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Marketing Channel Systems

This document provides an overview of marketing channel concepts and objectives. It discusses the growing importance of marketing channels due to factors like technology, competition, and costs. It defines marketing channels as the external organizations that help achieve distribution goals. Key flows in channels include products, negotiations, ownership, information, and promotions between manufacturers, wholesalers, retailers, and customers. Specialization and division of labor increase contractual efficiency in channels. Channel structure refers to the members that perform distribution tasks, while ancillary structure refers to institutions that assist those members.

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Ali Hassan
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37 views

Marketing Channel Systems

This document provides an overview of marketing channel concepts and objectives. It discusses the growing importance of marketing channels due to factors like technology, competition, and costs. It defines marketing channels as the external organizations that help achieve distribution goals. Key flows in channels include products, negotiations, ownership, information, and promotions between manufacturers, wholesalers, retailers, and customers. Specialization and division of labor increase contractual efficiency in channels. Channel structure refers to the members that perform distribution tasks, while ancillary structure refers to institutions that assist those members.

Uploaded by

Ali Hassan
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Part 1

Marketing Channel Systems

Chapter 1
Marketing Channel Concepts

Objectives
You will learn about:
The growing importance of marketing channels The definition of marketing channels How marketing channels relate to strategic variables in the marketing mix The flows in the marketing channels and their relationship to channel management The principles of specialization, division of labor, and contactual efficiency The difference between the concepts of channel structure and of ancillary structure

Objective 1:

Why the growing importance of marketing channels?

1. 2.

The explosion of information technology and E-commerce A greater difficulty in gaining a sustainable competitive advantage

3.
4.

The growing power of distributors, especially retailers in marketing channels


The need to reduce distribution costs

1.

2.

3.
4.

The explosion of information technology and E-commerce A greater difficulty in gaining a sustainable competitive advantage The growing power of distributors, especially retailers in marketing channels The need to reduce distribution costs

The prediction: Disintermediation reduction of number of intermediaries The reality: Reintermediationevolution of a new type of intermediary
Yahoo! eBay Amazon.com

1. 2. 3. 4.

The explosion of information technology and Ecommerce A greater difficulty in gaining a sustainable competitive advantage The growing power of distributors, especially retailers in marketing channels The need to reduce distribution costs

Sustainable competitive advantage

Place (distribution), or Marketing Channel Strategy

Potential for gaining competitive advantage because place is more difficult for competitors to copy

1. 2. 3. 4.

1 The explosion of information technology and E-commerce A greater difficulty in gaining a sustainable competitive advantage The growing power of distributors The need to reduce distribution costs

Power retailers as gatekeepers of consumer markets

Act as buying agents for customers rather than as selling agents for manufacturers

1. 2. 3. 4.

The explosion of information technology and E-commerce A greater difficulty in gaining a sustainable competitive advantage The growing power of distributors The need to reduce distribution costs

Marketing channels are the most recent target for reducing distribution costs.

The focus is on channel structure and management.

Objective 2:

What is a marketing channel?


Outside the firm

Firm involved in negotiatory functions


Managements involvement in the process External contactual organization that management operates to achieve its distribution objectives Goals that change, causing variations in contactual organization & the way in which management operates it

What is a channel manager?


Anyone in a firm or organization who is involved in marketing channel decision making

Objective 3:

How does marketing channel strategy relate to the rest of the marketing mix?
Marketing Mix or the four Ps

Challenges
Limited ability to gain and hold competitive advantage
Price wars erode profitability & provide unstable basis for sustaining competitive advantage Expensive and short-lived Marketing channels support & enhance other Ps to meet demands of target markets

Product
Price Promotion Place (Distribution)

The change of focus to channel strategy


Creates competitive advantage with long-term viability
Builds strong relationships between manufacturers and channel members Based on trust, confidence, and people power

Channel Strategy and Logistics Management

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

Objective 4:

Marketing Channel Flows


Product Flow
Negotiation Flow Ownership Flow

Information Flow
Promotion Flow

Product Flow
Manufacturer
Transportation Company Wholesalers

Retailers
Consumers

Negotiation Flow
Manufacturer

Wholesalers

Retailers
Consumers

Ownership Flow
Manufacturer

Wholesalers

Retailers
Consumers

Information Flow
Manufacturer Transportation Company Wholesalers

Retailers
Consumers

Promotion Flow
Manufacturer Advertising Agency Wholesalers

Retailers
Consumers

Objective 5:

Distribution through intermediaries

Factors that determine the role of intermediaries

Technology
Economic Considerations

the Internet
Specialization & Division of Labor Contactual Efficiency

Specialization & Division of Labor


Distribution Tasks Distributed interorganizationally Production Tasks Distributed intraorganizationally

Contactual Efficiency Granada Guitar Co.


Negotiation Effort 100 sales visits 100 phone calls 20 magazine ads Estimated Dollar Costs of Inputs @ $50 = $5,000 @ 3 = 300 @1,000 = 20,000 $25,300

Distribution Contactual Objective Efficiency (Output) Get 500 music stores to carry new guitar line Negotiation effort in dollar terms relative to achieving the distribution objective = $25,300

Objective 6:

Channel Structure v. Ancillary Structure


Channel Structure The group of channel members to which a set of distribution tasks has been allocated

Why are singlechannel structures currently the exception?

Ancillary Structure The group of institutions that assist channel members in performing distribution tasks

Why is managing the ancillary structure most likely to be less complex than managing the channel structure?

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