©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 2 The Channel Participants Part 1: Marketing Channel Systems

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Major Participants in Marketing Channels 1

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Why shift distribution tasks to intermediaries? 2 Producers & Manufacturers Lack expertise Lack economies of scale Intermediaries Spread high fixed costs over large quantities of diverse products Achieve economies of scope and economies of scale

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Major Types of Wholesalers 3

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Merchant Wholesalers Specialize in Performance Distribution Tasks Operate at high levels of effectiveness and efficiency Average cost curves lower than those for their suppliers 1.Provide market coverage 2.Make sales contacts 3.Hold inventory 4.Process orders 5.Gather market information 6.Offer customer support 5

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Merchant Wholesalers’ Distribution Tasks Serve Customers 1. Assure product availability 2.Provide customer service 3.Extend credit & financial assistance 4.Offer assortment convenience 5.Break bulk 6.Help customers with advice & technical support

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Agent Wholesalers’ Distribution Tasks  Market coverage  Sales contacts  Order processing  Marketing Information  Product availability  Customer services Manufacturers’, Selling Agents, Brokers

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Owned & operated by manufacturers Distribute manufacturer’s products at wholesale Some wholesale allied & supplementary products purchased from other manufacturers. Manufacturers’ Sales Branches & Offices Separated from manufacturing plants

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Retail Structure By Ownership of Establishment By Kind of Business (Merchandise Handled) By Size of Establishment By Degree of Vertical Integration By Type of Relationship with other Business Organizations By Method of Consumer Contact By Type of Location By Type of Service Rendered By Legal Form of Organization By Management Organizations or Operational Technique Alternative Bases for Classifying Retailers 6

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Distribution Tasks Performed by Retailers Offer manpower & physical facilities close to consumers’ residences Provide personal assistance to help sell products Interpret and relay consumer demand Divide large quantities into consumer-sized lots Offer storage Remove risk by ordering in advance of the season Offer manpower & physical facilities close to consumers’ residences Provide personal assistance to help sell products Interpret and relay consumer demand Divide large quantities into consumer-sized lots Offer storage Remove risk by ordering in advance of the season

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Retailers’ Growing Power in Marketing Channels 9 Increased size & buying power Become power retailers & category killers Application of advanced Technologies Information technology & the Internet; threetailing Use of modern marketing strategies Modern techniques; relationship marketing

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Facilitating Agencies in Marketing Channels Transportation agencies Storage agencies Order processing agencies Advertising agencies Financial agencies Insurance companies Marketing research firms 10