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Marketing. Chapter 14. Managing Distribution Channels. Gilbert A. Churchill, Jr. J. Paul Peter. Channel of Distribution. Slide 14-1. Source. Definition. Lamb, Hair, and McDaniel.

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Marketing

Chapter 14

Managing Distribution Channels

Gilbert A. Churchill, Jr. J. Paul Peter


Channel of Distribution

Slide

14-1

Source

Definition

Lamb, Hair, and McDaniel

A set of interdependent organizations that facilitate the transfer of ownership as products move from producer to business user or consumer

An array of exchange relationships that create customer value in the acquisition, consumption, and disposition of products and services

Pelton, Strutton, and Lumpkin

An organized network (system) of agencies and institutions that perform all the functions required to link producers with end users to accomplish the marketing task

Churchill and Peter


How Intermediaries Improve Channel Efficiency

Slide

14-2

Figure

14.1

Sales Contacts without an Intermediary

Sales Contacts with an Intermediary

Bike Shop

Intermediary

Manufacturers of Bicycle Helmets

Bike Riders

Manufacturers of Bicycle Helmets

Bike Riders


Essential channel functions

Slide

14-3

Essential Channel Functions

Transactional Functions

Contacting and Promoting

Negotiating

Risk Taking

Logistical Functions

Physical Distribution

Sorting

Sorting out

Accumulation

Allocation

Assorting

Facilitating Functions

Research

Financing


Common Channels for Consumer Goods

Slide

14-4

Figure

14.2

Direct Channel

Consumer

Producer

Indirect Channels

Consumer

Retailers

Producer

Consumer

Retailers

Wholesalers

Producer

Consumer

Agents

Wholesalers

Retailers

Producer


Common Channels for Consumer Goods - Examples

Slide

14-5

Corky’sBar-B-Q

Consumer

Consumer

Safeway

Frito Lay

InterstateBeverage Corporation

Soft DrinkRetailers

Consumer

Snapple

SmallHouseplantGrower

WholesaleFlorists

RetailFlorists

WillowRum

Consumer


Common Channels for Organizational Goods

Slide

14-6

Figure

14.3

Direct Channel

Organizational buyer

Producer

Indirect Channels

Organizational buyer

Producer

Distributors

Organizational buyer

Agents

Producer

Organizational buyer

Agents

Producer

Distributors


Alternative Channel of Distribution

Slide

14-7

Definition

Example

Type

Multiple/dual channel

Penn. tennis Balls, Cdico caller Id equipment

a manufacturer distributing the same product to target market through two or more channels

Nontraditional channel

channels used to differentiate itself from the competition

Internet, infomercial

using one manufacturer’s already established channel to reach customers

Blockbuster and Coca-Cola

Strategic alliance channel

Recycling (plastics, batteries), product recalls

Reverse/backward channel

products move in the opposite direction to traditional channels


Types of Vertical Marketing Systems

Slide

14-8

Figure

14.5

VerticalMarketingSystems (VMSs)

AdministeredVMSs

CorporateVMSs

ContractualVMSs

Wholesalers Sponsored Cooperatives

Retailer Sponsored Cooperatives

Franchising


Three Categories of Contractual Vertical Marketing Systems

Slide

14-9

McDonalds

Franchises

RetailerSponsoredCooperatives

WholesalerSponsoredCooperatives

True-ValueHardware

Independent GrocersAlliance (IGA)


Factors to Evaluate for Selecting a Distribution Channel

Slide

14-10a

Figure

14.6

CustomerCharacteristics

ProductCharacteristics

IntermediaryCharacteristics

NumberGeographic DispersionChannel PreferencesBuying BehaviorUse of Technology

Cost per UnitPershabilityBulkinessStandardizationNeed for Installation and Maintenance

AvailabilityWillingness to Carry ProductMarket ServicedDistribution Functions PerformedPotential for Conflict and CooperationOther Product OfferingsFinancial ConditionStrengths and Weaknesses


Factors to Evaluate for Selecting a Distribution Channel

Slide

14-10b

Figure

14.6

CompetitorCharacteristics

EnvironmentalCharacteristics

OrganizationCharacteristics

Number and SizeDistribution StrategiesFinancial ConditionsSizes of Product Lines, Product MixesObjectives, Strategies and BudgetsStrengths and Weaknesses

Economic ConditionsPolitical IssuesLaws, Regulations and EthicsCultural and Social Changes Technological Changes

Size and Market ShareFinancial ConditionSize of Product Lines, Product MixAbility to Perform Distribution Functions Objectives, Strategies and BudgetsChannel ExperienceStrengths and Weaknesses


Levels of Market Coverage

Slide

14-11

Table

14.2

Number ofIntermediariesin Trading Area

Level

Objective

Examples

Exclusive

One

Work with a single intermediary for a product that requires special resources or positioning; distribute luxury goods effectively.

Electronic Liquid Fillers packaging systems; Rolex watches

Selective

Several

Work closely with intermediaries who meet certain criteria; distribute shopping goods effectively.

Bose speakers; Compaq computer systems

Intensive

Many

Classic Coke; disposable writing pens

Support mass selling; distribute convenience goods effectively.


Channel Leadership

Slide

14-12

Information

Expert

Reward

Channel

Power

Captain

Referent

Coercive

Legitimate


Channel Options for Global Markets

Slide

14-13

Table

14.8

DomesticManufacturers

Least

Control

  • Most

  • Control

  • License Foreign Manufacturers

    License Foreign Manufacturers

    DomesticExporters

    GlobalIntermediaries

    GlobalBranches

    Global Markets

    Global Markets

    Global Markets

    Global Markets

    Global Markets


    Legal, Political and Ethical Issues

    Slide

    14-14

    Exclusive Dealing A restriction imposed by a supplier on a customer forbidding the customer from purchasing some type of product from any other supplier.

    Closed Sale Territories A producer specifies a geographic area and assigns one intermediary to serve it.

    Tying Contracts An agreement under which a marketer sells a particular product only if the buyer also purchases another specific product.

    Full Line Forcing A type of tying arrangement in which an intermediary that wants to carry a particular product must buy the entire line.

    Gray Market The situation in which foreign distributors sell foreign versions of U.S. products in the United States.

    Slotting Allowances A fee paid by a manufacturer for space in a retail store.


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