Market Channel Flashcards
What was the prediction for intermediaries based upon new technology?
The prediction was that the amount of intermediaries would go down, but this proved not to be the case because intermediaries will just evolve instead (CH 1)
Why is it harder to gain competitive advantage through channel strategy?
It is very difficult to copy an organization’s distribution strategy (CH 1)
Why are distributors (especially retailers) becoming more powerful?
Distributors basically act as gatekeepers for manufacturers to customers. Often times they act as buying agents for consumers, rather than selling agents for manufacturers. (CH 1)
What is a Marketing Channel?
A marketing channel is an organization that helps achieve distribution objectives of a firm. (CH 1)
Who is a Marketing Channel manager?
Anybody involved in making marketing channel decisions. (CH 1)
How does the marketing channel strategy relate to the price?
It is risky to compete based on price because it can cause a severe cut to profits. It is also a very unstable point of differentiation, because a competitor can simply just lower their prices which would force you to do the same in order to compete. (CH 1)
How does the marketing channel strategy relate to the product?
It is hard for a firm to gain and maintain a competitive advantage for a product, but marketing channel strategy makes this easier because it is hard to copy distribution strategies. (CH 1)
How does the marketing channel strategy relate to the promotion?
Efforts for promotion is expensive and is pretty short lived once the clout runs out. (CH 1)
How does the marketing channel strategy relate to the place?
The place/distribution strategy/marketing channel strategy helps support the rest of the P’s, and empowers the to better satisfy the target markets. It also helps to create sustainable competitive advantage, builds stronger relationships based on confidence, trust and power.
Describe the Product Flow.
The product flow is the movement of a product from the manufacturer to the final customer. For example, The Miller Coors beer product will start at the brewery plant (manufacturer) and then is transported (transportation company) to beer distributers (wholesalers) whether the product is purchased by liquor stores, supermarkets, convenience stores, restaurants and bars (retailers), where it is finally purchased by customers (consumers). (CH 1).
Describe the Negotiation Flow.
Describe the Ownership Flow.
The ownership flow describes the transfer of ownership of a product as it goes from the manufacturer to the final customer. It begins with the manufacturer, who passes ownership to the wholesalers, then to the retailers and lastly to the customers.
Describe the Information Flow
This describes the flow of information from manufacturer to consumer. For example, the manufacturer might give the transportation company information about how much they want to send and when, while requesting information from them about shipping rates and schedules. However the manufacturer does not have to go directly through the transportation company, and can rather gain and give information from each party of the flow, including wholesalers, retailers and consumers.
Describe the Promotion Flow.
This describes the persuasive messaging that is passed down to influence action surrounding the product. The manufacturer and advertising agency work closely to come up with advertising, personal selling, sales promotion and publicity. After the advertising agency, the flow goes directly down through the parties, not coming back up except between consumers and retailers. But, the manufacturer can also promote directly to the consumers.
Who are the major participants in marketing channels (Commercial Channel)
The major participants for the commercial channels are the Producers/Manufacturers and Intermediaries (wholesale and retail intermediaries). (CH 2)
Who are the major participants in the marketing channels (target markets)
The target markets are the major participants in the marketing channels, otherwise considered to be the final users. There are two type of final users, which are the consumer and industries.
** the final users will not be considered channel members because they are not involved in management processes. It is better to view them as the target market. (CH 2)
Why is it often better to not have producers and manufacturers complete distribution tasks?
Manufacturers and producers often lack expertise, and are not in positions to allow them to effectively distribute their product directly to the final user. They also lack economies of scale.
Why are intermediaries better suited for handling distribution tasks?
They are able to spread their very high fixed costs over very large quantities of diverse products. They are also able to achieve economies of scope and scale?
Who are the major types of wholesalers?
- Merchant Wholesalers (independent)
- Agents, Brokers and Commission Merchants (independent)
- Manufacturers, sales branches and offices (manufacturer owned)
What is the job of a merchant wholesaler?
Merchant wholesalers buy and store physical products in large quantities, and then sell off smaller portions of the product to retailers, other wholesalers and to industrial/institutional organizations.
What are the different names for merchant wholesalers?
Wholesaler, jobber, distributor, industrial distributor, supply house, assembler importer, exporter, etc.
What do agents, brokers and commission merchants do?
Agents do not actually ever own the products, but rather act on the behalf of their clients to buy and sell the products.
How do manufacturers sales branches and offices act as whole sales?
They typically directly sell their own product in whole sale at locations separate from the manufacturer plant, either in warehousing facilities or sales offices.
What were the major trends in size and concentration?
of Employees per firm: about 50% of firms had fewer than 5 employees.
Size of wholesaler: majority are small business.
Sales volume: nearly 45% of all firms have annual sales of less than 1 million.
Economic concentration in terms of % of total sales: 50 largest manufacturers’ sales generated nearly 63% of sales for this type
What are the six main tasks of the merchant wholesalers?
- Provide Market Coverage by helping manufacturers reach their widespread target markets at reasonable prices.
- They make sales contact, reducing the amount that manufacturers have to spending on outside sales force.
- They hold inventory, which reduced costs for the manufacturer, lowers rick of manufacturer holding large inventories, pand provides a ready outlet for manufacturers products and helps them b better plan production schedules.
- They help process orders, which is especially helpful because many customers order in small amounts
- They gather market information since they spend so much talking to consumers on sales calls.
- They also offer customer support services, which would be expensive for the manufacturer
Describe the Value-ADDED service?
This is when merchant wholesalers provide customer services on behalf of manufacturers, including refunds/exchanges, setups, repairs or tech support. Which makes this channel member more useful to customers and manufacturers.
What are some of the services a merchant wholesaler can offer customers?
They can assure product availability, provide customer service, extend credit and financial assistance (1. allowing customers to use products in their business before paying for them 2. stocking and providing ready availibity for the items need dby customers), offer assortment convenience, allow customers to buy smaller amounts, tech support
What do manufacturer’s agents do?
They focus on market coverage and sales contact.
What do selling agents do?
They completely take care of the marketing and sales efforts, taking care of market coverage, sales contacts, order processing, marketing, product availability and customer service.
What do brokers do?
They provide marketing information / bring buyers and sellers together?
What do commission merchants do?
They focus on market coverage, sales contacts, order processing, breaking bulk, credit and holding inventory.
How do you classify retailers?
- Ownership of Establishment
- Kind of Business
- Size
- Degree of Vertical Integration
- Type of Relationship with other business organization
- Method of consumer contact
- Type of location
- Type of Service rendered
- Legal forms of organization
-Management organizations or Operation Technique
What is a marketing channel strategy?
The plan that an organization has to accomplish its distribution objectives for its target markets.
What are the distribution decisions that firms need to make?
- the role of distribution in overall objectives and strategies
- The role distribution should play in the marketing mix
- The design of the firm’s marketing channels
- The selection of channel members
- The management of the marketing channel in order to implement the firm’s channel design effectively & efficiently on a continuing basis
- The evaluation of channel member performance
Should marketing managers deal with distribution on a proactive or reactive basis?
Proactive
Why should distribution be a top priority in marketing strategy/
- Distribution deserves attention from top management because competition has made distribution too big of an issue to ignore
- Should be a major concern to every business and industry because of changing tech, but few people are paying attention
What is the Abell & Hammond’s Three Cycle Strategic Planning Process?
When should distribution be the priority of a marketing strategy, instead of the other P’s?
Should be the main focus when there is a high level of emphasis on how a product is sold, how timely and conveniently a product is made available, and where it is sold
What other times should distribution be the top priorities?
- Distribution is the most relevant variable for satisfying target market demands.
- Parity exists among competitors in the other three variables of the marketing mix.
- A high degree of vulnerability exists because of competitors’ neglect of distribution.
- Distribution can enhance the firm by creating synergy from marketing channels.
What is Differential Advantage?
When a firm attains a long-term, advantageous positon in the market relative to competitors
What factors should channel members consider when picking channel members?
Members should:
- Reflect channel strategies the firm has developed to achieve its distribution objectives
- Be consistent with the firm’s broader marketing objectives & strategies
- Reflect the objectives & strategies of the organization as a whole
Describe Distribution Intensity
This essentially describes how hard a firm wants to penetrate the market through distribution. This will range from intensive (many members) to selective (relatively few) to exclusive (only one)
What are some of the ways that manufacturers aid retailers?
- Advertising and promotional support
- Management assistance
- Fair dealing policies and friendly relationships
What are some product line inducements?
- manufacturers offer good product line with strong sales and profit potential
- stress value of good product line from channel members’ perspective
What are some advertising and promotion inducements?
- Consumer Market: gain credibility through strong program of national advertising
- Industrial Market: gain recognition through program of trade paper ad
What are management assistance inducements?
- The ways which the manufacturer will help with training, finance analysis, market analysis, inventory control, promotional methods.
What is the manufacturer’s responsibility for fair trade and friendly dealing?
Its the manufacturer’s responsibility to ensure that they convey that they genuinely care about the welfare of that channel member.
What is the framework for market analysis?
Market size, market density, market geography, market behaviour
Where can firms locate markets?
- Bureau of census
- Postal ZIP Codes
What must channel managers consider regarding Market Size?
Channel managers must consider the peculiarities of particular situations and other relevant variables.
