Chapter 9: Marketing Channels and Channel Mapping

Question 1

what are the four most important considerations when thinking about channel value proposition?

Answer 1

• sales growth
• profitability
• return on capital
• brand leverage

Question 2

channel map

Answer 2

a diagram of the types of purchase points a business uses

Question 3

Each channel to the market produces a different level of sales revenue and has its own set of costs.

What are some channel costs?

Answer 3

The channel costs may include discounts to intermediaries, transaction costs, and commissions

Question 4

What three areas of performance will the choice of channel
impact?

Answer 4

• customer value
• sales revenues
• profitability

Question 5

to achieve a desired level of profits, a channel must
do well in all three of the following areas

Answer 5

• customer reach (volume)
• operating efficiency (cost to serve)
• service quality (retention)

Question 6

customer reach (volume) chosen based on what

Answer 6

chosen based on nature of business, PLC stage, target market etc

Question 7

operating efficiency (cost to serve) - direct channels

Answer 7

higher margins, but the business absorbs the cost of channel management and all marketing costs

Question 8

operating efficiency (cost to serve) - indirect

Answer 8

Lower margins, but lower channel management &
marketing costs

Question 9

service quality (retention) –> direct and indirect

Answer 9

– Direct = control of contact points
– Indirect forces the business to depend on intermediaries

Question 10

what is the marketing channel with the most potential for expanding customer reach>

Answer 10

digital marketing channel.

The ability to reach a world of prospective customers at a low marketing cost has led nearly every business, large and small, to invest in digital market- ing

Question 11

______ channels are the Best option for sales communication and customer interaction but the costs are high and increasing

Answer 11

direct

Question 12

Even when a firm uses a mixed approach they usually maintain their
key profitable customers under a ________ system

Answer 12

direct

Question 13

what are the five main examples of a direct systems

Answer 13

• direct sales
• online marketing
• direct marketing
• tele-marketing
• reps/agents

Question 14

examples of indirect channel systems

Answer 14

• wholesalers to consumer markets
• reps/agents to retailers to CM
• reps/agents to wholesales to retailers to CM
• retailers to CM

Question 15

Why do firms use Indirect Channel Systems?

Answer 15

Firms often cannot serve smaller customers with a direct approach
profitably

Question 16

When is it appropriate to use Mixed Channel Systems?

Answer 16

• When distinct target markets need to be served simultaneously
• Often used with specialized and technology products that require local
  availability of service

Question 17

When they use direct marketing channels, businesses control service quality because they, not channel intermediaries, _________________

Answer 17

interface with the customer at this and at all other customer touch points

Question 18

what are the additional kinds of channel intermediaries in B2B indirect channel systems?

Answer 18

• industrial and commercial dealers
• Value-Added Resellers an Original Equipment manufacturers

Question 19

In B2B markets firms tend to prefer a direct approach. Why?

Answer 19

– More control & specialized knowledge
– Serve clients needs better

Question 20

value added resellers (VAR’s)

Answer 20

– Purchase variety of components from various manufacturers and sell them as a system. (bundles)

Question 21

Original Equipment Manufacturers
(OEM’s)

Answer 21

– Creates a new product from manufactured components it buys. (e.g. GM)

Question 22

how does a channel system enhance customer value?

Answer 22

*Increase customer benefits
*Lower customer cost
*Both

Question 23

describe sales force advantage for channel systems

Answer 23

• sales force advantage
  –> Better, more informed, enough to properly service the market

Question 24

describe sales productivity

Answer 24

Built when there are high quality products, broad line of products,
and efficient sales admin systems

Question 25

describe distribution advantage

Answer 25

Share of distributors outlets

Question 26

Before selecting a channel system, a business needs to consider how that channel system either enhances or detracts from what three aspects of product performance?

Answer 26

1. Product Quality—Can the channel system deliver the product with the quality level that is required and expected by customers?
2. Product Assortment —Can the channel system provide the required range of products to achieve a desired level of customer appeal?
3. Product Form—Can the channel system provide the product, in the form needed, to both intermediaries and customers?

Question 27

To determine whether a channel system is viable, a business has to evaluate what three points with respect to a customer’s service needs and expectations?

Answer 27

1. After-Sale Services—What after-sale services are critical to achieving total customer satisfaction with the product or service?
2. Availability and Delivery—To what degree do customers benefit from quick access to goods or services and immediate delivery?
3. Transaction Services—Can the channel system accommodate the customers’ credit needs, terms of payment, warranty needs, desire for delivery at no charge, and easy return of faulty products?

Question 28

T or F: a channel system can affect the image of a product of manufacturer

Answer 28

true

Question 29

In the end, any channel system that does not provide effective sales interaction with target customers will be of _______ value.

Answer 29

little

Question 30

______________ channels are particularly well suited for customer interaction with a business.

Answer 30

Digital marketing

Question 31

By making its product readily available, a business can lower customers’ _____________ costs.

Answer 31

transaction

Question 32

Selecting a channel system, then, requires both careful consideration of _____________ and ________________.

Answer 32

(1) the bene- fits sought by customers and (2) the costs of the different channel systems that the business could use to deliver those benefits

Question 33

With direct channel systems, a business must have a sufficient number of _________ to establish and maintain an effective level of cus- tomer contact.

Answer 33

salespeople

Question 34

With indirect channel systems, a business must have enough ________________ to reach a high percentage of its target customers.

Answer 34

retail or wholesale outlets

Question 35

describe the profit impact of direct channels

Answer 35

direct channels are able to capture most, if not all, of the end-user price, but the cost of direct marketing channels is generally higher because the business is responsible for selling, distribution, and payment.

Digital marketing is an exception: after the online selling infrastructure is in place, direct online sales can yield very high margins

Question 36

describe the profit impact of mixed channels

Answer 36

Mixed channels provide a combination of direct sales and interme- diary distribution channels and lower the cost of marketing (as a percentage of sales), but revenues derived from mixed marketing channels are lower because intermediar- ies take a portion of the purchase price for their services.

Question 37

describe the profit impact of indirect channels

Answer 37

Indirect channels are able to achieve the lowest out-of-pocket marketing and sales expenses. However, the net price derived from the use of indirect marketing channels is much less than from direct channels because multiple interme- diaries capture percentages of the end-user price.