Channels of Distribution Chapter 14 Chapter One Marketing’s Role in the Global Economy Channels of Distribution McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Marketing’s Role in the Global Economy Chapter Goals Chapter One Marketing’s Role in the Global Economy Nature and importance of middlemen and distribution channels Direct sales to retailers Decisions in designing a channel Major channels for goods and services Vertical marketing systems Choosing specific channels and middlemen Intensity of distribution Conflict and control within channels Legal considerations in channels McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Middlemen Middlemen A business firm that renders services directly related to the sale/purchase of a product as it flows through from producer to consumer You can eliminate middlemen, but not the essential distribution activities they perform

Distribution Channels People and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user Final Consumer Or Business User Producers Middlemen

Middleman Activities

Middleman Activities

Major Channels of Distribution

Vertical Marketing Systems

Choice of Channels: Market Type of Market Number of potential customers Geographic concentration Order size

Choice of Channels: Product Perishability Unit Value Technical Nature

Choice of Channels: Middleman Services provided by middlemen Availability of desired middlemen Producer’s and middlemen’s policies

Choice of Channels: Company Desire for channel control Services provided by seller Ability of management Financial resources

Intensity of Distribution

Conflict in Channels Horizontal Different types Middlemen of middlemen of the same type Different types of middlemen on the same level Retailer

Conflict in Channels Vertical Producer vs. Wholesaler Producer vs. Retailers

Who Controls the Channels? Expertise Sanctions Rewards

Channel as Partnership Cooperation Collaboration Coordination Relationship Marketing

Legal Considerations Exclusive Tying dealing contracts Exclusive territory Refusal to deal

Marketing’s Role in the Global Economy Key Terms and Concepts Chapter One Marketing’s Role in the Global Economy Middlemen Merchant middlemen Agent middlemen Disintermediation Distribution channel Gray marketing Direct distribution Indirect distribution Multiple distribution channels Vertical marketing system Corporate vertical marketing system Contractual vertical marketing system Administered vertical marketing system Intensity of distribution Intensive distribution Selective distribution Exclusive distribution Channel conflict Chargeback Horizontal conflict Scrambled merchandising McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Marketing’s Role in the Global Economy Key Terms and Concepts Chapter One Marketing’s Role in the Global Economy Vertical conflict Slotting fee Channel control Channel power Exclusive dealing Tying contract Refusal to deal Exclusive-territory policy McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. For use only with Perreault and McCarthy texts. © 2002 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin