1. The Environment of Marketing Channels

2. Marketing Channel and the Environment
Marketing channels develop and operate in a complex environment that is continually changing.
Channel managers must therefore have an understanding of the environment and how it can influence channel management in order to plan effective marketing channel strategies for meeting these changes successfully.

3. Major Environment Economic environment Competitive environment
Sociocultural environment
Technological environment
Legal environment

4. Impact of Environment in a Marketing Channel Context
Economic
Sociocultural
Competitive
Legal
Technological
Producers and manufacturers
Locus of channel management
Member participants
Intermediaries
Target markets
Nonmember participants
Facilitating agencies
Channel manager’s analysis of environmental impact must include all channel participants

5. 1. Economic Environment
The most obvious and pervasive category of variables affecting all members and participants in the channel.

6. 1. Economic Environment Major economic phenomena:
Recession: 2 consecutive quarters of decline in the Gross Domestic Product (GDP), any period in which the GDP is stagnant or increasing very slowly is often referred to as ‘recessionary” or at least and “economic slowdown.”

7. 1. Economic Environment Major economic phenomena:
Inflation: Inflation is the rate of increase in prices for goods and services.  When the price level rises, each unit of currency buys fewer goods and services.
There are a number of different measures of inflation in use. The most frequently quoted and most significant ones are the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).

8. 1. Economic Environment Major economic phenomena:
Deflation: When the overall price level decreases so that inflation rate becomes negative, it is called deflation. It is the opposite of the often-encountered inflation.

9. 1. Economic Environment Major economic phenomena:
Other economic issues:
Trade deficit
National debt/ budget deficit
High interest rate

10. 2. Competitive Environment
Types of competition:
Horizontal competition
Intertype competition
Vertical competition
Channel system competition

11. 1) Horizontal (Intratype) Competition
Competition between firms of the same type. M M W W R R

12. 2) Intertype Competition
Competition between different types of firms at the same channel level. M M W W R R

13. 3) Vertical Competition
Competition between channel members at different levels in the channel. M W R

14. 4) Channel System Competition
Complete channels competing with other complete channels. M M W W R R

15. 3. Sociocultural Environment
Age patterns of population
Changing ethnic mix
Educational trends
Family or household structure
Changing role of women

16. 3. Sociocultural Environment
Population Age
Patterns
Ethnic Mix
Educational Trends
Family or Household
Structure
U.S. pop. Becoming
both younger &
older
# of minority-owned
businesses
Levels = people
more demanding
Smaller & more varied
Role of Women
# = changing
shopping needs

17. 4. Technological Environment
Scanners
Computerized inventory management
& Portable computers
Help retailers & wholesalers closely monitor success or
failure of products they handle

18. 4. Technological Environment
Electronic data interchange
EDI – Electronic
Data
Interchange
= Enhanced
Distribution
Efficiency
• Links together channel
information systems
• Provides real-time responses
• Enhanced by Internet

19. 5. Legal Environment The set of laws that impact marketing channels
• Continually evolving
• Affected by changing values, norms, politics,
& precedents
• Knowledge of basics helps channel manager
avoid serious & costly legal problems

20. • Dual Distribution, or multi-channel distribution
5. Legal Environment
Legal issues in channel management
• Dual Distribution, or multi-channel distribution
Producer or manufacturer uses 2 or more different channel structures for distributing the same product
Exclusive Dealing
Supplier requires its channel members to sell only its products or to refrain from selling directly to competitive suppliers
•Full-Line Forcing
Supplier requires channel members to carry a full-line of its products in order to sell any particular products in supplier’s line

21. • Price Discrimination
5. Legal Environment
Legal issues in channel management
• Price Discrimination
Supplier sells at different prices to the same class of channel members
Price Maintenance
Supplier dictates prices charged by channel members to their customers
• Refusal to Deal
Supplier has right to refuse to deal with whomever they want as channel members

22. • Vertical Integration
5. Legal Environment
Legal issues in channel management
• Resale Restrictions
Manufacturer attempts to stipulate to whom and in what geographical market channel members may resell the manufacturer’s products
Tying Agreements
Supplier sells a product to a channel member on condition that the channel member also purchase another product
• Vertical Integration
Firm owns and operates organizations at other levels of the distribution channel