MARKETING CHANNELS

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PROBLEM:

1. Industrial sales to auto assemblers OK

2. Retail sales of replacement tires doing poorly

22-3

COMPETITION:

1. Bridgestone / Firestone from Japan

2. Michelin from France / Germany

3. Both companies will sell at low low price to increase North American market share

SOLUTION re: PLACE

1. Sell replacement tires where people buy them - SEARS

2. Sell higher quality tire through dealerships so dealers can still bring in high end customers

3. Convert some stores to no-frills quick-serve

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Marketing Channels

Sets of interdependent organizationsinvolved in the process of making

a product or service available for use

or consumption.

Marketing ChannelIntermediaries

Marketing ChannelIntermediariesProducerProducer ConsumersConsumers

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Creates Utility

Marketing / Distribution Channels create Time, Place, Possession/ownership utility.

• Delivered at the right time - TIME UTILITY

• Delivered at the right place - PLACE UTILITY

• With appropriate legal requirements - POSSESSION / OWNERSHIP UTILITY

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Channels and Marketing Decisions

PUSH

STRATEGY

PULL

STRATEGY

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Categories of Buyers

Habitual shoppers

High value deal seekers

Variety-loving shoppers

High-involvement shoppers

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Should the 4 P’s be replaced?

• Solutions

• Information

• Value

• Access

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Channel Member Functions

• Gather information• Develop and disseminate persuasive

communications• Reach agreements on price and terms• Acquire funds to finance inventories• Assume risks• Provide for storage• Provide for buyers’ payment of their bills• Oversee actual transfer of ownership

Channels provide the means by which the firm moves the goods and services it produces to ultimate users

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Increasing Efficiency

22-11

Marketing Channel Flows

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Consumer Marketing Channels

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Industrial Marketing Channels

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Reverse Channel

- used cartridges - Canon

Also used for product recalls or for broken products that need to be fixed under Warranty - especially cars, tires and some expensive electronic consumer items.

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Conventional Channels

• Consists of one or more independent producers, wholesalers, and retailers.

• Each is a separate business looking to maximize profits.

• No channel member has much control over the others

• No formal means exists for assigning roles and resolving channel conflict

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BookDistributor

BookDistributor

Amazon.com(Virtual Retailer)

Amazon.com(Virtual Retailer)

BookPublisher

BookPublisher

AutoDealerAuto

Dealer

Auto-By-Tel(Virtual Broker)

Auto-By-Tel(Virtual Broker)

Travelocity(Virtual Agent)

Travelocity(Virtual Agent)

AutoManufacturer

AutoManufacturer

CommercialAirline

CommercialAirline

ComputerManufacturer

ComputerManufacturer

Ultimate BuyersUltimate Buyers

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Channel Service Outputs

Lot size

Waiting/delivery time

Spatial convenience

Product variety

Service backup

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Identifying Channel Alternatives

Types of

intermediaries

Number of

intermediaries

Terms and

responsibilities

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Number of Intermediaries

Exclusive

Selective

Intensive

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Types

• Intensive distributionIntensive distribution: channel policy in which a manufacturer of a convenience product attempts to saturate the market

• Selective distributionSelective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line

• Exclusive distributionExclusive distribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographic area

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Types….

IntensiveDistribution

IntensiveDistribution

ExclusiveDistributionExclusive

Distribution

Levi’s Women’s503 Jeans

SelectiveDistribution

SelectiveDistribution

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The Value-Adds Vs Costs of Different Channels

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Channel-Management Decisions

Selecting channel members

Training channel members

Motivating channel members

Evaluating channel members

Modifying channel members

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Channel Power

• Coercive

• Reward

• Legitimate

• Expert

• Referent

The capacity of a particular channelmember to control or influence the

behavior of another channel member

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Bases of Power for Channel Bases of Power for Channel ControlControl

• Reward power is based on perception held by channel member that another group has the ability to provide rewards for varying performances.

• Coercive power is based on perception held by channel member that another group has the ability to inflict punishment.

• Legitimate Power is based on perception held by channel member that another group has the right to influence the formers action.

• Referent Power is based on perception held by channel member that another group should be identified with as copying the latter style, beliefs and actions.

• Expert Power is based on perception held by channel member that another group should be identified with latter’s knowledge and expertise.

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Causes of Channel Conflict

Role IncongruitiesResource ScarcitiesPerceptual DifferencesExpectational DifferencesDecision Domain DisagreementsGoal IncompatibilitiesCommunication Difficulties

When a channel member perceivesthat another member’s actions impede the

attainment of his or her goals

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Managing Channel Conflict

• Adoption of superordinate goals

• Cooptation• Diplomacy• Mediation• Arbitration

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e-Commerce Marketing Practices

• Pure-click• Brick-and-click• Brick-and-mortar

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Marketing Debate

Does it matter where you are sold?

Take a position:1. Channel images do not really affect the

brand images of the products they sell.2. Channel images must be consistent with

the brand image.

22-30

Assignment…..

• Your group is starting a new business. You have developed a line of fashion t-shirts. What channel of distribution are you going to use?