Chapter10: Marketing Channels: Delivering Customer Value Flashcards
Supply chains
Upstream partners supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service.
Downstream partners serve as distribution channels that link the firm and its customers.
Value delivery network
A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.
Marketing Channels (distribution channels)
The downstream side of the supply chain.
Interdependent organizations that help make a product or service available for use or consumption.
Marketing channel decisions
- affect every other marketing decisions
- can lead to competitive advantage
- may involve long-term commitments to other firms
How a distributor reduces the number of channel transactions
Marketing channel intermediaries make buying a lot easier for consumers. (See figure 10.1)
How channel members add value
Intermediaries create greater efficiency in making goods available to target markets.
Marketing intermediaries transform the assortments of products made by producers into the assortments wanted by consumers.
Intermediaries bridge the major time, place, and possession gaps that separate goods and services from users.
Key functions performed by channel members
Help to complete transactions: information, promotion, contact, matching, negotiation.
Help to fulfill the complete transactions: physical distribution, financing, risk taking.
Channel level
A layer of intermediaries that performs work in bringing the product and its ownership closer to the final buyer.
Direct vs. Indirect marketing channels
Direct: no intermediary levels
Indirect: one or more intermediary levels
Types of flow that connect the institutions in the channel
Physical flow of products, flow of ownership, payment flow, information flow, promotion flow.
Consumer and business marketing channels
Consumer marketing channels:
Channel 1: producer —> consumer
Channel 2: producer —> retailer —> consumer
Channel 3: producer —> wholesaler —> retailer —> consumer
Business marketing channels:
Channel 1: producer —> business customer
Channel 2: producer —> business distributor —> business customer
Channel 3: producer —> manufacturer’s representatives or sales branch —> business distributor —> business customer
Channel behaviour
Channel conflict: disagreements among marketing channel members on goals, roles, and rewards.
Horizontal conflict: occurs among firms at the same level of the channel.
Vertical conflict: occurs between different levels of the same channel.
Vertical marketing system (VMS)
Consists of producers, wholesalers, and retailers acting as a unified system.
Comparison or conventional distribution channel with vertical marketing system
Conventional distribution channel: producer —> wholesaler —> retailer —> consumer.
Vertical marketing system: producer, wholesaler, retailer —> consumer.
It’s simply a channel in which members at different levels (hence, vertical) work together in a unified way (hence, system) to accomplish the work of the channel.
Horizontal marketing system
Two or more companies at one level join together to follow a new marketing opportunity.
Multichannel distribution systems
A single firm sets up two or more marketing channels to reach customer segments (see figure 10.4).
Advantages of multichannel distribution systems
Expansion of sales and marketing coverage.
Tailor-made products and services for the specific needs of customer segments.
Disadvantages of multichannel distribution systems
Harder to control
Generates conflict
Disintermediation
Occurs when product or service producers cut out marketing channel intermediaries or when radically new types of channel intermediaries displace traditional ones.
Channel design decisions
Marketing channel design involves designing effective marketing channels by:
- Analyzing customer needs: what do customers want from the channel? (e.g., would customers rather buy in person, by phone, or online? Do customers want to buy nearby or are they willing to travel to more centralized locations?)
- Setting channel objectives: companies should state their marketing channel objectives in terms of targeted levels of customer service. Usually, a company can identify several segments wanting different levels of service. The company should decide which segments to serve and the best channels to use in each case.
- Identifying major channel alternatives.
- Evaluating the alternatives: each alternative should then be evaluated against economic, control, and adaptability criteria.
Major channel alternatives
Types of intermediaries refers to channel members available to carry out channel work (e.g., retailers, distributors, value added resellers, etc.)
Number of intermediaries to use: intensive distribution, exclusive distribution, selective distribution.
Responsibilities of each channel member: mutual services and duties need to be spelled out carefully, especially in franchise and exclusive distribution channels.
Designing international channels
Channel strategies should be adapted to the existing structures within each country.
Distribution systems can have many layers and a large number of intermediaries.
Customs and government regulations can restrict distribution in global markets
Marketing channel management
Selecting channel members
Managing and motivating channel members
Evaluating channel members
Public policy and distribution decisions
Exclusive distribution
Exclusive dealing
Exclusive arrangements (Canadian competition act) are legal as long as the parties:
- do not substantially lessen competition or tend to create a monopoly.
- enter into the agreement voluntarily
