10.2: Channel Behaviour and Organization

Question 1

What is channel behavior?

Answer 1

Channel behavior refers to the interactions and relationships between firms in a marketing channel as they work together to accomplish individual, company, and channel goals.

Question 2

What is the ideal channel member relationship?

Answer 2

Ideally, channel members should understand and accept their roles, coordinate their activities, and cooperate to attain overall channel goals, focusing on tasks they can perform best.

Question 3

What is the ideal channel member relationship?

Answer 3

Ideally, channel members should understand and accept their roles, coordinate their activities, and cooperate to attain overall channel goals, focusing on tasks they can perform best.

Question 4

What is channel conflict?

Answer 4

Channel conflict is disagreement among channel members over goals, roles, and rewards, which can disrupt the smooth functioning of the marketing channel.

Question 5

What is horizontal conflict?

Answer 5

Horizontal conflict occurs among firms at the same level of the channel, such as disagreements or competition between dealers or franchisees within the same company.

Question 6

What is vertical conflict?

Answer 6

Vertical conflict occurs between different levels of the same channel, such as conflict between a manufacturer and its dealers or between a franchisor and its franchisees.

Question 7

How can channel conflict impact a marketing channel?

Answer 7

While some conflict can be healthy and promote innovation within the channel, severe or prolonged conflict can disrupt channel effectiveness and cause lasting harm to channel relationships. Proper management of channel conflict is necessary to maintain a functional and efficient marketing channel.

Question 8

What is a vertical marketing system (VMS)?

Answer 8

A VMS is a distribution system in which producers, wholesalers, and retailers act as a unified system, with one channel member owning the others, having contracts with them, or wielding enough power that they must all cooperate.

Question 9

What are the two types of channel arrangements?

Answer 9

The two types of channel arrangements are conventional distribution channels and vertical marketing systems.

Question 10

Figure 10.3: Comparison of Conventional Distribution Channel with Vertical Marketing System

Answer 10

Question 11

What is a corporate VMS?

Answer 11

A corporate VMS integrates successive stages of production and distribution under single ownership, enabling coordination and conflict management through regular organizational channels.

Question 12

What are the three types of franchises?

Answer 12

The three types of franchises are:

Manufacturer-sponsored retailer franchise system (e.g., Ford and its dealers)

Manufacturer-sponsored wholesaler franchise system (e.g., Coca-Cola and its bottlers)

Service-firm-sponsored retailer franchise system (e.g., Tim Hortons and its coffee shops)

Question 13

What is an administered VMS?

Answer 13

An administered VMS is a system where leadership is assumed not through common ownership or contractual ties, but through the size and power of one or a few dominant channel members, who can influence the activities of other channel members.

Question 14

What is a horizontal marketing system?

Answer 14

A horizontal marketing system is a system in which two or more companies at one level join together to pursue a new marketing opportunity, combining their financial, production, or marketing resources to achieve more than any one company could alone.

Question 15

What is an example of a horizontal channel arrangement in a global context?

Answer 15

Major airlines joining together in global alliances, such as Star Alliance, Skyteam, or Oneworld, is an example of a horizontal channel arrangement. These alliances create massive worldwide air travel networks with joint branding, marketing, co-locations at airports, interline scheduling, smoother global flight connections, and shared rewards and membership privileges.

Question 16

What is multichannel distribution, and what are its advantages and disadvantages?

Answer 16

Multichannel distribution occurs when a single firm sets up two or more marketing channels to reach one or more customer segments.

Advantages include expanded sales and market coverage, as well as opportunities to tailor products and services to the specific needs of diverse customer segments.

Disadvantages include the difficulty in controlling such systems and the potential for channel conflict as multiple channels compete for customers and sales.

Question 17

What is a multichannel distribution system?

Answer 17

A multichannel distribution system is when a single firm sets up two or more marketing channels to reach one or more customer segments.

Question 18

What are the advantages of multichannel distribution systems?

Answer 18

Advantages include:

expanded sales and market coverage,

opportunities to tailor products and services to specific customer segments,

and reaching diverse markets.

Question 19

What are the disadvantages of multichannel distribution systems?

Answer 19

Disadvantages include increased difficulty in controlling the system and potential channel conflicts as multiple channels compete for customers and sales.

Question 20

Provide an example of a company using a multichannel distribution system.

Answer 20

John Deere uses a multichannel distribution system, selling lawn and garden products through John Deere retailers, Home Depot stores, and online; agricultural equipment through its premium dealer network; and large construction and forestry equipment through selected full-service dealers.

Question 21

Figure 10.4 Multichannel Distribution System

Answer 21

Question 22

What is disintermediation?

Answer 22

Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers or when radically new types of channel intermediaries displace traditional ones.

Question 23

What consequences can disintermediation have for producers and resellers?

Answer 23

Disintermediation presents both opportunities and problems for producers and resellers. Channel innovators can displace traditional resellers and reap rewards, while traditional intermediaries must innovate to avoid being displaced.

Question 24

Provide an example of disintermediation in the music industry.

Answer 24

Online music download services like iTunes and Amazon put traditional music-store retailers out of business, with physical music sales capturing less than 22% of music market revenues. In turn, streaming music services such as Spotify, Amazon Prime Music, and Apple Music are now disintermediating digital download services.

Question 25

How do companies avoid channel conflict when developing new direct channels?

Answer 25

Companies often look for ways to make going direct a plus for the entire channel. For example, Harley-Davidson routes all its online sales through its independent dealers, ensuring they receive credit for the sale and keeping them at the center of the customer experience.