1. Marketing Channel Systems
Part 1
Marketing Channel Systems

2. Primer on “The Basics”
What is Marketing?

3. Primer on “The Basics” What is Marketing?
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. (Lusch and Marshall 2004)
Competition for a Differential Advantage (Alderson 1957)

4. What is the Marketing Concept?
Primer on “The Basics”
What is the Marketing Concept?
A management philosophy which advocates that a business organization (or channel):

5. What is the Marketing Concept?
Primer on “The Basics”
What is the Marketing Concept?
A management philosophy which advocates that a business organization (or channel):
Exists to identify and satisfy the needs of its customers (i.e., customer orientation)
That a customer orientation is accomplished through an integrative effort throughout the firm or channel (i.e., integrated effort)
That the firm’s (or channel’s) focus should be long-term and seek to provide a satisfactory return on owner’s investment (ROI) (i.e., long-term profit orientation)

6. What are the Eight (8) General Marketing Functions?
Primer on “The Basics”
What are the Eight (8) General Marketing Functions?

7. What are the Eight (8) General Marketing Functions?
Primer on “The Basics”
What are the Eight (8) General Marketing Functions?
Buying
Selling
Storing
Transporting
Sorting
Financing
Information Gathering
Risk Taking

8. Marketing Channels Perform?
Primer on “The Basics”
What Purpose do
Marketing Channels Perform?

9. Marketing Channels Perform?
Primer on “The Basics”
What Purpose do
Marketing Channels Perform?
Make products and services conveniently available to customers when, where, and how they want them in order to satisfy demand.
The farmer, egg, & grocery store example.

10. Marketing Channel Concepts
Chapter 1
Marketing Channel Concepts

11. Why the growing importance of marketing channels?
Objective 1: 1
Why the growing importance of marketing channels?
1. The explosion of information technology and
E-commerce
2. A greater difficulty in gaining a sustainable
competitive advantage
3. The growing power of distributors, especially
retailers in marketing channels
4. The need to reduce distribution costs

12. The explosion of information technology and E-commerce1.
2. A greater difficulty in gaining a sustainable competitive
advantage
3. The growing power of distributors, especially retailers
in marketing channels
4. The need to reduce distribution costs 1
The prediction:
Disintermediation — reduction of number of intermediaries
Yahoo!
eBay
Amazon.com
The reality:
Reintermediation—evolution of a new type of intermediary
E-commerce is more an evolution than a revolution in marketing.

13. The explosion of information technology and E-commerce1.
2. A greater difficulty in gaining a sustainable competitive
advantage
3. The growing power of distributors, especially retailers
in marketing channels
4. The need to reduce distribution costs 1

14. A greater difficulty in gaining a sustainable competitive advantage1
The explosion of information technology and E-
commerce 2.
The growing power of distributors, especially retailers in
marketing channels
The need to reduce distribution costs
A greater difficulty in gaining a sustainable competitive advantage
Place (distribution), or Marketing
Channel Strategy
Sustainable competitive advantage
Potential for gaining
competitive advantage
because place is more
difficult for competitors
to copy

15. The growing power of distributors1
The explosion of information technology and E-commerce
A greater difficulty in gaining a sustainable competitive advantage 3.
The need to reduce distribution costs
The growing power of distributors
Power retailers as gatekeepers of consumer markets
Act as buying agents for customers rather than
as selling agents for manufacturers

16. The need to reduce distribution costs1
The explosion of information technology and E-commerce
A greater difficulty in gaining a sustainable competitive advantage
The growing power of distributors 4.
The need to reduce distribution costs
Marketing channels are the most recent target for
reducing distribution costs.
The focus is on channel structure and management.

17. What is a marketing channel?
Objective 2: 1
What is a marketing channel?
Outside the firm
Firm involved in negotiatory functions
Management’s involvement in the process
External contactual organization that management operates to achieve its distribution objectives
Goals that change, causing variations
in contactual organizations involved

18. What is a channel manager?1
What is a channel manager?
Anyone in a firm or organization who is involved in marketing channel decision making

19. Objective 3: 1
How does marketing channel strategy relate to the rest of the marketing mix?
Marketing Mix or
the four Ps
Challenges
Product
Limited ability to gain and hold competitive advantage
Price
Price wars erode profitability & provide unstable basis for sustaining competitive advantage
Promotion
Expensive and short-lived
Place (Distribution)
Marketing channels support & enhance other Ps to meet demands of target markets

20. The change of focus to channel strategy1
The change of focus to channel strategy
Creates competitive advantage with long-term viability
Builds strong relationships between manufacturers and channel members
Based on trust, confidence,
and people power

21. Channel Strategy and Logistics Management1
Channel Strategy and Logistics Management
Parts of the “Place” or “Distribution” Variable
• Concerned with entire process of starting and operating contactual organization
• Formulated before logistics management
Focused specifically on providing product availability at appropriate time & place

22. 5 Primary Marketing Channel Flows1
Objective 4:
5 Primary Marketing Channel Flows
Product Flow
Negotiation Flow
Ownership Flow
Information Flow
Promotion Flow

23. Transportation Company*1
Product Flow
Manufacturer
Transportation Company*
Wholesalers
Retailers
Consumers

24. 1
Negotiation Flow
Manufacturer
Wholesalers
Retailers
Consumers

25. Ownership Flow 1
Manufacturer
Wholesalers
Retailers
Consumers

26. Transportation Company
Information Flow 1
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers

27. Promotion Flow 1 Manufacturer Advertising Agency Wholesalers Retailers
Consumers

28. Distribution through intermediaries
Objective 5: 1
Distribution through intermediaries
Factors that determine the role of intermediaries
Technology the Internet
Economic Specialization &
Considerations Division of Labor
Contactual Efficiency

29. Channel Structure v. Ancillary Structure
Objective 6: 1
Channel Structure v. Ancillary Structure
Channel Structure
The group of channel members to which a
set of distribution tasks has been allocated
Why are single-channel
structures currently
the exception?
Ancillary Structure
The group of institutions that
assist channel members in performing
distribution tasks
Why is managing the ancillary structure most likely to be less complex than managing the channel structure?
Note that when the text talks about single channel structure, it’s not only talking about width, but also dual distribution. Therefore make sure to briefly discuss width and dual distribution, how width allows you to reach multiple targets by varying the number and types of wholesalers and retailers that a product flows through, and finally discuss how dual distribution can not only have potential positive effects like increasing brand image, but also how it can cause conflicts where the retailer and wholesaler feel that they are not only a customer of the manufacturer, but also a competitor. Then end on the Calloway Golf example from our text where they do sell clubs over the Net from their site, but to avoid angering their retailers and wholesalers, they require that the clubs be picked up from the retailer and that the retailer records the sale.