1. B2B MKTG Chapter 12 Channel Relationships Vitale and Giglierano
2002 Edition
Vitale and Giglierano
Chapter 12
Channel Relationships
Prepared by John T. Drea, Western Illinois University

2. Basic Channel Terms
Direct Channel
Participants
Wholesalers, distributors, retailers, etc. who are part of the proactive marketing design of the channel
Ancillary Channel
Participants
Business and service providers who are necessary for the channel to function (trucking, JIT, 3PL, etc.)
Direct Channel
A channel in which the supplier markets and sells directly to the buying organization

3. Exhibit 12-1 Channels Can Create Efficiency
Direct: V x C transactions
Via reseller: V x C transactions V1 V2 V3 V4 C1 C2 C3 C4 V1 C1 C2 C3 C4 V2 RS V3 V4
V = Vendors C = Customers RS = Reseller

4. Economic Utility
Form
The quantity/mode of the product most preferred by the customer

5. Economic Utility
Form
The quantity/mode of the product most preferred by the customer
Time
The availability of the product when the customer needs it.

6. Economic Utility
Form
The quantity/mode of the product most preferred by the customer
Time
The availability of the product when the customer needs it.
Place
The availability of the product where it is needed. In B2B, it involves rapid/frequent product delivery.

7. Economic Utility
Form
The quantity/mode of the product most preferred by the customer
Time
The availability of the product when the customer needs it.
Place
The availability of the product where it is needed. In B2B, it involves rapid/frequent product delivery.
Possession
The process by which the customer obtains ownership or the right to use a product/service.

8. Exhibit 12-2b Marketing Channel Flows from Customer to Supplier

9. Why Do Some End Users Prefer Distributors? Distributors Can…
Provide fast delivery
Provide segment-base
product assortment
Provide local credit
Provide product information
Assist in buying decisions
Anticipate needs

10. Why Do Some Suppliers Prefer Distributors? Distributors Can…
Buy and hold inventory
Combine manufacturers’ outputs
Share credit risk
Share selling risk
Forecast market needs
Provide market information

11. Exhibit 12-5 A Value Network

12. Product Support and Delivery
Different target markets have different expectations of the total offering
User Training
Think about the different training needs
of corporate customers vs. consumers
Product Information
Dealers are likely to emphasize what
an offering can accomplish, rather than
how it can accomplish it
Product Support and Delivery
Institutional buyers expect more
than consumers.
Financing
Institutional buyers are likely to expect
suppliers/distributors to arrange credit.

13. The Physical Distribution Concept Focuses on Three Elements
Inventory
Management
Transportation
Warehousing
It is a balancing of cost and service.

14. Inventory Management Often the largest logistics cost.
Inventory management tools are important for reducing logistics costs.
While lower inventory levels result in lower costs, lower inventory levels may result in more frequent and costly transportation.

15. Transportation
Involves the choice of water, air, truck, rail, or pipeline.
Slower transportation methods usually have lower costs, but imply larger safety stocks and longer lead times.

16. Warehousing As inventory increases, so do warehousing costs.
Lowering inventory levels and warehousing costs can lead to stockouts.
Channels that focus on rapid movement of goods (as opposed to storage of large quantities) are likely to utilize distribution centers.

17. Channel Design Decisions
Through
marketing
intermediaries
or a direct
channel?
Intensity of
distribution issues:
Kinds of
channel partners
Structure of
channel flows
How competitive
advantage
can be built
One channel,
dual distribution or
multidistribution?

18. Factors Favoring the Use of Distributor Channels
Product requires
local stock.
Product is near
the end of its
product life cycle.
Customers are
widely dispersed.
Small product line,
unable to support
a direct sales force.
Factors Favoring the Use of Distributor Channels
Local repackaging,
sizing, or
fabrication
is required
Product is
somewhat generic.
Product has low
unit value.
Many
small buyers.

19. Factors not Favoring the use of Distributor Channels
Product is highly
customized.
Significant
missionary
selling is
required.
Factors not Favoring the use of Distributor Channels
Manufacturer
requires control
over product
application.
Product is new
or innovative.
Product is
technically
sophisticated.
Geographic
concentration of
large buyers.

20. Selecting & Caring for Distributors: Points to Remember
Train and support them
well and often, at both
your facilities and theirs.
Make calls on them.
Make calls with them.
Determine which distributor fits
your marketing plan goals.
Ask potential customers who they recommend.

21. Bases of Power in Marketing Channels
Soft Bases
of Power
Hard Bases
of Power
Expertise
Information
Reward
Coercion
Legitimate
Identification

22. New Types of Channels Affiliates Hubs
Someone with a special link on its web site that refers a viewer to a product or service supplier’s site. The affiliate downloads a special code from the supplier’s web site that allows the supplier to track referrals. A commission is paid for each referral.
Affiliates
An intermediate that brings buyers and sellers together to make a market. These can include catalog hubs, auction hubs, exchange hubs, and barter hubs.
Hubs