic Environment
Major economic phenomena:
• Inflation: Inflation is the rate of increase in prices
for goods and services. When the price level
rises, each unit of currency buys fewer goods and
services.
• There are a number of different measures of
inflation in use. The most frequently quoted and
most significant ones are the Consumer Prices
Index (CPI) and the Retail Prices Index (RPI).
www.bbc.com/news/business-12196322
• For example, in the supermarket industry during
inflationary periods, consumer buying patterns
increasingly reflected such tactics as:
• Going to the supermarket without bringing along extra
money
• Putting items back before checking out
• Buying only the amount needed
• Buying less meat • Stocking up on bargains
• Buying lower-quality brands
• Buying unplanned items only if they are on special sale
 1. Economic Environment
Major economic phenomena:
• Deflation: When the overall price level
decreases so that inflation rate becomes
negative, it is called deflation. It is the
opposite of the often-encountered inflation.
For example.
Dollar rates decrease and prices of mobile
phones are decreasing

http://economictimes.indiatimes.com/definition/deflation
 1. Economic Environment
Major economic phenomena:
• Other economic issues:
– Trade deficit
– National debt/ budget deficit
– High interest rate
 2. Competitive Environment
Types of competition:
1.Horizontal competition
2.Intertype competition
3.Vertical competition
4.Channel system competition
1) Horizontal (Intratype) Competition

• Competition between firms of the same type.

M M

W W

R R
 2) Intertype Competition
• Competition between different types of firms
at the same channel level.
M M

W W

R R
 3) Vertical Competition
• Competition between channel members at
different levels in the channel.
M

R
 4) Channel System Competition
• Complete
channels M M
competing with
other complete
channels. W W

R R
 3. Sociocultural Environment
• Age patterns of population
• Changing ethnic mix
• Educational trends
• Family or household structure
• Changing role of women
 3. Sociocultural Environment
Population Age U.S. pop. Becoming
Patterns both younger &
older
Ethnic Mix # of minority-owned
businesses
Educational Trends Levels = people
more demanding
Family or Household Smaller & more varied
Structure

Role of Women # = changing

shopping needs
4. Technological Environment
Scanners
Computerized inventory management
& Portable computers

Help retailers & wholesalers closely monitor success or

failure of products they handle
 4. Technological Environment
• Electronic data interchange

EDI – Electronic
Data
Interchange
= Enhanced
Distribution
• Links together channel
information systems
Efficiency
• Provides real-time responses
• Enhanced by Internet
 5. Legal Environment
The set of laws that impact marketing channels

• Continually evolving
• Affected by changing values, norms, politics,
& precedents
• Knowledge of basics helps channel manager
avoid serious & costly legal problems
 5. Legal Environment
• Legal issues in channel management

• Dual Distribution, or multi-channel distribution

Producer or manufacturer uses 2 or more different channel structures
for distributing the same product
• Exclusive Dealing
Supplier requires its channel members to sell only its products or to
refrain from selling directly to competitive suppliers
•Full-Line Forcing
Supplier requires channel members to carry a full-line of its products in
order to sell any particular products in supplier’s line
 5. Legal Environment
• Legal issues in channel management

• Price Discrimination
Supplier sells at different prices to the same class of channel
members
• Price Maintenance
Supplier dictates prices charged by channel members to their
customers
• Refusal to Deal
Supplier has right to refuse to deal with whomever they want as
channel members
 5. Legal Environment
• Legal issues in channel management

• Resale Restrictions
Manufacturer attempts to stipulate to whom and in what geographical market channel
members may resell the manufacturer’s products

• Tying Agreements
Supplier sells a product to a channel member on condition that the channel member also
purchase another product

• Vertical Integration
Firm owns and operates organizations at other levels of the distribution channel