CH15: Distribution Channels Flashcards
distribution channel
set of interdependent organizations (intermediaries) participating in the process of making a product or service available for use or consumption
main types of intermediaries
- wholesalers
- brokers
- mfg. reps
- agents
- facilitators
- transport/warehouse
the 7 main functions of the distribution channel
- gather info about customers, competitors, mktg environment
- develop comms to stimulate purchasing and brand loyalty
- negotiate terms to facilitate the transfer of ownership or possession
- place orders with manufacturers
- financing activities
- assume risks associated with channel work
- oversee the actual transfer of ownership
the 3 common characteristics of dist channel functions
- use up scarce resources
- can often be performed better through specialization
- can be shifted among channel members
types of flow between channel members
- forward flow (goods, title, promotion)
- backward flow (payment)
- dual flow (info, negotiation, finance, risk)
the 3 levels of mktg channels
- 0-level
- 1-level
- 2-level
benefits of multichannel distribution
- increased market coverage
- lower channel cost
- customized selling options
drawbacks of multichannel distribution
- potential for channel conflict
- issues with control and cooperation
exclusive distribution
severely limits the number of channel partners; for when the producer wants to ensure more knowledgeable and dedicated efforts by the resellers
selective distribution
relies on some but not all of the intermediaries willing to carry a particular product; may include retailers that compete for the same customers
intensive distribution
places the goods/services in as many outlets as possible; works well for foods, soft drinks, etc.
the 3 main characteristics of franchising
- the franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments
- the franchisee pays for the right to be part of the system
- the franchisor provides the franchisees with a system for doing business
the 3 main franchising formats
- manufacturer-sponsored retail franchise (auto dealers)
- manufacturer-sponsored wholesale franchise (Coca-Cola)
- service-firm-sponsored retailer franchise (Hertz, Aviz, Howard Johnson)
channel power
the ability to alter channel members’ behavior so they take actions they would not have taken otherwise
the 5 types of channel power
- coercive power
- reward power
- legal power
- expert power
- referent power
the 3 main types of conventional marketing channels
- independent producer
- wholesaler
- retailer
channel coordination
occurs when channel members are brought together to advance the goals of the channel instead of their own potentially incompatible goals
vertical marketing system
the producer, wholesaler, and retailer are unified
- corporate (single ownership, e.g. Apple)
- administered (dominant brand secures cooperation from resellers
- contractual system
the 3 types of a contractual vertical system
- voluntary chains organized by wholesalers (e.g. IGA, NAPA)
- retailer Co-ops
- franchise
horizontal marketing system
two or more unrelated companies combining resources to exploit a market opportunity; may result in a joint venture (e.g. Nike Ed. Apple Watch)
the 5 main factors by which to evaluate intermediary performance
- sales quota attainment
- inventory levels
- customer delivery time
- treatment of damaged and lost goods
- cooperation in promotional and training programs
channel conflict
generated when one channel member’s actions prevent another channel member from achieving its goal (horizontal, vertical, multichannel)
horizontal channel conflict
occurs between channel members at the same level
vertical channel conflict
occurs between different levels of the channel
multichannel conflict
exists when the manufacturer has established two or more channels that sell to the same market; likely to be intense when members of one channel get a lower price or work with a lower margin
the 4 main causes of channel conflict
- goal incompatibility (e.g. market penetration vs high margins)
- differences in strategies and tactics
- power imbalance
- unclear roles and rights
the 8 main ways to manage channel conflict
- strategic justification
- dual compensation
- superordinate goals
- employee exchange
- joint membership
- co-optation
- diplomacy, mediation, arbitration
- legal recourse
the 2 main components of market logistics
- planning the infrastructure to meet demand
- implementing and controlling the physical flows of materials and final goods from points of origin to points of use
the 3 main components of supply chain management
- strategically procuring the right inputs
- converting inputs efficiently into finished products
- dispatching finished products to the final destinations
the 4 main market logistics considerations
- order processing
- warehousing
- inventory
- transportation
order-to-payment cycle
the time between an order’s receipt, delivery, and payment; most companies are trying to shorten this
just-in-time inventory management
carrying near-zero inventory, and acquiring stock based on orders; customers pay in advance, and the company uses that money to pay suppliers
