Marketing Mix- Place-Marketing Channels (Lecture #16)

Question 1

describe marketing channels

Answer 1

• Marketing channel consists of individuals or firms involved in the process of making a product available for use or consumption by consumers
• channel makes it possible for a product to “flow” from a producer, through intermediaries (if any), to consumers

Question 2

what are channel members

Answer 2

individuals or firms and end consumers

e.g., producers, intermediaries, consumers

Question 3

what do intermediaries include

Answer 3

retailers, wholesalers, and agents/brokers

Question 4

def. direct channel

Answer 4

a producer and consumers directly deal with each other

ex. : farmer’s market/ retail stores / company’s website/ service (babysitting; housekeeping)

Question 5

def. indirect channel

Answer 5

a marketing channel that involves intermediaries between a producer and consumers

Question 6

def. retail channel

Answer 6

involves retailers as the intermediaries who:

• -mainly sell to consumers for personal use
• -take ownership of products
  ex. department store / Online retailers

Question 7

def. wholesale channel

Answer 7

Wholesale channel involves wholesalers who:

• -sell to retailers and other wholesalers for resale (B2B, do not sell to consumers)
• -take ownership of products

ex. Sysco (grocery wholesaler)

Question 8

def. agent/ broker channel

Answer 8

Agent/broker channel involves agents or brokers who:

• -have legal authority to represent producers wholesalers, or retailers
• -do not take ownership of products
• *may or may not involve wholesalers or retailer

Question 9

describe a broker

Answer 9

• Serve many sellers or buyers, one-time
• functions:Bring sellers and buyers together, negotiation
• ex. An insurance broker, who sells insurance products from many companies to businesses and individuals

Question 10

def. agent

Answer 10

• More exclusive and continuous relationship
• functions:Selling, marketing
• ex. A literary agent, who represents writers and their written works to publishers, theatrical producers, and film producers

Question 11

what are the three kinds of indirect channels?

Answer 11

• retailer channel
• wholesaler channel
• agent/broker channel

Question 12

what is multi-channel distribution

Answer 12

• firms employ two or more different types of marketing channels:
• -Same customer/segment -same product
• -different customer/segment-same product
• -different customer/segment–different product

Question 13

What are the pros of using intermediaries

Answer 13

1. Intermediaries can function more efficiently in terms of
   - -Transactional function: buying, selling, risk taking –Logistical function: storing, dispersing, assorting
   - -Facilitating function: financing, marketing
2. Intermediaries can help a producer to reach target markets, which it otherwise cannot

Question 14

What are the cons of using intermediaries?

Answer 14

1.Costs and mark-ups will finally transfer to the price consumers pay, which hurts sales
– Recall price chain
2. For non standardized/high-end products, intermediaries’ standardized practices may not serve targeted consumers
3. Channel conflicts can arise

Question 15

what are channel conflicts

Answer 15

Channel conflicts occur when one channel member disagrees with another member’s behavior that prevents it from achieving its goal
–Horizontal conflict occurs among the channel members at the same level
–Vertical conflict occurs between different
levels

Question 16

def. horizontal conflict

Answer 16

Occurs among the channel members at the same level

• -e.g. (Costco and Walmart)
• -Common sources:
• –Increase distribution coverage in a geographical area

Question 17

def. vertical conflict

Answer 17

Vertical conflict occurs between different levels

Question 18

def, disintermediation

Answer 18

—Disintermediation: a channel member bypasses another member and sells or buys products directly
—E.g., in a wholesale channel, disintermediation happens when wholesalers bypass retailers and sell to consumers directly or retailers bypass wholesalers and buy from producers directly

Question 19

what can asymmetric bargaining power can cause?

Answer 19

-vertical conflict
—Disagreement over how profit should be distributed between the channel members
—Disagreement over how much attention and effort one channel member should devote for the other

ex. In 2009, Amazon paid $51 million to settle a lawsuit by Toys “R” US because Amazon violated their 10-year exclusive contract of not allowing other vendors to market toys and baby products on its site

Question 20

how can you resolve channel conflicts?

Answer 20

1. Differentiating product offerings
   – E.g., a producer sells different products through different channels
   –don’t cannibalize products
2. Using Vertical Marketing Systems

Question 21

describe a conventional distribution channel?

Answer 21

–Consist of independent channel members
–Often result in poor performance
–Each seeking to maximize its own profits

Question 22

describe vertical marketing systems (VMS)

Answer 22

–Channel members act as a unified system
–Benefits should include greater control, less conflict, and economies of scale due to the size of the system
–A unified system can be implemented through single ownership (corporate VMS), contracts (contractual VMS), or coordination of one powerful channel member (administered VMS)

Question 23

def, corporate VMS

Answer 23

–Successive stages of production and distribution under one single ownership
—-E.g., Zara’s fast-fashion secret

Question 24

def. contractual VMS

Answer 24

–Successive stages of production and distribution based on contracts agreed by independent firms
–E.g., franchising

Question 25

def. administered VMS

Answer 25

– Successive stages of production and distribution coordinated by one powerful channel member
– E.g., P&G ; Walmart

Question 26

What are the 4 main things to consider when designing a distribution strategy?

Answer 26

1. Which channel and intermediaries will provide the best coverage of the target market? (target market coverage) (Intensity of target market coverage)
2. Which channel and intermediaries will best satisfy the buying requirements of the target market? (satisfying buyer requirements)
   –E.g. Information; convenience; variety; pre, post-sales services
3. Which channel and intermediaries will be the most profitable? (profitability)
4. Consistent with the other Ps

Question 27

def. intensive distribution

Answer 27

place the product as much as possible E.g., ATM machines

Question 28

def. selective distribution

Answer 28

lies between intensive and exclusive

—E.g, Starbucks

Question 29

def. exclusive distribution

Answer 29

only one retail outlets in a specified geographical area carries the firm‘s product
—E.g., High-end products

Question 30

what type of goods are intensive distribution consistent with

Answer 30

convenience goods

Question 31

what type of goods are selective distribution consistent with

Answer 31

shopping goods

Question 32

what type of goods is exclusive distribution consistent with

Answer 32

specialty goods

Question 33

What is the “push” strategy?

Answer 33

manufacturer provides resources to induce intermediaries to carry, promote, and sell the product to users

Question 34

what is the “pull” strategy?

Answer 34

manufacturer’s advertising and promotion resources are applied to the end user to induce consumers to ask intermediaries for the product, thus inducing intermediaries

Question 35

what is a push tactic

Answer 35

• any tactic that results in a third party stocking your products
• ex. trade shows
• competitions with retailers
• point of sale displays

Question 36

what is a pull tactic?

Answer 36

-any tactic that results in customers demanding your product from retailers