chapter 12 Flashcards
marketing channels
sets of interdependent organisations participating in the process of making a product or service available for use or consumption. it performs the work of moving goods from producers to consumers. it overcomes the time, place, and possession gaps that separate goods and services from those who want or need them.
the marketing channel system
the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces.
push strategy
uses the manufacturer’s sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users. this strategy is appropriate when there is low brand loyalty in a category, brand choice is made in-store, the product is an impulse item, and product benefits are well understood.
pull strategy
when the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it. this strategy is appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between the brands, and when they choose the brand before they go to the store.
multichannel marketing
using two or more marketing channels to reach customer segments in one market area. multichannel customers can be more valuable to marketers. companies are increasingly employing digital distribution strategies, selling directly online to customers or through e-merchants who have their own websites.
omnichannel marketing
occurs when multiple channels work seamlessly together and match each target customer’s preferred ways of doing business, delivering the right product information and customer service regardless of whether customers are online, in-store, or on the phone.
integrated marketing channel system
the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels. adding more channels gives companies three important benefits;
1. increased market coverage
2. lower channel cost
3. ability to do more customised selling
however, it can introduce conflict and problems with control and cooperation or two channels may compete for the same customers.
demand chain planning
refers to first thinking about the target market and then designing the supply chain backward from that point.
value network
a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings. it includes a firm’s suppliers and its suppliers’ suppliers and its immediate customers and their end customers. it also incorporates valued relationships with others such as university researchers and government approval agencies.
forward flow
forward flow of activity from the company to the customer. functions such as storage and movement, title, and communications.
backward flow
backward flow of activities from the consumer to the company. functions such as ordering and payment.
manufacturer selling physical products/services require three channels
- sales channel
- delivery channel
- service channel
zero-level channel/direct marketing channel
consists of a manufacturer selling directly to the final customer.
one-level channel
contains one selling intermediary, typically a retailer.
two-level channel
contains two selling intermediaries, typically a wholesaler and a retailer.
three-level channel
contains three selling intermediaries, typically wholesalers, jobbers, and retailers.
reverse-flow channels
are important to:
1. reuse products or containers
2. refurbish products for resale
3. recycle products
4. dispose of products and packaging
reverse-flow intermediaries include recycling centres, trash-collection specialists, etc.
marketing channel service outputs
- desired lot size
- waiting and delivery time
- spatial convenience
- product variety
- service backup
providing more service outputs means increasing channel costs and raising prices.
desired lot size
the number of units the channel permits a typical customer to purchase on one occasion.
spatial convenience
the degree to which the marketing channel makes it easy for customers to purchase the product.
service backup
add-on services provided by the channel.
channel alternatives differ in three ways
- types of intermediaries (merchants, agents, and facilitators)
- numbers of intermediaries (exclusive, selective, and intensive distribution)
- terms and responsibilities of channel members (elements: price policy, conditions of sale, distributors’ territorial rights, and mutual services and responsibilities)
merchants
are wholesalers and retailers. they buy, take title to, and resell the merchandise.
agents
are brokers, manufacturers’ representatives, and sales agents. they search for customers and may negotiate on the producer’s behalf but do not take title to the goods.
facilitators
are transportation companies, independent warehouses, banks, and advertising agencies. they assist in the distribution process but neither take title to goods nor negotiate purchase or sales.
exclusive distribution
limits the number of intermediaries. is appropriate when the producer wants more knowledgable and dedicated resellers. this often includes exclusive dealing arrangements, especially in markets increasingly driven by price.
selective distribution
when only some of the intermediaries are willing to carry a particular product. the company can gain adequate market coverage with more control and less cost than intensive distribution.
intensive distribution
places the goods or services in as many outlets as possible. it is a good strategy for products consumers buy frequently or in a variety of locations, eg. snacks and gum.
price policy
the producer establishes a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient.
conditions of sale
refers to payment terms and producer guarantees.
distributors’ territorial rights
define the distributors’ territories and the terms under which the producer will enfranchise other distributors.
steps of economic criteria for evaluating channel alternatives
- estimating the dollar value of sales for each alternative
- estimating the costs of selling different volumes through each channel
- comparing sales and costs
channel power
the ability to alter channel members’ behaviour so that they take actions they would not have taken otherwise. in many cases, retailers hold the power, so manufacturers need to know the acceptance criteria used by retail buyers and store managers. more sophisticated companies try to forge a long-term partnership with distributors.
conventional marketing channel
consists of an independent producer, wholesaler(s), and retailer(s).
vertical marketing system (VMS)
includes the producer, wholesaler(s), retailer(s) acting as a unified system. types of VMS:
1. corporate VMS
2. administered VMS
3. contractual VMS
corporate VMS
combines successive stages of production and distribution under single ownership.
administered VMS
coordinates successive stages of production and distribution through the size and power of one of the members.
contractual VMS
consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone. types: 1. wholesaler-sponsored voluntary chains 2. retailer cooperatives 3. franchise organisations
wholesaler-sponsored voluntary chains
organise voluntary chains of independent retailers to help standardise their selling practices and achieve buying economies in competing with large chain organisations.
retailer cooperatives
take the initiative and organise a new business entity to carry on wholesaling and possibly some production. members concentrate their purchases through the retailer co-op and plan their advertising jointly, sharing in profits in proportion to their purchases.
franchise organisations
might link several successive stages in the production distribution process. such arrangements include manufacturer-sponsored retailer franchises (ford and its dealers), manufacturer-sponsored wholesaler franchises (coca-cola and its bottlers), and service-firm-sponsored retailer franchises (mcdonald’s).
horizontal marketing systems
those in which two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.
e-commerce
uses websites to transact or facilitate the sale of products and services online.
m-commerce
selling via mobile devices such as smartphones.
competition in key aspects of a transaction
- customer interaction with the website
- delivery
- ability to address problems when they occur
pure-click companies
those that have launched a website without any previous existence as a firm.
brick-and-click companies
existing companies that have added an online site for information or e-commerce.
infomediaries
third parties that add value by aggregating information about alternatives.
market makers
third parties that link buyers and sellers.
customer communities
where buyers can swap stories about products and services.
to gain acceptance from intermediaries
marketers are:
1. offering different brands or products online and offline.
2. offering offline partners higher commissions to cushion the negative impact on sales.
3. taking orders online but having retailers deliver and collect payment.
geofencing
to target customers with a mobile promotion when they are within a defined geographical space, typically near or in a store.
channel conflict
generated when one channel member’s actions prevent another channel from achieving its goal.
channel coordination
occurs when channel members are brought together to advance the goals of the channel instead of their own potentially incompatible goals.
horizontal channel conflict
occurs between channel members at the same level.
vertical channel conflict
occurs between different levels of the channel.
multichannel conflict
when the manufacturer has established two or more channels that sell to the same market. it is likely to be especially intense when the members of one channel get a lower price (based on larger-volume purchases) or work with a lower margin.
causes of channel conflict
- goal incompatibility
- unclear roles and rights
- differences in perception
- intermediaries’ dependence on the manufacturer
managing channel conflict
- strategic justification
- dual compensation
- superordinate goals
- employee exchange (between channel levels)
- joint memberships
- co-optation
- diplomacy, mediation, or arbitration (when conflict is chronic or acute)
- legal recourse (if nothing else works)
strategic justification
showing channels or members how each serves distinctive segments.
dual compensation
paying existing channels for sales made through new channels.
exclusive distribution
only certain outlets are allowed to carry a seller’s products.
exclusive dealing
requiring dealers not to handle competitors’ products.
full line forcing
only selling to dealers if they will take some or all of the rest of the line.
tying agreements
like full line forcing, are not illegal but can violate the law if they lessen competition substantially.
