© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin MANAGING MARKETING CHANNELS AND WHOLESALING 15 C HAPTER.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

MANAGING MARKETING

CHANNELS AND WHOLESALING

1515CHAPTER

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• Explain what is meant by a marketing channel of distribution and why intermediaries are needed.

• Recognize differences between marketing channels for consumer and business products and services in domestic and global markets.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

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• Describe the types and functions of firms that perform wholesaling activities.

• Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

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• Describe factors considered by marketing executives when selecting and managing a marketing channel, including channel conflict and legal restrictions.

AFTER READING THIS CHAPTERYOU SHOULD BE ABLE TO:

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AVON’S MAKEOVER IS MORE THAN COSMETIC

MANAGING MARKETING CHANNELS AND WHOLESALING

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• Defining Marketing Channels of Distribution

NATURE AND IMPORTANCE OF MARKETING CHANNELS

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• Value Created by Intermediaries

NATURE AND IMPORTANCE OF MARKETING CHANNELS

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• Value Created by Intermediaries (cont)• Functions Performed by Intermediaries

NATURE AND IMPORTANCE OF MARKETING CHANNELS

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• Value Created by Intermediaries (cont)• Consumer Benefits from Intermediaries

NATURE AND IMPORTANCE OF MARKETING CHANNELS

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Concept Check

1. What is meant by a marketing channel?

A: A marketing channel consists of the individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

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Concept Check

2. What are the three basic functions performed by intermediaries?

A: Intermediaries perform transactional, logistical, and facilitating functions.

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• Marketing Channels for Consumer Goods and Services

Direct channel Indirect channels

CHANNEL STRUCTURE AND ORGANIZATION

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• Marketing Channels for Business Goods and Services

Industrial distributor

CHANNEL STRUCTURE AND ORGANIZATION

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• Electronic Marketing Channels

CHANNEL STRUCTURE AND ORGANIZATION

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• Direct Marketing Channels

• Multiple Channels and Strategic Alliances

Dual distribution Strategic channel alliances

CHANNEL STRUCTURE AND ORGANIZATION

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• A Closer Look at Channel Intermediaries• Merchant Wholesalers

• Agents and Brokers Manufacturer’s agents Selling agents Brokers

• Manufacturer’s Branches and Offices

CHANNEL STRUCTURE AND ORGANIZATION

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• Vertical Marketing Systems and Channel Partnerships

CHANNEL STRUCTURE AND ORGANIZATION

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• Vertical Marketing Systems and Channel Partnerships (cont)• Corporate Systems

• Contractual Systems Franchising

• Administered Systems

• Channel Partnerships

CHANNEL STRUCTURE AND ORGANIZATION

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Concept Check

1. What is the difference between a direct and an indirect channel?

A: With direct channels, a producer and ultimate consumers deal directly with each other. With indirect channels, intermediaries are situated between the producer and consumers.

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Concept Check

2. Why are channels for business products typically shorter than channels for consumer products?

A: Channels are typically shorter for industrial products, since these users are fewer in number, tend to be more concentrated geographically, and buy in larger quantities.

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Concept Check

3. What is the principal distinction between a corporate vertical marketing system and an administered vertical marketing system?

A: Corporate vertical marketing systems achieve coordination at successive stages of production and distribution by ownership, whereas administered vertical marketing systems achieve the same thing by the size and influence of one channel member.

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• Factors Affecting Channel Choice and Management• Environmental Factors

• Consumer Factors

• Product Factors

• Company Factors

CHANNEL CHOICEAND MANAGEMENT

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• Channel Design Considerations• Target Market Coverage

Intensive distribution Exclusive distribution Selective distribution

• Satisfying Buyer Requirements

• Profitability

• Global Dimensions of Marketing Channels

CHANNEL CHOICEAND MANAGEMENT

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• Channel Relationships: Conflict, Cooperation, and Law• Conflict in Marketing Channels

Disintermediation

• Cooperation in Marketing Channels Channel captain

• Legal Considerations

CHANNEL CHOICEAND MANAGEMENT

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Concept Check

1. What are the three degrees of distribution intensity?

A: Intensive, exclusive, selective

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Concept Check

2. What are the three questions marketing executives consider when choosing a marketing channel and intermediaries?

A: 1. Which channel and intermediaries will provide the best coverage of the target market?

2. Which channel and intermediaries will best satisfy the buying requirements of the target markets?

3. Which channel and intermediaries will be the most profitable?

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A: When a supplier requires channel members to sell only its products or restricts distributors from selling directly competitive products.

Concept Check

3. What is meant by “exclusive dealing”?