chapter 11: marketing channels Flashcards
what is the value delivery network?
made up of the company, suppliers, distributors, and ultimately customers
goal is to improve the performance of the entire system in delivering customer value
includes upstream and downstream relationships
upstream relationships
set of firms that supply the raw materials, components, part, information, finances, and expertise needed to create a product or service
downstream relationships
marketing/distribution channels that look toward the customers
(wholesalers and retailers)
Marketing channel (or Distribution channel)
a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business customer
they work as intermediaries
directly affect every other marketing decision
how do marketing channels influence the acquiring of a product?
it influences whether a company develops or acquires certain new products
may depend on how well those products fit the capabilities of its channel members
how do channels add value?
how can intermediaries offer the firm more than it can achieve on its own?
Through their contacts, experience, specialization, and scale of operation
Reduce the amount of work that must be done by both producers and consumers
Intermediaries also play an important role in supply and demand
how can intermediaries offer the firm more than it can achieve on its own?
Information gathering and distribution
Promotion at point of purchase
Contact
Matching and arranging
Negotiation
Physical distribution
Financing
Risk taking
After-sales support
why is Information gathering and distribution useful?
channel partners, such as retailers that are closer to the final customer, have access to information the manufacturer might not have
Channel partners can collect market intelligence and communicate it back to the original producer
what is the use of promotion at point of purchase?
locally advertised sales
how can marketing intermediaries increase contacts if you’re s supplier?
they can find new customers
what is the use of matching and arranging ?
channel partners often play a role in adapting the product to fit the buyer’s needs
what is the use of negotiation?
channel partners such as brokers negotiate price and terms so that the product can move from one channel member to another
give examples of financing?
companies that sell cars may have finance organizations, as well as companies
like Canadian Tire who offer store credit cards
what are channel partners
businesses that are owned and operated independently from the manufacturer
they are also contracted by the manufacturer to perform a specific function in the movement of the product
what are the types of channel partners
retailers
wholesalers
drop shippers and jack robbers
brokers
agents
retailers
a business that primarily sells products and services to consumers
wholesalers
companies whose primary business is selling goods and services to those buying for resale or business us
buy from producers and seek to retailers, business customers
Apple and Samsung are wholesa
lers
merchant wholesaler
who purchases the product then physically distributes it to consumers
like Costco
drop shipper
intermediary that takes orders and payment from the customer
arranges to have the merchandise shipped to the customer directly from the supplier
for what type of items is drop shipping usually used for?
usually for items that are not in stock
rack jobber
wholesaler that buys merchandise and resells it on “racks” inside the retail store (in partnership with retailer)
They retain ownership of the goods until they are sold, and once they are sold, the rack jobber bills the retailer for the items that were sold
brokers
wholesaler that does not take title to goods
function is to bring buyers and sellers together and assist in negotiation
agents
a representative who performs only a few functions and does not take title to goods
either of a buyer or a seller
Manufacturer’s agents
sells the manufacturer’s goods to buyers and receives a commission from the manufacturer
(usually small manufacturers that don’t have their own sales staff)
Advertising agencies
provide marketing communications services such as designing and producing advertisements
buying the media in which to run this ads
what are the steps to organization and management of channels?
- select channel partners
- Decide how many channel levels to create
- Decide between vertical and horizontal marketing systems
- On an ongoing basis, manage and motivate channel partners and AVOID channel conflict
occasionally: Changing Channel Organization
step 1: Selecting channel partners
Marketers must evaluate each potential partners’ year in business, other lines carried, location, growth and profit record, cooperativeness, and reputation
they must see who be the gyuest
- Decide how many channel levels to create
what is a channel level?
a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer
produces and find consumers are part of every channel
what is the length of the channel?
number of channel members that function as
intermediaries between the producer and the consumer
what is a direct marketing channel?
a marketing channel that has no intermediary levels
what is an indirect marketing channel?
a marketing channel containing one or more intermediary levels
companies use more indirect or direct marketing channel?
they use more the indirect marketing channels
Very few companies use a direct marketing channel
- Deciding between vertical and horizontal marketing systems
what is a Vertical Marketing System (VMS)?
a distribution channel structure in which producers, wholesalers, and retailers act as a unified system
One channel member owns the others, has contracts with them, or has so much power that they all cooperate
what are the types of Vertical Marketing Systems (VMS)?
Corporate VMS
Administered VMS
Contractual VMS
Corporate VMS
combines successive stages of production and distribution under single ownership
channel leadership is established through common ownership
ex: Zara either owns or controls most of its distribution systems, from manufacturing through to retailing
administered VMS
coordinates successive stages of production and distribution through the size and power of the parties
not through common ownership or contractual ties
Example: General Electric, P&G, and Kraft can command unusual cooperation from retailers regarding displays, shelf space, promotions and price policies
Contractual VMS
independent firms at different levels of production and distribution work together under contract
The most common type of contractual VMS is the franchise organization
franchise organization
a marketing system that links several stages in the production and distribution prices, and controls operations form a central head office
- Deciding between vertical and horizontal marketing systems
what is a Horizontal Marketing System (VMS)?
an arrangement in which two or more companies that operate at the same channel level get together
goal is to follow a new marketing opportunity
might join forces with competitors or non competitors
Example: Tim Hortons set up express versions of its stores at Esso gas stations so that commuters can fill up and get coffee on the way to work without making 2 stops
- Deciding between vertical and horizontal marketing systems
what is a Multichannel (Hybrid) Marketing System (VMS)?
a distribution system in which a single firm sets up two or more marketing channels to reach one or more target segments
Example: Zara sells its merchandise both online and through its traditional retail distribution channel
what should you be cautious about regarding Multichannel (Hybrid) Marketing Systems (VMS)?
Can be hard to control and may create channel conflict
- On an ongoing basis, managing and motivating channel partners and AVOIDING channel conflict
explain this step
companies use Partnership Relationship Management (PRM) software to help recruit, train, organize, motivate, and evaluate relationships with channel partners
Channel Conflicts
disagreement among marketing channel members over goals, roles and rewards
what are the types of channel conflicts
horizontal conflicts
vertical conflicts
horizontal conflicts
occurs among firms that perform the same function at the same level of the channel
Example: Toyota Laval feels that Toyota Montreal is stealing business by pricing too low
vertical conflicts
conflict between different levels of the same channel common
Example: KFC came into conflict with its franchisees over the brand’s decision to emphasize grilled chicken over the brand’s traditional fried chicken
Changing Channel Organization
Disintermediation
Disintermediation
the cutting out of marketing channel intermediaries by product or service producers
the displacement of traditional resellers by radical new types of intermediaries
what are the different types of distribution strategies (channel strategies)
intensive distribution
selective distribution
exclusive distribution
intensive distribution
distribute products in as many locations as possible.
not always the best strategy
selective distribution
marketer selects a set of retailers that specialize in their product category
Example: Sony and Bose are high-quality brands that would only be found in high- end electronic retailers and not at discount retailers
Exclusive Distribution
marketer gives the rights to distribute its products to only one retailer, or to only one retailer in a particular geographic territory
Usually associated with luxury brands such as Rolex and Tiffany
Example: The Cindy Crawford line in home furnishing is available exclusively at The Brick.
what is marketing Chanel design?
designing effective marketing channels by analyzing customer needs
setting channel objectives
determining the types and responsibilities of channel members
making decisions about international distribution channels
how does analyzing customer needs influence our Chanel design decision??
you want to find out what customers want from that channel
how does setting channel objectives influence our channel design decisions?
the company should decide which segments to serve and the best channels to use in each case
Influences by nature of the company, its competitors, its environment, its marketing intermediaries, and its products
how do types and responsibilities of channel members influence our channel design decisions?
Each channel alternative should be evaluated against economic, control, and adaptability criteria
economic criteria of a channel
what will be investment required by each channel alternative, and what returns will result?
control criteria of a channel
how much control will the intermediary take?
adaptability criteria of a channel
will a channel involving long-term commitment be flexible?
how do international distribution channels influence our channel design decisions?
each country has its own unique distribution system
international marketers usually adapt their channel strategies to the existing structures within each country instead of changing the channel
