Chapter 14 - Channels, Supply Chains and Retailing Flashcards
What are benefits of using intermediaries?
- Improved efficiency
- Product assortment
- Accessibility
- Time, Information & Ownership utility
- Specialist services
What are the two main issues related with the management of marketing channels?
- Design of the channel (structure and activities)
2. Relationships between channel members
What are three key decisions about channel design that should be taken to get the offering to the customer in the most efficient way?
- The distribution intensity decision: what coverage do we want?
- The channel configuration decision: how many intermediaries are necessary to deliver to optimum number of outlets?
- The multichannel decision: how many types of channels should we use?
What are the three broad elements that should be considered to ensure that the design of the distribution channel suits the organization’s objectives?
- Economics. Recognize where costs are incurred and profits are made, to maximize return on investment
- Coverage. Maximizing the offering’s availability in the market for the customer. Satisfying the desire to have the offering available to the largest number of customers in as many locations as possible, at the widest range of time.
- Control. Achieving the optimum distribution costs without losing decision-making authority over the offering (pricing, promotion, delivery) in the distribution channel.
What are the three kinds of channel structures?
- Direct channel structure (direct to end users with little involvement from other organizations). Maintained control, can build strong customer relationships. Large amounts of resources needed to reach customers.
- Indirect channel structure (use of intermediaries). Enable producers to focus on skills/processes of making the offerings.
- Multichannel structure (combination of both). Increased reach (utilise both own and intermediaries relationships). Some maintained control. May confuse customers, if unsure of which channel they should use.
What is channel intensity/coverage?
The number and dispersion of outlets an end user can use to buy a particular offering.
What are the three levels of channel intensity/coverage?
- Intensive distribution. Placing an offering in as many outlets/locations as possible. Commonly used for offerings that consumers are unlikely to search for (impulse/convenience purchases), such as soft drinks, candy or magazines. Retailers have increased control over how intensive distribution is, since they can limit what brands they offer. Nearly all distribution through internet is intensive because of the massive reach.
- Selective distribution. A limited number of outlets are used. When customers are actively involved in a purchase and perceive moderate/high levels of risk, they are prepared to seek appropriate suppliers. Producers control which intermediaries that deliver the products, and the required levels of services. Can be appropriate for furniture, clothing, jewelry and electrical equipment.
- Exclusive distribution. Intermediaries are given exclusive rights to market an offering within a defined “territory”. Can be useful where significant support is required from the intermediary, and the exclusivity is a payback for their investment and support. Common for high-prestige goods such as sports cars and designer fashion apparel. It is also good when an offering requires complex servicing arrangements or tight control.
What is disintermediation and reintermediation?
- Dis: reducing number or strength of intermediaries, to trade directly with buyers.
- Re: Adding intermediaries, where customers prefer their role (ex price comparison sites).
What are the views on channel conflicts?
Always some level of conflict between channel members. Can be both horizontal (between intermediaries on the same level) and vertical (between members on different tiers), and sometimes multichannel. How we solve conflicts depend on the corporate culture, risk attitude and sense of power.
