1. 13-1

2. McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 13 Channel Management

3. 13-3 Channel Management Does it matter where you are sold? Take a position: 1.Channel images do not really affect the brand images of the products they sell that much. 2. Channel images must be consistent with the brand image.

4. 13-4 Channel Management A channel of distribution is the combination of institutions through which a seller markets products to the user or ultimate consumer Sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

5. 13-5 Example: Personal Computer Distribution Channels Manufacturers End customers RetailVARs,OEMsMailMassresellerInternet

6. 13-6 Channel Management Channel systems are not fixed, rigid structures but are rather dynamic in nature. It is a primary responsibility of the product manager to always keep abreast of changes in customer needs about how they want to purchase the product or service and then adapt the channel structure accordingly.

7. 13-7 Designing a Marketing Channel System Analyze customer needs Evaluate major channel alternatives Identify major channel alternatives Establish channel objectives

8. 13-8 Channel Management Direct Vs. Indirect

9. 13-9 Direct Appears to Be Better than Indirect When: 1.Information needs (often due to technical complexity) are high. 2.Product customization is important. 3.Quality assurance matters – direct control is needed. 4.Purchase orders are large. 5.Transportation and storage are complex.

10. 13-10 Factors Pointing to Indirect Channels 1.One-stop shopping for many products is important. 2.Availability is important. 3.After-sales service is important.

11. 13-11 The Distribution Value-Added Chain SuppliersChannelProducerChannelCustomer

12. 13-12 Value-Adds Versus Costs of Different Channels

13. 13-13 Services Provided by Channel Members

14. 13-14 Channel Arrangements

15. 13-15 Power in Channel Relationships: Channel Members Have it When The channel’s volume of sales of the product is large relative to the product’s total sales volume The product is not well differentiated from competitors The channel has low switching costs; it is relatively easy to find an alternative to replace the product The channel poses a credible threat of backward integration or competing with the product The channel member has better information than the product manager about market conditions

16. 13-16 Power in Channel Relationships: Maintaining Power Over Retailers Protect the brand name Customize products and promotions Innovate constantly Organize around the customers Invest in technology Cut costs to keep prices low Support smaller retailers

17. 13-17 Putting the Internet into Perspective 1.It is not the first new communication technology. 2.For most products, it is not a sufficient channel. 3.Its “widespread availability” is limited.

18. 13-18 Primary Benefits of the Internet It is interactive It is inexpensive It has broad scope It is fast Internet Can’t: Provide physical product Provide human contact

19. 13-19 The Direct Marketing Process 1.Set an objective 2.Determine the target market 3.Choose the medium/media 4.Get a list 5.Analyze the list 6.Develop the offer 7.Test the offer 8.Analyze the results

20. 13-20 Marketing Intermediaries Middleman – independent link between producers and consumers Merchant middleman – actually buys goods and takes title/ownership Agent – business unit that negotiates purchases and sales but does not take ownership Wholesaler – a merchant who primarily stores and handles goods in large quantities Retailer – merchant middleman who sells to final consumers Broker – middleman who serves as a go-between for the buyer and seller Manufacturer’s agent – an agent who operates by contract serving a geographic territory Distributor – wholesale middleman in lines with selective or exclusive distribution Jobber – a middleman who buys from manufacturers and sells to retailers Facilitating agent – a firm that performs distribution tasks other than buying, selling and transferring

21. 13-21 Channel Function Analysis

22. 13-22 Good Stuff, Inc., Sales by Channel

23. 13-23 PC Sales Volumes by Channel

24. 13-24 Percentage of Company Sales to Wal-Mart Tandy Brands39% Mattel23% Clorox23% Hershey21% Revlon20% RJR Tobacco20% P&G17% Kraft Foods12%

25. 13-25 Company-to-Company Contacts Agent/ Broker rep Indirect Company Direct In person PhoneMailElectronic Customer Retailer/ Dealer Wholesale/ Distributor

26. 13-26 Differing Perspectives between Manufacturers and Channel Members Channel 1 Channel 2 Firm Channel 3 Customer Firm 1 Channel Firm 2 Firm 3 Customers Channel perspective: Firm perspective:

27. 13-27 A Hybrid Marketing Channel System

28. 13-28 Overall Surefoot Master Contribution

29. 13-29 Allocation of Costs by Function

30. 13-30 Allocation of Functional Costs to Channels

31. 13-31 Direct Mail vs. Direct E-mail

32. 13-32 Direct Marketing Planning