Marketing Mix- Place-Marketing Channels (Lecture #16) Flashcards
describe marketing channels
- 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
what are channel members
individuals or firms and end consumers
e.g., producers, intermediaries, consumers
what do intermediaries include
retailers, wholesalers, and agents/brokers
def. direct channel
a producer and consumers directly deal with each other
ex. : farmer’s market/ retail stores / company’s website/ service (babysitting; housekeeping)
def. indirect channel
a marketing channel that involves intermediaries between a producer and consumers
def. retail channel
involves retailers as the intermediaries who:
- -mainly sell to consumers for personal use
- -take ownership of products
ex. department store / Online retailers
def. wholesale channel
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)
def. agent/ broker channel
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
describe a broker
- 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
def. agent
- 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
what are the three kinds of indirect channels?
- retailer channel
- wholesaler channel
- agent/broker channel
what is multi-channel distribution
- 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
What are the pros of using intermediaries
- Intermediaries can function more efficiently in terms of
- -Transactional function: buying, selling, risk taking –Logistical function: storing, dispersing, assorting
- -Facilitating function: financing, marketing - Intermediaries can help a producer to reach target markets, which it otherwise cannot
What are the cons of using intermediaries?
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
what are channel conflicts
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
def. horizontal conflict
Occurs among the channel members at the same level
- -e.g. (Costco and Walmart)
- -Common sources:
- –Increase distribution coverage in a geographical area
def. vertical conflict
Vertical conflict occurs between different levels
def, disintermediation
—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
what can asymmetric bargaining power can cause?
-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
how can you resolve channel conflicts?
- Differentiating product offerings
– E.g., a producer sells different products through different channels
–don’t cannibalize products - Using Vertical Marketing Systems
describe a conventional distribution channel?
–Consist of independent channel members
–Often result in poor performance
–Each seeking to maximize its own profits
describe vertical marketing systems (VMS)
–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)
def, corporate VMS
–Successive stages of production and distribution under one single ownership
—-E.g., Zara’s fast-fashion secret
def. contractual VMS
–Successive stages of production and distribution based on contracts agreed by independent firms
–E.g., franchising
def. administered VMS
– Successive stages of production and distribution coordinated by one powerful channel member
– E.g., P&G ; Walmart
What are the 4 main things to consider when designing a distribution strategy?
- Which channel and intermediaries will provide the best coverage of the target market? (target market coverage) (Intensity of target market coverage)
- 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 - Which channel and intermediaries will be the most profitable? (profitability)
- Consistent with the other Ps
def. intensive distribution
place the product as much as possible E.g., ATM machines
def. selective distribution
lies between intensive and exclusive
—E.g, Starbucks
def. exclusive distribution
only one retail outlets in a specified geographical area carries the firm‘s product
—E.g., High-end products
what type of goods are intensive distribution consistent with
convenience goods
what type of goods are selective distribution consistent with
shopping goods
what type of goods is exclusive distribution consistent with
specialty goods
What is the “push” strategy?
manufacturer provides resources to induce intermediaries to carry, promote, and sell the product to users
what is the “pull” strategy?
manufacturer’s advertising and promotion resources are applied to the end user to induce consumers to ask intermediaries for the product, thus inducing intermediaries
what is a push tactic
- any tactic that results in a third party stocking your products
- ex. trade shows
- competitions with retailers
- point of sale displays
what is a pull tactic?
-any tactic that results in customers demanding your product from retailers
