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Distribution Channels

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  1. Marketing for Hospitality and Tourism Kotler, Bowen and Makens Distribution Channels Chapter 12

  2. Learning Objectives • Describe the nature of distribution channels, and tell why marketing intermediaries are used. • Understand the different marketing intermediaries available to the hospitality industry and the benefits each of these intermediaries’ offers. • Discuss channel behavior and organization, explaining corporate, contractual, and vertical marketing systems, including franchising. • Illustrate the channel management decisions of selecting, motivating, and evaluating channel members. • Identify factors to consider when choosing a business location.

  3. Supply Chain • The Supply Chain consists of Upstream and Downstream partners • Upstream partners are firms that supply what is needed to create a product or service • Downstream partners connect the firm with its customers • A better approach is to think of the supply chain as a Value Delivery Networkwhere all parties partner with each to improve the performance of the entire system

  4. Distribution Channel Functions Information Promotion Contact Matching Negotiation Physical Distribution Financing Risk Taking

  5. Major Hospitality Distribution Channels Travel Agents Direct Booking GDSs Tour Wholesalers OTAs Hospitality Distribution Channels

  6. Vertical Marketing Systems Corporate VMS Contractual VMS Administered VMS

  7. Contractual VMS Contractual VMS Alliances Franchises

  8. Advantages and Disadvantagesof Franchises

  9. Other Management Systems Other Management Systems Multichannel Marketing Systems Horizontal Marketing Systems

  10. Evaluating Channel Alternatives Economic Feasibility of the Channel Member Control Criteria Levels of Sales Costs

  11. Business Location Understanding the Marketing Strategy & Target Market Conducting a Regional Analysis Selecting an Area Within that Region Choosing Individual Sites

  12. KeyTerms Administered VMS A vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties. Agent A wholesaler who represents buyers or sellers on a more permanent basis, performs only a few functions, and does not take title to goods. AlliancesAlliances are developed to allow two organizations to benefit from each other’s strengths. Broker A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiations. Channel conflict Disagreement among marketing channel members on goals and roles—who should do what and for what rewards. Channel level A level of middleman that performs some work in bringing the product and its ownership closer to the final buyer.

  13. KeyTerms (cont.) Contractual VMS A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone. Corporate VMS A vertical marketing system that combines successive stages of production and distribution under single ownership. Channel leadership is established through common ownership. Direct marketing channel A marketing channel that has no intermediary levels. Franchise A contractual vertical marketing system in which a channel member called a franchiser links several stages in the production distribution process. Horizontal conflictConflict between firms at the same level. Horizontal marketing systems (HMS) Two or more companies at one level join to follow new marketing opportunities. Companies can combine their capital, production capabilities, or marketing resources to accomplish more than one company working alone.

  14. KeyTerms (cont.) Multichannel marketing Multichannel distribution, as when a single firm sets up two or more marketing channels to reach one or more customer segments. Online Travel Agent (OTA) A travel agency that conducts business through the Internet with no physical locations or stores. Retailer Business whose sales come primarily from retailing. Supply Chain Upstream and downstream partners. Upstream from the company is a set of firms that supply raw materials, components, parts, information, finances, and expertise needed to create a product. Downstream marketing channel partners, such as wholesalers and retailers form a vital connection between the firm and its customers. Vertical conflictConflict between different levels of the same channel.

  15. KeyTerms (cont.) Vertical marketing system (VMS) A distribution channel structure in which producers, wholesalers, and retailers act as a unified system: Either one channel member owns the others, or has contracts with them, or has so much power that they all cooperate. Wholesaler Firms engaged primarily in wholesaling activity.