class 11 Flashcards
marketing channel
: path that enables goods/ services to flow from producers to end users
Channels make it possible for a product to flow from a producer, through intermediaries (if any) to consumers
Everyone involved in the distribution is a channel member
Intermediaries include: retailers, wholesalers, and agents/brokers
Direct channel:
a channel that doesn’t have any intermediaries→ (producer to consumer)
offline and online
Indirect channel:
channel that involves intermediaries between producer and consumer (producer to retailer to consumer OR producer to wholesaler to retailer to consumer)
Unique channel structures
Agents and brokers:
Channel involves agents or brokers who:
Have legal authority to represent producers, wholesalers, or retailers
Do not take ownership of products
agent/ broker channel may or may not involve wholesalers or retailers
Agents act on behalf of the producer or manufacturer and represent their interests in transactions with customers.
ex: real estate agents
They typically have ongoing relationships with the producer and may be authorized to negotiate sales, handle contracts, and provide customer support.
Agents earn commissions or fees based on the sales they generate for the producer.
Brokers act as intermediaries between buyers and sellers but do not represent the interests of either party.
They facilitate transactions by bringing buyers and sellers together and helping them negotiate terms, but they do not have ongoing relationships with either party.
C2C channel
Consumers can become sellers/manufacturers
Multichannel distribution
Producer cultivates multiple distribution channels to get product in hands of consumers
Ex: Apple has own stores and website but also sells to retailers like Best Buy and wholesalers like innovix
ex with nike–> they sell in footlocker, in other stores, websites,
Why do intermediaries exist
What benefits do they provide for you as a consumer?
efficiency - only have to go to one place
Less searching
Specific retailer perks→ discounts, financing, warranties
Wider availability
benefits of intermediaries for producers
Less investment into own channels
Share risks with other firms
Inventory clearing
Reach new target markets
Transactional functions (type of functions that intermediaries perform)
Buying, selling
Wholesalers, retailers, agents, brokers
how the wholesalers buy from the manufactures …
Logistical functions
Transporting, storing, sorting (breaking bulk) and creating assortments
Distributors, wholesalers and retailers
Facilitating functions
Payment processing, consumer financing, market research, promotion, product testing, data/analysis, platform maintenance
Specialists in each of these specific functio
Are intermediaries always beneficial
Makeups increase the price for end customers,which can hurt sales→ recall price chain, constraints on pricing
Intermediaries may interfere with branding strategy→ loss of control in how the products are presented
Channel conflicts can arise
what are channel conflicts
Occur when two channel members have foals that are at odds with each other
When the channel members are independent entities there is more likely to be conflict
what are horizontal channel conflicts
Occurs among the channel members at the same level
Ex: aggressive geographic expansions, retailers are competing on price
Ex: grocery store that sells coke and pepsi - you will focus more on the one giving you a higher margin
vertical channel conflicts
Occurs among the channel members at different levels
Ex: disintermediation (reduce reliance on intermediaries), asymmetric bargaining power (producer has power to make strong demands of retailers or vice versa)
how to avoid channel conflicts
vertical integration, central coordination of the marketing channel, independent marketing channel, vertical marketing system
what is indepdent marketing channel
channel members are independent, each seeks to maximize its own profit, can result in poor performance/high prices
vertical marketing system
channel members act as a unified system, greater control, less conflict, and economies of scale (ex: corporate, contractual and administered VMS)
what are the different types of vertical marketing system
Corporate: successive stages of production and distribution under one single ownership (ex: Zara, Warby Parker).
Zara and Warby Parker are good examples. They own everything from designing and manufacturing to retailing their products. Zara designs, manufactures, and sells its clothing, while Warby Parker designs, manufactures, and sells its eyewear. They control every step of the process.
Contractual: successive stages of production and distribution based on contracts agreed by independent firms (ex: Mcdonalds). McDonald’s is a prime example. It operates through franchising, where individual franchisees run their own McDonald’s restaurants. These franchisees have agreements with McDonald’s that outline how they should operate and what standards they should meet.
Administered: successive stages of production and distribution coordinated by one powerful channel member (ex: Walmart). Walmart controls everything. Walmart is a classic example. It doesn’t own everything, but it’s so big and influential that it can dictate terms to suppliers. Suppliers want to work with Walmart because it’s such a major retailer. Walmart doesn’t need contracts; its power is enough to make suppliers listen.
what are the different distribution intensities
Not always more= better
Coverage of target market
Intensive distribution: as many outlets as possible (ex: gas, cash from ATM)–> convenience good, high coverage. Most consumer packaged-goods companies,
Exclusive distribution: as few outlets as possible, idea of exclusivity (prada)–> speciality goods, high margins throughout the channel . Ex: Rolex watches are only sold by high-end jewellers and a few retail outlets, keeping with their prestigious brand image
Selective distribution: balances between intensive and exclusive–< shopping goods, retailers compete
