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Chapter 11:

Place andDevelopment ofChannel Systems

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When you finish this chapter, you should

11-2

Chapter 11 Objectives

1. Understand what productclasses suggest about Placeobjectives.

2. Understand why some firmsuse direct channel systems

while others rely onintermediaries and indirectsystems.

3. Understand how and whymarketing specialists developto make channel systems

more effective.4. Understand how to develop

cooperative relationshipsand avoid conflictsinchannel systems.

5. Know how channel membersin vertical marketing systemsshift and share functionstomeet customer needs.

6. Understand the differences

between intensive, selective,and exclusive distribution.

7. Understand the important newterms.

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Strategy Decision Areas in Place

Exhibit 11-1

11-3

Type ofchannel

Type ofphysical distribution

facilities needed

How to managechannels

Middlemen/facilitators needed

Degree of marketexposure desired

IndirectDirect

Place objectives

Customerservice

level desired

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Why a Firm May Want to Use Direct Channels

Greater Control

Lower Cost

Value added subsequent to

production process

Direct contact withCustomer Needs

Quicker Response orChange in Marketing Mix

Suitable Middlemen NotAvailable

SomeReasonsfor ChoosingDirect Channels

11-4

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AccumulatingBulk-Breaking

AssortingSorting

Regrouping Activities

11-5

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Managing Channel Relationships

Role of Channel Captain

Common Objectives

Conflict Handling

Whole-Channel Product-Market Commitment

Choosing the Type of

Relationship

KeyIssues inChannel

Management

11-6

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Vertical Marketing Systems

Exhibit 11-3

11-7

Characteristics

Type of channel

Little ornone

Some togood

Fairly goodto good

Complete

NoneEconomicpower andleadership

ContractsOne

companyownership

Typicalinde-

pendentsMcDonalds Florsheim

GeneralElectric

Amount ofcooperation

TraditionalVertical marketing systems

Administered Contractual Corporate

Control maintainedby

Examples

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= number ofoutlets

Intensive

Selective

Exclusive

What Market

ExposureFits the

MarketingObjectives

11-8

Market Exposure

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PlaceChannel of DistributionDirect MarketingDiscrepancy of QuantityDiscrepancy of AssortmentRegrouping Activities

AccumulatingBulk-BreakingSortingAssorting

Traditional Channel SystemsChannel Captain

Vertical Marketing SystemsCorporate SystemsVertical IntegrationAdministered SystemsContractual Systems

Ideal Market ExposureIntensive DistributionSelective DistributionExclusive DistributionDual DistributionReverse Channels

Key Terms