1. 1 Copyright ©2009 by Cengage Learning Inc. All rights reserved Designed by Eric Brengle B-books, Ltd. CHAPTER 13 Prepared by Amit Shah Frostburg State University Marketing Lamb, Hair, McDaniel 10 Marketing Channels

2. Copyright ©2009 by Cengage Learning Inc. All rights reserved Marketing Channels 2 Marketing Channel Marketing Channel LO I A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.

3. Copyright ©2009 by Cengage Learning Inc. All rights reserved Specialization and Division of Labor 3 LO I  Creates greater efficiency  Provides lower costs  Achieves economies of scale  Aids producers who lack resources to market directly  Builds good relationships with customers

4. Copyright ©2009 by Cengage Learning Inc. All rights reserved Overcoming Discrepancies 4 LO I Discrepancy of Quantity Discrepancy of Quantity Discrepancy of Assortment Discrepancy of Assortment The difference between the amount of product produced and the amount an end user wants to buy. The difference between the amount of product produced and the amount an end user wants to buy. The lack of all the items a customer needs to receive full satisfaction from a product or products. The lack of all the items a customer needs to receive full satisfaction from a product or products.

5. Copyright ©2009 by Cengage Learning Inc. All rights reserved Overcoming Discrepancies 5 LO I Temporal Discrepancy Temporal Discrepancy Spatial Discrepancy Spatial Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets. The difference between the location of a producer and the location of widely scattered markets.

6. Copyright ©2009 by Cengage Learning Inc. All rights reserved Providing Contact Efficiency 6 LO I

7. Copyright ©2009 by Cengage Learning Inc. All rights reserved Channel Intermediaries 7 LO 2 Retailers Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods

8. Copyright ©2009 by Cengage Learning Inc. All rights reserved Channel Functions Performed by Intermediaries 8 LO 2 Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions Logistical Functions

9. Copyright ©2009 by Cengage Learning Inc. All rights reserved Logistics 9 LO 2 Logistics The efficient and cost- effective forward and reverse flow as well as storage of goods, services, and related information, into, through, and out of channel member companies.

10. Copyright ©2009 by Cengage Learning Inc. All rights reserved 10 Producer Consumers Retailers Wholesalers Agents or BrokersWholesalerChannelRetailerChannelDirectChannelAgent/BrokerChannel Channels for Consumer Products LO 3

11. Copyright ©2009 by Cengage Learning Inc. All rights reserved 11 LO 3 Channels for Business Products Producer Industrial User DirectChannel Producer Govt. BuyerDirectChannel Producer Industrial User Industrial Distributor Agents or Brokers Agents or BrokersAgent/BrokerChannel Industrial Distributor Agent/Broker Industrial Channel

12. Copyright ©2009 by Cengage Learning Inc. All rights reserved Alternative Channel Arrangements 12 LO 3 Multiple channels Strategic channel alliances Nontraditional channels

13. Copyright ©2009 by Cengage Learning Inc. All rights reserved Market Factors 13 LO 4 Market Factors That Affect Channel Choices Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial Customer Consumer or Industrial Customer Size of market Geographic location

14. Copyright ©2009 by Cengage Learning Inc. All rights reserved Product Factors 14 LO 4 Product Factors That Affect Channel Choices Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price

15. Copyright ©2009 by Cengage Learning Inc. All rights reserved Producer Factors 15 LO 4 Producer Factors That Affect Channel Choices Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control

16. Copyright ©2009 by Cengage Learning Inc. All rights reserved Levels of Distribution Intensity 16 LO 4 Intensive Achieve mass market selling. Convenience goods. Many Selective Exclusive Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment. Several One Intensity Level Objective Number of Intermediaries

17. Copyright ©2009 by Cengage Learning Inc. All rights reserved Arm’s Length, Integrated, and Cooperative 17 LO 5 Arm’s Length Relationship Arm’s Length Relationship A relationship between companies that is loose, characterized by low Relational investment and trust, and usually taking the form of a series of discrete transactions with no/low expectation of future interaction or service. A relationship between companies that is loose, characterized by low Relational investment and trust, and usually taking the form of a series of discrete transactions with no/low expectation of future interaction or service. Integrated Relationship Integrated Relationship A relationship between companies that is tightly connected, with linked processes across and between firm boundaries, and high levels of trust and inter-firm commitment. A relationship between companies that is tightly connected, with linked processes across and between firm boundaries, and high levels of trust and inter-firm commitment.

18. Copyright ©2009 by Cengage Learning Inc. All rights reserved Channel Conflict and Partnering 18 LO 5 Cooperative Relationship Cooperative Relationship A relationship between companies that takes the form of informal partnership with moderate levels of trust and information sharing as needed to further each company’s goals. A relationship between companies that takes the form of informal partnership with moderate levels of trust and information sharing as needed to further each company’s goals.

19. Copyright ©2009 by Cengage Learning Inc. All rights reserved Channel Conflict Conflicts may occur if channel members: Have conflicting goals Fail to fulfill expectations of other channel members Have ideological differences Have different perceptions of reality 19 LO 6

20. Copyright ©2009 by Cengage Learning Inc. All rights reserved Channels and Distribution Decisions for Services 20 LO 8 Minimizing wait times Managing service capacity Improving service delivery