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
