1. ROAD MAP: Previewing the Concepts
Chapter 1
ROAD MAP: Previewing the Concepts
Explain why companies use distribution channels and discuss the functions these channels perform.
Discuss how channel members interact and how they organize to perform the work of the channel.
Identify the major channel alternatives open to a company.
Explain how companies select, motivate, and evaluate channel members.
Discuss the nature and importance of marketing logistics and supply chain management.

2. Marketing or Distribution Channel
Chapter 1
Marketing or Distribution Channel
A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

3. Channel of Distribution
Chapter 1
Channel of Distribution
eGO faces challenges in establishing a channel of distribution for its product.
Click the picture above to play video

4. Distribution in Action
Chapter 1
Distribution in Action
FedEx’s creative and imposing distribution system made it a market leader in express delivery.

5. How Channel Members Add Value
Chapter 1
How Channel Members Add Value
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Offers the firm more than it can achieve on its own through the intermediaries:
Contacts
Experience
Specialization
Scale of operation

6. How a Distributor Reduces the Number of Channel Transactions
Chapter 1
How a Distributor Reduces the Number of Channel Transactions

7. Chapter 1
Channel Functions
These functions should be assigned to the channel member who can add the most value for the cost
Information
Negotiation
Promotion
Physical
Distribution
Contact
Financing
1). Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.
2). Promotion:
3). Contact: with prospective buyers.
4). Matching—buyers with sellers.
5). Negotiation so ownership can take place.
6). Others include:
a). Physical distribution (such as transportation and storage).
b). Financing.
c). Risk taking.
Note: The question is not whether these functions must be performed but rather who will perform them.
Matching
Risk Taking

8. Consumer and Business Channels
Chapter 1
Consumer and Business Channels

9. Channel Behavior The channel will be most effective when:
Chapter 1
Channel Behavior
The channel will be most effective when:
each member is assigned tasks it can do best.
all members cooperate to attain overall channel goals.
If this does not happen, conflict occurs:
Horizontal Conflict occurs among firms at the same level of the channel (e.g., retailer to retailer).
Vertical Conflict occurs between different levels of the same channel (e.g., wholesaler to retailer).
Some conflict can be healthy competition.

10. Chapter 1
Channel Conflict
When it decided to sell its familiar containers at retail through Target stores, Tupperware avoided conflicts with its army of in-home sales consultants by inviting them into the stores to demonstrate the products.

11. Conventional vs. Vertical Marketing System
Chapter 1

12. Vertical Marketing System (VMS)
Chapter 1
Vertical Marketing System (VMS)
A distribution channel structure in which producers, wholesalers, and retailers act as a unified system
One channel member owns the other, has contracts with them, or has so much power that they all cooperate.

13. Types of Vertical Marketing Systems
Corporate VMS
Common Ownership at Different
Levels of the Channel (e.g., Sears)
Chapter 1
Types of Vertical Marketing Systems
Contractual VMS
Contractual Agreements Among
Channel Members (e.g., ACE Hardware)
Control
High
Administered VMS
Leadership is Assumed by One or
a Few Dominant Members (e.g., Kraft)
Low

14. Franchise Organization
Chapter 1
Franchise Organization
Manufacturer-Sponsored Retailer Franchise System
Ford and its independent franchised dealers
Manufacturer-Sponsored Wholesaler Franchise System
Coca-Cola’s licensed bottlers
Service-Firm Sponsored Retailer Franchise System
McDonald’s, Avis, and Holiday Inn
1]. Manufacturer-sponsored retailer franchise system (automobile industry).
2]. Manufacturer-sponsored wholesaler franchise system (soft-drink industry).
3]. Service-firm-sponsored retailer franchise system (auto-rentals, fast food, hotels business).

15. Innovations in Marketing Systems
Chapter 1
Innovations in Marketing Systems
Horizontal Marketing System
Hybrid Marketing System
Two or more companies at one channel level join together to follow a new marketing opportunity.
Example: Banks in grocery stores
A single firm sets up two or more marketing channels to reach one or more customer segments.
Example: Retailers and catalogs

16. Hybrid Marketing Channel
Chapter 1
Hybrid Marketing Channel

17. Changing Channel Organization
Chapter 1
Changing Channel Organization
Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones.

18. Chapter 1
Disintermediation
Travel supersites such as Expedia, Travelocity, Priceline, Hotels.com, and Orbitz have threatened the very existence of traditional travel agents.

19. Channel Design Decisions
Chapter 1
Channel Design Decisions
Analyzing Consumer Needs
Setting Channel Objectives
Identifying Major Alternatives
Types of intermediaries
Number of intermediaries
Responsibilities of intermediaries

20. Types of Intermediaries
Chapter 1
Types of Intermediaries
Company sales force
Manufacturer’s agency
Industrial distributors

21. Number of Intermediaries
Chapter 1
Number of Intermediaries
Intensive distribution
Exclusive distribution
Selective distribution

22. Selective Distribution
Chapter 1
Selective Distribution
Luxury car makers sell exclusively through a limited number of dealerships. Such limited distribution enhances the car’s image and generates strong dealer support.

23. Evaluating the Major Alternatives
Chapter 1
Evaluating the Major Alternatives
Economic Criteria:
A company compares the likely sales, costs, and profitability of different channel alternatives.
Control Issues:
How and to whom should control be given?
Adaptive Criteria:
Consider long-term commitment vs. flexibility.

24. Channel Management Decisions
Selecting Channel Members
Chapter 1
Channel Management Decisions
Managing & Motivating Channel Members
Evaluating Channel Members
Selecting Channel Members
The first decision that must be reached is to select the channel members. The fact is that some manufacturers vary in their ability to attract qualified intermediaries. At the other extreme is the manufacturer with whom everyone wants to work. The best approach is to determine what characteristics are necessary, and be able to distinguish the better intermediaries.
Motivating Channel Members
Once selected, intermediaries must be continuously motivated to do their best. They must not only sell through them but to and with them as well. Positive and negative measures are possible—positive is preferred.
1). Many companies are now developing partner relationship management systems to coordinate their whole-channel efforts.
Evaluating Channel Members
Finally, the producer must regularly check on the intermediary’s performance against set standards. Periodic re-qualification is advised. Be sensitive to the needs of dealers and they will be sensitive to the firm’s needs as well.

25. Public Policy and Distribution Decisions
Chapter 1
Public Policy and Distribution Decisions
Exclusive distribution
Exclusive dealing
Exclusive territorial agreements
Tying agreements

26. Logistics and Supply Chain Management
Chapter 1
Logistics and Supply Chain Management
Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit.
Includes:
Outbound distribution
Inbound distribution
Reverse distribution

27. Supply Chain Management
Chapter 1
Supply Chain Management

28. Major Logistics Functions
Chapter 1
Major Logistics Functions
Warehousing
Inventory management
Transportation
Logistics information management

29. Warehousing How many, what types, and where? Storage warehouses
Chapter 1
Warehousing
How many, what types, and where?
Storage warehouses
Distribution centers
Automated warehouses

30. Chapter 1
Inventory Management
Must balance between too much and too little inventory.
Just-in-time logistics systems
RFID, AutoID, or Smart Tag technology
Click Here to Find Out All About RFID

31. Chapter 1
Logistics Technology
In the not-too-distant future, AutoID or “smart tag” technology could make the entire supply chain—which accounts for nearly 75% of a product’s cost—intelligent and automated.

32. Transportation Trucks Railroads Water carriers Pipelines Air Internet
Chapter 1
Transportation
Trucks
Railroads
Water carriers
Pipelines
Air
Internet
Intermodal transportation

33. Intermodal Transportation
Chapter 1
Intermodal Transportation

34. Intermodal Transportation
Chapter 1
Intermodal Transportation

35. Intermodal Transportation
Chapter 1
Intermodal Transportation

36. Intermodal Transportation
Chapter 1
Intermodal Transportation

37. Intermodal Transportation
Chapter 1
Intermodal Transportation

38. Integrated Logistics Management
Chapter 1
Integrated Logistics Management
The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system.
Involves:
Cross-functional teamwork inside the company
Building logistics partnerships
Third-party logistics

39. Chapter 1
Third Party Logistics
Many companies are now outsourcing logistics tasks to companies like Ryder Integrated Logistics. Here, Ryder describes a system it designed to keep Friendly’s refrigerated trucks on the road. “Thanks to Ryder, Friendly’s doesn’t have to worry about breakdowns. Or meltdowns.”

40. Rest Stop: Reviewing the Concepts
Chapter 1
Rest Stop: Reviewing the Concepts
Explain why companies use distribution channels and discuss the functions these channels perform.
Discuss how channel members interact and how they organize to perform the work of the channel.
Identify the major channel alternatives open to a company.
Explain how companies select, motivate, and evaluate channel members.
Discuss the nature and importance of marketing logistics and integrated supply chain management.

41. Q: A retailing operation that depends upon handy location and long hours to attract customers to its limited line of frequently purchased products is a:
1. specialty store. 
2. department store. 
3. superstore. 
4. convenience store.
AK, 7e – Chapter 11

42. Q: Kar Krazy, an auto parts category killer, has just opened in your home town. Which of the following types of stores would most likely survive Kar Krazy’s assault on the market?
1. An auto parts department store that offers a little of everything 
2. A small store that caters to owners of high-performance sports cars 
3. A small store that sells parts for less than Kar Krazy 
4. A small self-service parts shop
AK, 7e – Chapter 11

43. Q: You prefer to shop for underwear, socks, and other goods at a store in which the staff simply keeps the shelves stocked and assumes you’re there to locate, compare, and select your items on your own. This is what sort of retailer?
1. Limited-service retailer 
2. Specialty store 
3. Full-service retailer 
4. Self-service retailer
AK, 7e – Chapter 11

44. Q: A _______ is a group of retail businesses planned, developed, owned, and managed as a unit.
1. power center 
2. shopping center 
3. central business district 
4. strip mall
AK, 7e – Chapter 11

45. Q: You want to open a coffee bar that stands a chance of competing with Starbucks, and you must consider product assortment and services. These entail making all the following decisions except:
1. what will be the general atmosphere of your establishment. 
2. where and how much you will advertise. 
3. what customer service training you will provide for employees. 
4. the types and amounts of coffee you will serve.
AK, 7e – Chapter 11

46. Q: Bloomingdale’s is known for running spectacular shows featuring goods from a certain country, such as India or China. These shows are examples of:
1. service mix. 
2. store atmosphere. 
3. product assortment. 
4. country range.
AK, 7e – Chapter 11

47. Q: The ________ concept suggests that many new forms of retailing begin as low-margin, low-price, low-status operations, which take the place of other such retailers who have, over time, added services and moved upscale.
1. retail life cycle 
2. wheel-of-retailing 
3. scrambled merchandising 
4. merchant wholesaling
AK, 7e – Chapter 11

48. Q: Which of the following is not a current retailing trend?
1. The demise of the department store 
2. Online retailing 
3. Global retailing 
4. The rise of megaretailers
AK, 7e – Chapter 11

49. Q: Which of the following middlemen takes title to the goods they are selling?
1. Agents 
2. Brokers 
3. Merchant wholesalers 
4. Cash-and-carry wholesalers
AK, 7e – Chapter 11

50. Q: Which of the following services do wholesalers provide to retailers?
1. Retail pricing 
2. Accounting services 
3. Online transactions 
4. All of the above
AK, 7e – Chapter 11

51. Q: Which of the following is not a likely trend in the wholesaling industry?
1. Geographic expansion of operations 
2. Vertical integration 
3. Increase in services provided 
4. Increase in the number of wholesalers
AK, 7e – Chapter 11

52. EXAMPLES of what you could do. PLS
EXAMPLES of what you could do. PLS. DO NOT DO MORE THAN ONE OF ANY OF THESE: Radio Commercial TV commercial Magazine Ad Newspaper AD Outdoor Ad Direct Mail Piece Point-of-Purchase Display Brochure Internet Ad Press Release Specialty Advertising Item like: A refrigerator * * Coupons Premiums such as Refrigerator Magnet, Key Chain, or some other type of inexpensive item Sales Literature for Sales Representatives Newspaper Inserts Self-liquidating Premium: Example: Bud Light Sports Bag which customer buys at a reduced price if he/she buys a case of Bud Light.
AK, 7e – Chapter 11 52