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13. Marketing Channels. Learning Objectives. After studying this chapter, you should be able to: Explain the functions and key activities of marketing channels. Discuss the role of intermediaries in marketing channels. Distinguish between direct and indirect marketing channels.

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learning objectives
Learning Objectives
  • After studying this chapter, you should be able to:
    • Explain the functions and key activities of marketing channels.
    • Discuss the role of intermediaries in marketing channels.
    • Distinguish between direct and indirect marketing channels.
    • Illustrate how some firms use multiple channels successfully.
    • See how marketing channel decisions are related to other key marketing decision variables.
    • Understand how power, conflict, and cooperation affect the operation of a marketing channel.
    • Give examples of ethical and legal issues encountered in the operations of marketing channels.
timbuk 2
Timbuk 2
  • Timbuk2, a San Francisco–based manufacturer of urban shoulder bags, iPod holsters, tote bags, and yoga mat carriers, has learned that having the right channels for distributing its products is every bit as important for success as having cutting-edge products.
  • When CompUSA agreed to carry Timbuk2 bags, CEO Mark Dwight thought his company had hit the jackpot. Four months later, Timbuk2 was hard pressed to keep up with the high volume demand and remain profitable given its low selling price to CompUSA.
consumer and b2b channels
Consumer and B2B Channels
  • The marketing channel is a combination of organizations and individuals who perform the required activities to link producers of products to users of those products to accomplish marketing objectives.

Exhibit 13-1

functions of marketing channels
Functions of Marketing Channels
  • By performing five critical functions, marketing channels play an important role in accomplishing the key marketing activities.

Exhibit 13-2

direct marketing channels
Direct Marketing Channels
  • A direct channel describes movement of the product from the producer to the user without intermediaries.

Exhibit 13-3

indirect marketing channels
Indirect Marketing Channels
  • An indirect channel requires intermediaries between the originator and the user to perform some functions related to buying or selling.

Exhibit 13-4

vertical marketing systems
Vertical marketing systems. are centrally coordinated, highly integrated operations that work together to serve the ultimate consumer.

The word vertical refers to the flow of the product from the producer to the customer. This flow is “down the channel” or “downstream,” meaning that the product flows down from the producer to the customer.

Vertical Marketing Systems

Exhibit 13-5

corporate channel systems
Corporate Channel Systems

Forward

Integration

A corporate channel system in which one channel member owns one or more of its buyers downstream is called forward integration.

Backward

Integration

Backward Integration aims to improve the efficiency and effectiveness of marketing channels through ownership of one or more of their suppliers, not their buyers.

contractual channel systems
Contractual Channel Systems
  • Wholesaler-sponsored voluntary groups consist of independent retailers that operate under the name of a sponsoring wholesaler.
  • Retailer-owned cooperative groups operate like wholesaler-sponsored voluntary groups, but the retailers actually own the wholesaler.
  • The third type of contractual channel system is the franchise system. One party, the franchisor, grants another party, the franchisee, the right to distribute and sell specified goods and services.
franchise channels
Franchise Channels

Exhibit 13-6

managing marketing channels13

Evaluate

Alternatives

Determine

Structure

Implement

Strategy

EvaluatePerformance

Managing Marketing Channels

Develop

Strategy

  • Channel objectives should be specifically stated, measurable, and consistent with the firm’s marketing objectives.
  • Channel strategy is an expression of a general action plan and guidelines for allocating resources to achieve the channel objectives.

Buyer

Preferences

Relationship

Orientation

Degree of

Market

Coverage

managing marketing channels14
Managing Marketing Channels

Develop

Strategy

EvaluateAlternatives

Determine

Structure

Implement

Strategy

Evaluate

Performance

  • Evaluation of Capabilities and Costs
  • Evaluation of Channel Compatibility:
    • Product Considerations
    • Pricing Considerations
    • Marketing Communications Considerations
  • Evaluation of Availability
managing marketing channels15
Managing Marketing Channels

Develop

Strategy

Evaluate

Alternatives

Determine

Structure

Implement

Strategy

Evaluate

Performance

  • The key question is “What channel structure is best for us to use?”
    • Direct or Indirect Channels
    • Single or Multiple Channels
    • Vertical Marketing Systems
managing marketing channels16
Managing Marketing Channels

Develop

Strategy

Evaluate

Alternatives

Determine

Structure

Implement

Strategy

Evaluate

Performance

  • Run a Trial Period
  • Set Performance Expectations
  • Create Communication Networks
managing marketing channels17
Financial Evaluation

Evaluate Working Relationship

Ethical and Legal Issues

Channel Power

Reward Power

Legitimate Power

Expert Power

Referent Power

Coercive Power

Channel Leader Power

Channel Conflict

Channel Cooperation

Managing Marketing Channels

Develop

Strategy

Evaluate

Alternatives

Determine

Structure

Implement

Strategy

Evaluate

Performance

channel conflict
Channel Conflict
  • It is inevitable that channel members experience conflict with one another. Channel conflict may result from poor communications, a struggle over power in the channel, or incompatible objectives.
summary
Summary
  • After studying this chapter, you should be able to:
    • Explain the functions and key activities of marketing channels.
    • Discuss the role of intermediaries in marketing channels.
    • Distinguish between direct and indirect marketing channels.
    • Illustrate how some firms use multiple channels successfully.
    • See how marketing channel decisions are related to other key marketing decision variables.
    • Understand how power, conflict, and cooperation affect the operation of a marketing channel.
    • Give examples of ethical and legal issues encountered in the operations of marketing channels.