Marketing Channels Designs & Dynamics

Work Performed by Marketing Channels Channel-Design Decisions Channel-Management Decisions Channel Dynamics

How a Distributor Reduces theNumber of Channel Transactions

= Customer= Customer= Manufacturer= Manufacturer

A. Number of contacts A. Number of contacts without a distributorwithout a distributor

M x C = 3 X 3 = 9M x C = 3 X 3 = 9

11

3322

445566

778899

How a Distributor Reduces theHow a Distributor Reduces theNumber of Channel TransactionsNumber of Channel Transactions

= Distributor= Distributor= Customer= Customer= Manufacturer= Manufacturer

B. Number of contacts B. Number of contacts with a distributorwith a distributorM x C = 3 + 3 = 6M x C = 3 + 3 = 6

Store

11

22

33

44

55

66

OrderingOrdering

PaymentsPayments

CommunicationCommunicationTransferTransfer

NegotiationNegotiation

FinancingFinancingRisk TakingRisk Taking

PhysicalDistribution

PhysicalDistribution

InformationInformation

Distribution Channel Functions

WholesalerWholesaler JobberJobber RetailerRetailer ConsumerConsumer

ConsumerConsumer

RetailerRetailer ConsumerConsumer

ManufacturerManufacturer

0-level channel

WholesalerWholesaler RetailerRetailer ConsumerConsumer MfgMfg

2-level channel

MfgMfg

3-level channel

1-level channel

ManufacturerManufacturer

Consumer Marketing Channels

Industrialdistributors

Man

ufa

ctu

rer

Co

nsu

mer

Manufacturer’srepresentative

Manufacturer’ssales branch

Lot size Waiting time Spatial convenience Product variety Service backup

SellingSellingcostscosts

(dollars)(dollars)

Level of sales (dollars)Level of sales (dollars)

Break-Even Cost ChartBreak-Even Cost Chart

CompanyCompanysales forcesales force

Manufacturer’s Manufacturer’s sales agencysales agency

SSBB

SelectingSelecting

MotivatingMotivating

TrainingTraining

EvaluatingEvaluating

Channel Management Decisions

CorporateCommon Ownership at Different

Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Type of Vertical Marketing System

Conventional Distribution Channel vs. Conventional Distribution Channel vs. Vertical Marketing SystemsVertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

Incompatibility Difference in Perception Dependence

Exclusive Dealing Exclusive Territories Tying Agreements Dealers’ Rights

Work Performed by Marketing Channels Channel-Design Decisions Channel-Management Decisions Channel Dynamics