Chapter 7. Marketing Channel Strategy and Management. In this chapter, you will learn about…. The Channel-Selection Decision The Design of Marketing Channels Channel Selection at the Retail Level Channel Selection at Other Levels of Distribution Dual Distribution and Multi-Channel Marketing
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Marketing Channel Strategy and Management
A marketing channel consists of individuals and firms involved in the process of making a product or service available for consumption or use by consumers and industrial users.
The marketing manager must answer the following questions:
Distributors or Wholesalers
Retailers or DealersTraditional Marketing Channel Designs
DIRECT DIST.The Design of Marketing Channels
Direct distribution is typically used when:
Direct distribution must be considered when:
Indirect distribution must be considered when:
Electronic marketing channels employ some form of electronic communication, including the Internet, to make products and services available for consumption or use by consumers and industrial users.
Auto-By-Tel (Virtual Broker)
Amazon.com (Virtual Retailer)
Agent)Representative Electronic Marketing Channels
Disintermediation is the elimination of traditional intermediaries and direct distribution through electronic marketing channels.
CokeChannel Selection at the Retail LevelTarget Market Coverage
Effective Distribution occurs when a limited number of retail outlets account for a significant fraction of the market potential.
Example: A marketer distributes the product through 40% of available outlets, but these outlets account for 80% of the market.
When is it used
Multi-channel marketing involves the blending of an electronic marketing channel and a traditional channel in ways that are mutually reinforcing in attracting, retaining, and building relationships with customers.
Satisfying Intermediary Requirements and Trade RelationsIntermediary Requirements
Satisfying Intermediary Requirements and Trade RelationsTrade Relations
Channel Conflict arises when one channel member believes another channel member is engaged in behavior that is preventing it from achieving its goals.
Satisfying Intermediary Requirements and Trade RelationsSources of Channel Conflict
Channel Captain is a channel member that takes on the role of coordinating, directing, and supporting other channel members.
Satisfying Intermediary Requirements and Trade RelationsForms of Channel Captain Power
…considers the financial impact of the change in channel members in terms of revenues and expenses
Margin to wholesalers $5,000,000
Service expense 500,000
Total cost $5,500,000
Suppose an organization is considering replacing its wholesalers with its own distribution centers. The cost of wholesalers includes:
Sales to retailers $1,500,000
Sales administration 250,000
Inventory cost 935,000
Delivery and storage 1,877,000
Accounts receivable 438,000
Total cost $5,000,000
The cost of Distribution Centers:
Determining the dollar value of:
Since using wholesalers costs $3.5 million and the cost of distribution centers would be $5 million, a cost perspective suggests selection of the latter option. However, the effect on revenues must be considered by: