1. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 1 Lamb, Hair, McDaniel CHAPTER 13 Marketing Channels © EIGHTFISH/Stone/Getty Images

2. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 2 Marketing Channels LO 1 a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer. A Marketing Channel is…

3. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 3 Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency LO 1

4. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 4 Specialization and Division of Labor  Creates greater efficiency  Provides lower production costs  Achieves economies of scale  Aids producers who lack resources to market directly  Builds good relationships with customers LO 1

5. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 5 Overcoming Discrepancies 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. LO 1

6. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 6 Overcoming Discrepancies 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. LO 1

7. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 7 LO 1 Exhibit 13.1 How Marketing Channels Reduce the Number of Required Transactions

8. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 8 Channel Intermediaries Retailer A channel intermediary that sells mainly to customers. A channel intermediary that sells mainly to customers. Merchant Wholesaler Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel members. LO 2

9. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 9 Channel Intermediaries Retailers Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods LO 2

10. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 10 Factors Suggesting Type of Wholesaling Intermediary to Use Product characteristics Buyer considerations Market characteristics LO 2

11. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 11 Factors Suggesting Type of Wholesaling Intermediary to Use FactorMerchant Wholesalers Agents/ Brokers Nature of productStandardNonstandard, custom Complexity of productSimpleComplex Product’s gross marginHighLow Frequency of orderingFrequentInfrequent Time between order and receipt of shipment Shorter lead time Longer lead time Number of buyersManyFew Concentration of buyersDispersedConcentrated LO 2

12. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 12 Logistics The efficient and cost- effective forward and reverse flow and storage of goods, services, and related information, into through, and out of channel member companies. LO 2

13. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 13 LO 3 Exhibit 13.3 Marketing Channels for Consumer Products

14. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 14 LO 3 Exhibit 13.4 Channels for Business and Industrial Products

15. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 15 Business-to-Business Exchanges on the Internet Companies drop the intermediary from the supply chain “Private exchanges” with select suppliers automate the supply chain LO 3 The Internet has forced traditional distributors to expand their model.

16. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 16 Alternative Channel Arrangements Multiple channels Strategic channel alliances Nontraditional channels LO 3

17. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 17 Channel Strategy Decisions FactorsAffectingChannelChoiceFactorsAffectingChannelChoice Producer Factors Product Factors Market Factors Exclusive Distribution Selective Distribution Intensive Distribution Level of Distribution Intensity LO 4

18. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 18 BenefitsHazards Arm’s Length Relationship Fulfills a one time or unique need; low involvement/risk Parties unable to develop relationship; low trust level Cooperative Relationship Formal contract without capital investment/long-term commitment; “happy medium” Some parties may need more relationship definition Integrated Relationship Closely bonded relationship; explicitly defined relationships High capital investment; any failure could affect every channel member LO 5 Types of Channel Relationships

19. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 19 Channel Power, Control, and Leadership Channel Power Channel Power A channel member’s capacity to control or influence the behavior of other channel members A channel member’s capacity to control or influence the behavior of other channel members Channel Control Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior A situation that occurs when one marketing channel member intentionally affects another member’s behavior Channel Leader A member of a marketing channel that exercises authority/power over the activities of other members A member of a marketing channel that exercises authority/power over the activities of other members LO 6

20. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 20 Channel Conflict Channel Conflict Channel Conflict A clash of goals and methods between distribution channel members LO 6 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

21. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 21 Channels and Distribution Decisions for Global Markets Global Channel Development Global Channel Development Channel structure and type differ Gray marketing channels Distribute directly or through foreign partners LO 7

22. Chapter 13 Copyright ©2012 by Cengage Learning Inc. All rights reserved 22 Assignment CurrentTV Case In groups of 5-7, discuss the answers to the questions given in the case.