Chapter 1

1. Chapter 1 Marketing Channel Concepts

2. 1 Major Points for Ch. 1 Let’sLearnabout: 1. Key Terms and Definitions 2. Why Marketing Channels and Intermediaries?** 3. Marketing Channels and other Marketing Concepts 4. The Flows in the Marketing Channels** 5. Basic Principles for Marketing Channels** 6. Evolution of Marketing Channel Concept

3. Marketing Channels Originally defined as:Paths through which goods or materials can move from producers to users. Cf) Distribution Channels

4. Middleman (Intermediaries) create value by reducing the spatial separation – the physical distance between the point of production and point of consumption

5. 1 What is a marketing channel? (Textbook version) Firm involved in negotiatory functions Internal & External contactual organization that management operates to achieve its distribution objectives What are the distribution objectives?

6. Marketing Channels Act as Exchange Facilitators We define a Marketing Channel as “exchange relationships that create customer value in the acquisition, consumption, and disposition of products and services”

7. Point 2: Why Channels and Intermediaries?**Create Higher Exchange Utility by Providing More Customer Value* • Four Basic Components: • Form Utility • Place Utility • Possession Utility • Time Utility • New: Developing and Enhancing Customer Relationships

8. c r a M • Create utility by contributing to Contactual efficiency* • Facilitating Routinization • Simplifying Assortment • Minimizing uncertainty within marketing channels

9. FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES Selling Directly (Without Intermediaries) Manufacturers 40 Contact Lines Retailers

10. FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES Selling Through One Wholesaler Manufacturers 14 Contact Lines Wholesaler Retailers ex) one-stop shopping

11. FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES Selling Through Two Wholesalers Manufacturers Wholesalers 28 Contact Lines Retailers

12. Why the growing importance of marketing channels? 1 1.The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs

13. The explosion of information technology and E-commerce 1. 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs 1 The prediction: Disintermediation — reduction of number of intermediaries Yahoo! eBay Amazon.com The reality: Reintermediation — evolution of a new type of intermediary

14. A greater difficulty in gaining a sustainable competitive advantage 1 1. The explosion of information technology and E- commerce 2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs Place(distribution), or Marketing Channel Strategy Sustainable competitive advantage Potential for gaining competitive advantage because place is more difficult for competitors to copy

15. The growing power of distributors 1 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. 4. The need to reduce distribution costs Power retailers as of consumer markets gatekeepers Act as buying agents for customers rather than as selling agents for manufacturers Ex) Recent Changes in IT industry

16. The need to reduce distribution costs 1 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors 4. Marketing channels are the most recent target for reducing distribution costs. The focus is on channel structure and management.

17. Point 3: 1 How does marketing channel strategy relate to the rest of the marketing mix?

18. Marketing Channels Originally defined as:Paths through which goods or materials can move from producers to users. ©McGraw-Hill Companies, Inc. 2002

19. Marketing Channel Flows** 1 Point 4: Product Flow* Negotiation Flow Ownership Flow Information Flow* * Unbundling Flows Promotion Flow

20. Product Flow 1 Manufacturer Transportation Company Wholesalers Retailers Consumers

21. Negotiation Flow 1 Manufacturer Wholesalers Retailers Consumers

22. Ownership Flow 1 Manufacturer Wholesalers Retailers Consumers

23. Information Flow 1 Manufacturer Transportation Company Wholesalers Retailers Consumers

24. Promotion Flow 1 Manufacturer Advertising Agency Wholesalers Retailers Consumers

25. FIGURE : MARKETING FLOWS IN CHANNELS  Physical Possession Ownership Promotion Negotiation Financing Risking Ordering Payment  Physical Possession Ownership Promotion Negotiation Financing Risking Ordering Payment  Physical Possession Ownership Promotion Negotiation Financing Risking Ordering Payment Consumers Industrial and Household Producers Wholesalers Retailers Commercial Channel Subsystem

26. MarketingChannel and Logistics Management: Same or Different? 1 Part of distribution variable • Concerned with entire process of starting and operating contactual organization • Formulated before logistics management Focused specifically on providing product availability at appropriate time & place

27. Foundations on Distribution through intermediaries (Basic Principles) point 5: 1 Factors that determine the role of intermediaries Economic Specialization & ConsiderationsDivision of Labor.* Contactual Efficiency New Technology New channels Social Considerations  Relationships

28. 4. Relationship Marketing Era 2. The Institutional Period And Selling Orientation 3. The Marketing Concept 1. The Production Era And Distributive Practices 1900s 1940s 1950s 1990s Point 6 The Evolution of Marketing Channel Concepts

29. 1 The change of focus to channel strategy • Creates competitive advantage with long-term viability • Builds strong relationships between manufacturers and (selected) channel members • Use of Multichannel Strategy