SEGMENT 14: CHANNEL STRATEGY



SEGMENT 14: CHANNEL STRATEGY

(Related chapter in text: 15)

LEARNING OBJECTIVES:

1. Understand how channel strategy creates time and place utility

2. Delineate key functions of the channel of distribution

3. Distinguish intensive vs. selective vs. exclusive channels and direct vs. indirect channels

4. Know the roles of the various forms of marketing intermediaries - wholesalers and retailers

5. Know the advantages and disadvantages of contractual, administered, and vertically-integrated channels

CREATING PLACE AND TIME UTILITIES-roots of practice –where things are produced and how they get where the consumers are… marketing spawned by distribution

TIME UTILITY

1. CONVENIENCE- mininimize time making purchase, buy when you want too

2. SPEED-getting the product there quickly

PLACE UTILITY

CONVENIENCE-having a product readily available in lots of areas

PRESTIGE- place where we purchase products increases the prestige of the product (balharbor and Gucci) through the prestige of retailer

DISTINGUISHING CHANNEL OF DISTRIBUTION FROM PHYSICAL DISTRIBUTION OF PRODUCTS (not just transportation)

-Logistical Functions

--Assorting (creating assortment of different products, selection) , Transporting-how we move the product

-Transactional Functions

--Selling (selling the products, speciality org, represent product don’t take onventory ), Risk taking ( who is going to make investment in product)

-Facilitating Functions

--Financing (manu or retailer) , Market research (feedback from marketplace)

DEGREE OF CHANNEL COVERAGE: 3 BASIC OPTIONS (how widespread, how saturated the market)

INTENSIVE-convenient good (gum, coke) convenient stores

SELECTIVE- a few outlets that sell the product 2-3

EXCLUSIVE- one outlet in geographical area to build prestige, along with car dealers, along with high tech bicycles, out of your way to buy the brand

TWO BASIC TYPES OF CHANNELS

DIRECT- is awhen a manu is dealing directly with end user, say from manu website (ship directly) to consumer (dell) too many consumers so use indirect

INDIRECT- typicall- manu- to wholesaler-retailer-consumer..

Channel conflict... manu-retailer-consumer… manu to consumer, retailer isn’t happy because they are taking sales.. Movies to dvd-horizontal

Manu-bottlers-retailers-consumers. Powerade directly to retailers instead of bottlers –vertical

A "TYPICAL" CHANNEL

MANUFACTURER

(

WHOLESALER

(

RETAILER

(

CONSUMER

TYPES OF CHANNEL MEMBERS

(ALSO KNOWN AS INTERMEDIARIES OR MIDDLEMEN)

WHOLESALERS- sell to retailers

12. MERCHANT WHOLESALERS

-DISTRIBUTOR-full function wholesaler, perform all functions (selling, catalog, inventory, credit, employee, parts inventory, feedback)

-JOBBER-performs subsets, ( has inventory)

13. AGENTS-does not own product, or inventory-provide sales and service

14. MANUFACTURER'S SALES BRANCH VS. SALES OFFICE-parraelel between distrubitor and agents, owned by manu

15. Owned and take possession (sales branch), Independent and take possession (Merchant wholesaler) Independent don’t take possession (agent) owned, don’t take possession (sales office)

16.

RETAILERS -

STORE- 4 types of stores

- SPECIALTY-small stores, narrow merchandise

- DEPARTMENT STORES ( diverse, dillards, anchor store)

- POWER RETAILERS-specialized large stores, (home depot) more depth

- DISCOUNTERS walmart, target

NONSTORE- internet retailing, networking to consumers

CHANNEL TYPES

19. CONTRACTUAL-relationship is governed by contract

e.g., FRANCHISING-get power of well developed corporate backing them, centralized planning, advertising powers ability to expand rapidly, disadvantage is quality of control

20. ADMINISTERED- handshake agreement, independent convenient store and buying coca-cola vault, big dog runs show, who has more power gets better deal

21. VERTICALLY INTEGRATED-one entity owns entire channel (nokia opening it’s own stores, forward) backward is amazon buying rights to make movie. Gets rid of conflict of independent channels helps with control

KEY TRADEOFF

COST VS. CONTROL-cost to own everything is very expensive

(CHANNEL CAPTAIN)-has the most power over the manu and retailer for instance walmart asking p&G to cut packaging for green marketing retailers having more power than manu

QUESTION:

WHY USE INTERMEDIARIES?-

ANSWER:

TRANSACTION EFFICIENCY-

O O O O

O O O O

O

O O O O

O O O O

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