12-1 Chapter 12 Themes for Class Discussion Distribution Channel Decisions Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

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Presentation transcript:

12-1 Chapter 12 Themes for Class Discussion Distribution Channel Decisions Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

12-2 Are channel decisions important? Consider what consumers pay. Specialty store price: food item $10.00 Retailer gross margin (50%) 5.00 Price to retailer 5.00 Wholesaler gross margin (25%) 1.25 Selling price to wholesaler (revenue to manufacturer) $3.75 Note what the consumer pays for distribution: 62.5% of price paid!

12-3 Are costs different in lower cost channels like supermarkets? Supermarket price: similar item $5.00 Retailer gross margin (25%) 1.25 Price to retailer 3.75 Food broker commission (3%-5%).19 Revenue to manufacturer $3.56 More efficient, lower price, but the consumer still pays 29% for distribution!

12-4 So why do distribution channels exist? Sounds complicated and expensive!

12-5 For the Channels Portion of a Marketing Plan, There Are Two Key Sets of Decisions: Channel design decisions: what’s the optimal distribution channel structure?Channel design decisions: what’s the optimal distribution channel structure? Channel management decisions: how to win support and cooperation among channel members?Channel management decisions: how to win support and cooperation among channel members?

12-6 What must be decided regarding channel design?

12-7 Consider the Channel Design Options for a Consumer Product Producer Consumer Retailer BProducer Consumer Retailer Wholesaler CProducer Agents Wholesaler Retailer Consumer DConsumer AProducer EProducer Agents Retailer Consumer How should we decide which channel structure is best? Exhibit 12.5

12-8 Exhibit 12.6 Consider the channel options for industrial goods and services Producer Industrial Buyer Wholesaler BProducer Agent CProducer Agent Wholesaler D AProducer

12-9 Objectives for Channel Design Decisions Product availabilityProduct availability Meet customer service requirementsMeet customer service requirements Win promotional supportWin promotional support Obtain market informationObtain market information Cost effectivenessCost effectiveness FlexibilityFlexibility Can all these be met at once? Rarely if ever!

12-10 Exhibit Example of a Hybrid Marketing Channel Supplier Company Website & Sales Force WholesaleDistributor Company Help Line & Outside Service Centers Customer Demand Generation Physical Distribution Post-Sale Service

12-11 What must be accomplished regarding channel management?

12-12 Two main channel strategies: how do they work? How does a “pull”strategy work?How does a “pull”strategy work? How does a “push” strategy work?How does a “push” strategy work? Which is better when?

12-13 What incentives may be used to motivate channel performance?