Marketing Or Distribution Channels

Marketing or Distribution Channel

A set of interdependent

organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
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Why Use Marketing Intermediaries?

Selling through wholesalers

and retailers usually is much more efficient and cost effective than direct sales

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Why are Marketing Intermediaries Used?

Greater efficiency in making goods available to target markets. Contacts Experience Specialization Scale of operation Match supply and demand.
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Distribution Channel Functions Information: gathering and distributing marketing research and intelligence information about the marketing environment Promotion: developing and spreading persuasive communications about an offer

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Distribution Channel Functions Contact: finding and communicating with prospective buyers Matching: shaping and fitting the offer to the buyers needs, including such activities as manufacturing, grading, assembling, and packaging
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Distribution Channel Functions

Negotiation: agreeing on

Physical distribution:

price and other terms of the offer so that ownership or possession can be transferred

transporting and storing goods

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Distribution Channel Functions

Financing: acquiring and using

funds to cover the costs of channel work Risk taking: assuming financial risks such as the inability to sell inventory at full margin

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Number of Channel Levels

Channel level can be described

as distribution channels

Direct marketing channel

Retailer Wholesaler
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Consumer and Business Channels

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 Channel members are dependent

Channel Behavior

upon one another and must work together for the channel to operate successfully Members should understand and accept their roles, coordinate their goals and activities, and cooperate to attain overall channel goals
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Channel Behaviour
The channel will be most effective when:

each member is assigned tasks it cando best. will be most effective when: The channel all members cooperateassigned task each member is to attain overall channel goals. can do best. If this does not happen, conflict occurs: to atta all members cooperate Horizontal Conflict occurs among firms at the overall channel goals.

same level of the channel (e.g., retailer to retailer). If Conflict occurs between different levels Vertical this does not happen, conflict occurs: Horizontal Conflict occurs to retailer). of the same channel (e.g., wholesaler among firms at same level of the channel (e.g., retailer to re
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Conventional vs. Vertical Marketing System

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Channel Organization

A vertical marketing system

(VMS) consists of producers, wholesalers, and retailers acting as a unified system One channel member either owns the others, has contracts with them, or wields so much power that they all cooperate
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 Corporate VMS combines

ownership

Vertical Marketing Systems

successive stages of production and distribution under single successive stages of production and distribution through the size and power of the parties
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Administered VMS coordinates

Contractual VMS consists of independent firms at different levels of production and distribution who join through contracts to obtain economies or sales impact

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Types of Vertical Marketing Systems

Corporate VMS Common Ownership at Different Levels of the Channel (e.g., Sears)
High

Contractual VMS Contractual Agreements Among Channel Members (e.g., ACE Hardware)

Control

Administered VMS Leadership is Assumed by One or Few Dominant Members (e.g., Kraft) a

Low

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Innovations in Marketing Systems

Horizontal Marketing System
Two or more companies at one channel level join together to follow a new marketing opportunity. Example: Banks in grocery stores

Hybrid or multi channel Marketing System

A single firm sets up two or more marketing channels to reach one or more customer segments. Example: Retailers and catalogs
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Channel Organization
Alliances are developed to allow two
organizations to benefit from each others strengths Horizontal marketing systems are two or more companies at one level that join to follow a new marketing opportunity Multichannel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments
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Channel Design Decisions

Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

Identifying Major Alternatives
Intensive Distribution Selective Distribution

Exclusive Distribution

Evaluating the Major Alternatives

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Channel Management Decisions

Selecting
FEEDBACK

Motivating

Evaluating
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Number of Intermediaries
Intensive distribution
Exclusive distribution Selective distribution

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Franchising Granting the right to engage in

offering, selling, or distributing goods or services under a marketing format which is designed by the franchisor franchisee to use its trademark, name, and advertising
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The franchisor permits the

Franchisee Advantages
Brand Name Contracts Plans and Systems
Reservation systemsCustomers

Marketing Support

2006 Pearson Education, Inc. Upper Saddle River, NJ 07458

Marketing for Hospitality and Tourism, 4th edition Kotler, Bowen, and Makens

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Franchisee Disadvantages

Value of brand name determined by franchiser Introduction of new products determined by franchiser Your reliability tied to the rest of the system

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Selecting Channel Members

Attracting Channel Members Evaluating Major Channel

Alternatives Economic Feasibility of the Channel Member Control Criteria Customer Needs
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Table : Factors Influencing Marketing Channel Strategies

Market factors

Characteristics of Short Channels Business users

Characteristics of Long Channels

Consumers

Geographically concentrated

Geographically diverse

Extensive technical knowledge and regular s servicing required

Product factors

Little technical knowledge and no regular servicing

Durable

Perishable Complex
...

Standardized
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