2. ©2000 Prentice Hall ObjectivesObjectives ä Work Performed by Marketing Channels ä Channel-Design Decisions ä Channel-Management Decisions ä Channel Dynamics

3. ©2000 Prentice Hall How a Distributor Reduces the Number of Channel Transactions = Customer = Manufacturer A. Number of contacts without a distributor M x C = 3 X 3 = 9 13 2 4 5 6 7 8 9

4. ©2000 Prentice Hall How a Distributor Reduces the Number of Channel Transactions = Distributor = Customer = Manufacturer B. Number of contacts with a distributor M x C = 3 + 3 = 6 Store12 3 4 5 6

5. ©2000 Prentice Hall Distribution Channel Functions Ordering Payments Communication Transfer Negotiation Financing Risk Taking Physical Distribution Physical Distribution Information

6. ©2000 Prentice Hall Consumer Marketing Channels Wholesaler Jobber Retailer Consumer  Retailer Consumer  Manufacturer 0-level channel Wholesaler Retailer Consumer  Mfg 2-level channel Mfg 3-level channel 1-level channel Manufacturer

7. ©2000 Prentice Hall Industrial distributors Manufacturer Consumer Manufacturer’s representative Manufacturer’s sales branch Industrial Marketing Channels

8. ©2000 Prentice Hall Customers’ Desired Service Levels ä Lot size ä Waiting time ä Spatial convenience ä Product variety ä Service backup

9. ©2000 Prentice Hall Break-Even Cost Chart Sellingcosts(dollars) Level of sales (dollars) Company sales force Manufacturer’s sales agency SBSBSBSB

10. ©2000 Prentice Hall Channel Management Decisions Selecting FEEDBACK Motivating Training Evaluating

11. ©2000 Prentice Hall Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members Administered Leadership is Assumed by One or a Few Dominant Members

12. ©2000 Prentice Hall Conventional Distribution Channel vs. Vertical Marketing Systems Verticalmarketingchannel Manufacturer Retailer Conventionalmarketingchannel Consumer Manufacturer ConsumerRetailer Wholesaler

13. ©2000 Prentice Hall Causes of Channel Conflict ä Incompatibility ä Difference in Perception ä Dependence Legal & Ethical Issues in Channel Relations ä Exclusive Dealing ä Exclusive Territories ä Tying Agreements ä Dealers’ Rights