ch 01 intro handouts

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Part I: Introduction

Chapter 1: Marketing Channels:Structure and Functions

MKTG 406 Pimentel


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Marketing Channel Defined

A set of interdependent organizationsinvolved in

the processof making a product or serviceavailable for use or consumption.


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Gatekeeper

Important asset of marketing strategy Differentiator Difficult to replicate

End-user satisfaction

Overall brand image Awareness of channel importance is low

Opportunity for competitive advantage Difficult to create and maintain channel

Difficult and costly to change Right the first time

Importance of Studying Marketing Channels


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Channel Development and Change

Demand-side factors Supply-side factors


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Demand-Side Factors

Facilitation of search

Adjustment for assortment discrepancy Sorting Accumulation Allocation (breaking bulk)

Assorting


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Supply-Side Factors

Routinization of transactions

Continuous replenishment programs (CRP) Reduction in number of contacts

Manufacturers

Wholesaler

Retailers

Manufacturers

Retailers


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Marketing Flows

Processes flow through the channel

Done at different points in time by differentchannel members


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Marketing Flows

The Eight Universal Marketing Channel Flows

1. Physical possession2. Ownership3. Promotion4. Negotiation

5. Financing6. Risking7. Ordering8. Payment

Flow of information


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Channel Members

Channel formatscombinations of channel

members Specialization

Third-party logistics (3PL)

Channel captain Manufacturer brands Private brands


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Channel Analysis Framework

CHANNEL DESIGN

Segmentation

Channel StructureSplitting the Workload

Degree of Commitment

Gap Analysis

CHANNEL IMPLEMENTATION

Channel Power Channel Conflict

Manage/Defuse Conflict

Channel Coordination

INSIGHTS FOR SPECIFIC CHANNEL INSTITUTIONS


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Segmentation

Splitting market into groups of end-users

Similar within groups Different between groups Based on demands for the outputs of the

marketing channel

Added value Service outputs


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Segmentation

Example: Segments of book end-users

Recreational readers University students

Convenience-oriented Price-oriented


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Selecting Target Segments

Those we can serve most profitably

Restrictions Managerial bounds Environmental bounds

Legal

Competitive benchmarks


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Channel Structure

1. Types of channel members

2. Identities of specific channel members3. Channel intensity: number of each type


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Splitting the Workload

Assign channel flows to channel members

Meet target segments service output demands Reliable Minimize total cost, while meeting service level


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Degree of Commitment

Transactional relationships

Pursue individual goals No guarantee of continued business

Alliances Enduring connections throughout companies

Pursue common goals Vertical integration

Own channel members Reasons

Channel members do not exist Company can handle flows as efficiently Channel member is not sufficiently committed

Can be done in degrees


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Gap Analysis

The difference between optimal

and actual channels Demand side gaps Service output demands are

not being met Undersupplied

Oversupplied Supply side gaps

At least one flow is costingtoo much

Lack of expertise Waste

Closing gaps is difficult andcostly


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Channel Power

Ability to control other channel members

Necessary to implement channel design May be used to optimize channel to benefit of all

channel members May be used to achieve own ends without regard

to other channel members


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Channel Conflict

Actions of channel members prevent channel

from achieving its goals Goal conflict Domain conflict Perceptual conflict


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Manage/Diffuse Conflict

Identify sources of conflict

Poor channel design Poor performance

Take action Exercise channel power


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Channel Coordination

Result of

Channel designed to meet service outputdemands of target end-user segments Application of channel power to ensure smooth

implementation of the channel design

Ongoing process


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Insights for Specific Channel Institutions

Retailers

Wholesalers Logistics firms Supply chain issues Franchises


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Key Terms

marketing channel

end-user sorting accumulation allocation

breaking bulk assorting continuous

replenishment

programs (CRP) marketing flows channel members channel captain

manufacturer

intermediary merchant wholesaler manufacturers

representatives

agents brokers specialized

intermediaries

internationalspecialists

channel design segmentation


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Key Terms

service outputs

channel structure channel intensity transactional

relationships

alliances vertical integration gap analysis demand side gaps

supply side gaps channel power channel conflict goal conflict

domain conflict

perceptual conflict retailers wholesalers logistics firms

supply chain franchises

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