Marketing Channels

©2000 Prentice Hall

ObjectivesObjectivesObjectivesObjectives

Work Performed by Marketing ChannelsWork Performed by Marketing Channels Channel-Design DecisionsChannel-Design Decisions Channel-Management DecisionsChannel-Management Decisions Channel DynamicsChannel 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


Distribution Channel Functions

Distribution Channel Functions

OrderingOrdering

PaymentsPayments

CommunicationCommunicationTransferTransfer

NegotiationNegotiation

FinancingFinancingRisk TakingRisk Taking

PhysicalDistribution

PhysicalDistribution

InformationInformation


Consumer Marketing ChannelsConsumer Marketing Channels

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


Industrialdistributors

Man

ufa

ctu

rer

Co

nsu

mer

Manufacturer’srepresentative

Manufacturer’ssales branch

Industrial Marketing ChannelsIndustrial Marketing ChannelsIndustrial Marketing ChannelsIndustrial Marketing Channels


Customers’ Desired Service Customers’ Desired Service LevelsLevels

Customers’ Desired Service Customers’ Desired Service LevelsLevels

Lot sizeLot size Waiting timeWaiting time Spatial convenienceSpatial convenience Product varietyProduct variety Service backupService 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


Channel Management DecisionsChannel Management Decisions

SelectingSelecting

FE

ED

BA

CK

MotivatingMotivating

TrainingTraining

EvaluatingEvaluating


Types of Vertical Marketing SystemsTypes of Vertical Marketing Systems

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


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


Causes of Channel ConflictCauses of Channel ConflictCauses of Channel ConflictCauses of Channel Conflict

IncompatibilityIncompatibility Difference in PerceptionDifference in Perception DependenceDependence


Legal & Ethical Issues in Legal & Ethical Issues in Channel RelationsChannel Relations

Legal & Ethical Issues in Legal & Ethical Issues in Channel RelationsChannel Relations

Exclusive DealingExclusive Dealing Exclusive TerritoriesExclusive Territories Tying AgreementsTying Agreements Dealers’ RightsDealers’ Rights


ReviewReviewReviewReview

Work Performed by Marketing ChannelsWork Performed by Marketing Channels Channel-Design DecisionsChannel-Design Decisions Channel-Management DecisionsChannel-Management Decisions Channel DynamicsChannel Dynamics

Education

Marketing Channels