Marketing Channels

Chapter 7 Marketing Research and Decision Support Systems

Marketing Channels

Chapter 13 1Determine 2-3 different ways of transportation for the following 24 air compressors, each of 36x36x60, 400 p. each to Dallas, TX.

Two crates of rare orchids, 12x24x48, each weighing 27 pounds to NYC

6 classic cars purchased by an eccentric, wealthy customer in UK. The cars are not currently running.VocabularyMarketing (Supply/Distribution)Channel: group of individuals and organizations that directs the flow of products from producers to customers.

Supply chain management: starts before physical distribution, covering procurement of inputs, conversion into finished products, and product movement to final destinations ? retail stores wholesalers telemarketing mail order catalogs web sites

"Push" : getting channels to your product "Pull" : getting consumers to ...your product by name FirmChannel membersCustomer4Why would a manufacturer want to use a wholesaler or a retailer?Functions performed by intermediaries

Transactional (promote, negotiate, take risks )Logistical Facilitating (researching and financing)6Logistical : Physical Distribution Gets It to Customers

LogisticsorPhysicalDistributionCoordinating the flow of information among channel members7This slide relates to material on p. 256.

Assorting..Bulk-BreakingAllocatingorBulk-Breaking

Accumulating(Medical Clinics)Facilitating : Channel Specialists Adjust Discrepancies with Regrouping ActivitiesSorting(Grading Oranges)COSTCOHeterogeneityQUANTITYASSORTMENT8NORTH BRUNSWICK, NJ, June 2, 2003 - neXpansion announced today that Winn-Dixie, an operator of more than 1,070 stores across 12 southeastern states and the Bahamas, will leverage neXpansion`s Endless Aisle technology to expand Winn-Dixie`s product offerings via the web. Branded as Winn-Dixie`s "Express Special Purchase " or "E.S.P." and available to shoppers in June 2003, the service will provide Winn-Dixie`s customers with easy online and telephone access to more than 30,000 items above and beyond those carried in the supermarket`s retail stores. Using technology and fulfillment expertise from neXpansion, Winn-Dixie`s E.S.P. service will offer a virtual supermarket of non-perishable food items and general merchandise shipped straight to the customer`s door. Shoppers seeking products that are not stocked in their local Winn-Dixie stores can look to the new service to provide those items. The assortment available from Winn-Dixie`s E.S.P. service will include a wide selection of ethnic and specialty foods, baby care and beauty products, natural and organic items, pet supplies and even electronics. "Being located in the Southeastern United States, we have many customers from other regions of the country who vacation here or spend a portion of their winter here," stated Joanne Gage, Sr. Director Consumer & Marketing Services. "E.S.P. makes items that they may purchase back home available to them without us having to warehouse and stock them. It also works in reverse. When they return to their permanent residences, they can purchase some items that they love from Winn-Dixie." To use the service, Winn-Dixie`s customers may simply log onto www.winn-dixie.com , where they will find a link to Winn-Dixie`s E.S.P. online service. Simple on-screen instructions will direct shoppers to either search for a specific item or browse the broad assortment of products and categories. If a customer is unable to locate a specific product through Winn-Dixie`s E.S.P., he/she can fill out an online request form, and the service will work to find the item and provide a response to the customer within 10 business days. All purchases are shipped directly to the customer. Customers also have the option of phoning in an order at 1-866-946-6349. "We are extremely pleased that Winn-Dixie has chosen to partner with neXpansion to deliver this value-added service to their large and diverse customer base," said Lisa Kent, president and CEO of neXpansion. "With the E.S.P. service, Winn-Dixie shoppers will benefit from the vastly expanded array of product choices, easy ordering process and direct home delivery, and Winn-Dixie will profit from increased customer satisfaction and loyalty." About neXpansion Founded in 1996 as Netgrocer.com, neXpansion (http://www.nexpansion.com ) is a private company that provides customized e-commerce, fulfillment and "hard-to-find" merchandising expertise for manufacturers and retailers. neXpansion`s online store, Netgrocer.com, continues to offer consumers non-perishable grocery, health and beauty, and general merchandise products nationwide. neXpansion`s largest shareholders include Parmalat SpA, a $6 billion multinational dairy and food company, and Cendant Corporation, a $6 billion global provider of business and consumer services.

This slide relates to material on pp. 240-241.: Indicates place where slide builds to include the corresponding point.

::::Marketing channels add Value

9Channel Intermediaries

RetailersMerchant Wholesalers

Agents andBrokersTake Title to GoodsTake Title to GoodsDo NOT Take Title to Goods10

Types of Marketing ChannelsChannels for Consumer ProductsDirect ChannelTRADITIONALDUAL DISTRIBUTION & REVERSE CHANNELS11Reverse : recycling and product recalls.Exploring Multiple Channel Options:Benefits of Different ChannelsStoresCatalogsInternetBrowsingConvenienceBroader selectionTouching and feelingInformationMore informationPersonal serviceSafetyPersonalizationCash and creditTouch and feel attributesEntertainment and social interactionInstant gratificationRisk reduction12Types of Marketing ChannelsChannels for Industrial Products

13CHANNEL STRATEGY DECISIONS1.Selection of a Marketing Channel2.Intensity of Distribution3.Management of Relationships14Which means: how to choose a channel!1.Selection of a Marketing ChannelMarket factors:Consumer vs Business markets (large vs. small quant, service)Geographic location (concentrated, dispersed)

Product factors:Complex, customized, expensiveProducts life cycle/delicacy (e.g. mature, perishable)

Producer factors:Big/smallImage protection

2. Intensity of Market coverage

16Red Bull is sold at convenience stores, supermarkets and warehouse clubs. Red Bull has _________ distributionselectiveexclusiveintermediateintensivelimited173. Management of relationship

Retailer

Distributor

Retailer

Retailer

RetailerHorizontal19"Captive Channels" : channels owned by firm "Non-Captive Channels" : channels not owned by firm

"When do retailers have "channel power"? firm's product is not well differentiated from competitors threat of backward integration

FirmChannelsCustomer20Channel conflict examplesFirm: Your retail prices are too high, and are driving down demand Retailer: With your wholesale prices, its the only way we can make money

Firm: You carry too many lines, our product isn't even noticed on shelves Retailer: Customers come first. BTW, why don't you prune your line.FirmChannelsCustomer21"free riding" by internet channel

customers who use more than one channel get confused

return policies origin of merchandise different prices FirmWebsiteCustomerRetail store22Questions?