Post on 05-Apr-2018
7/31/2019 Ch 01 Intro Handouts
1/25
Part I: Introduction
Chapter 1: Marketing Channels:Structure and Functions
MKTG 406 Pimentel
7/31/2019 Ch 01 Intro Handouts
2/25
Marketing Channel Defined
A set of interdependent organizationsinvolved in
the processof making a product or serviceavailable for use or consumption.
7/31/2019 Ch 01 Intro Handouts
3/25
Gatekeeper
Important asset of marketing strategy Differentiator Difficult to replicate
End-user satisfaction
Overall brand image Awareness of channel importance is low
Opportunity for competitive advantage Difficult to create and maintain channel
Difficult and costly to change Right the first time
Importance of Studying Marketing Channels
7/31/2019 Ch 01 Intro Handouts
4/25
Channel Development and Change
Demand-side factors Supply-side factors
7/31/2019 Ch 01 Intro Handouts
5/25
Demand-Side Factors
Facilitation of search
Adjustment for assortment discrepancy Sorting Accumulation Allocation (breaking bulk)
Assorting
7/31/2019 Ch 01 Intro Handouts
6/25
Supply-Side Factors
Routinization of transactions
Continuous replenishment programs (CRP) Reduction in number of contacts
Manufacturers
Wholesaler
Retailers
Manufacturers
Retailers
7/31/2019 Ch 01 Intro Handouts
7/25
Marketing Flows
Processes flow through the channel
Done at different points in time by differentchannel members
7/31/2019 Ch 01 Intro Handouts
8/25
Marketing Flows
The Eight Universal Marketing Channel Flows
1. Physical possession2. Ownership3. Promotion4. Negotiation
5. Financing6. Risking7. Ordering8. Payment
Flow of information
7/31/2019 Ch 01 Intro Handouts
9/25
7/31/2019 Ch 01 Intro Handouts
10/25
Channel Members
Channel formatscombinations of channel
members Specialization
Third-party logistics (3PL)
Channel captain Manufacturer brands Private brands
7/31/2019 Ch 01 Intro Handouts
11/25
Channel Analysis Framework
CHANNEL DESIGN
Segmentation
Channel StructureSplitting the Workload
Degree of Commitment
Gap Analysis
CHANNEL IMPLEMENTATION
Channel Power Channel Conflict
Manage/Defuse Conflict
Channel Coordination
INSIGHTS FOR SPECIFIC CHANNEL INSTITUTIONS
7/31/2019 Ch 01 Intro Handouts
12/25
Segmentation
Splitting market into groups of end-users
Similar within groups Different between groups Based on demands for the outputs of the
marketing channel
Added value Service outputs
7/31/2019 Ch 01 Intro Handouts
13/25
Segmentation
Example: Segments of book end-users
Recreational readers University students
Convenience-oriented Price-oriented
7/31/2019 Ch 01 Intro Handouts
14/25
Selecting Target Segments
Those we can serve most profitably
Restrictions Managerial bounds Environmental bounds
Legal
Competitive benchmarks
7/31/2019 Ch 01 Intro Handouts
15/25
Channel Structure
1. Types of channel members
2. Identities of specific channel members3. Channel intensity: number of each type
7/31/2019 Ch 01 Intro Handouts
16/25
Splitting the Workload
Assign channel flows to channel members
Meet target segments service output demands Reliable Minimize total cost, while meeting service level
7/31/2019 Ch 01 Intro Handouts
17/25
Degree of Commitment
Transactional relationships
Pursue individual goals No guarantee of continued business
Alliances Enduring connections throughout companies
Pursue common goals Vertical integration
Own channel members Reasons
Channel members do not exist Company can handle flows as efficiently Channel member is not sufficiently committed
Can be done in degrees
7/31/2019 Ch 01 Intro Handouts
18/25
Gap Analysis
The difference between optimal
and actual channels Demand side gaps Service output demands are
not being met Undersupplied
Oversupplied Supply side gaps
At least one flow is costingtoo much
Lack of expertise Waste
Closing gaps is difficult andcostly
7/31/2019 Ch 01 Intro Handouts
19/25
Channel Power
Ability to control other channel members
Necessary to implement channel design May be used to optimize channel to benefit of all
channel members May be used to achieve own ends without regard
to other channel members
7/31/2019 Ch 01 Intro Handouts
20/25
Channel Conflict
Actions of channel members prevent channel
from achieving its goals Goal conflict Domain conflict Perceptual conflict
7/31/2019 Ch 01 Intro Handouts
21/25
Manage/Diffuse Conflict
Identify sources of conflict
Poor channel design Poor performance
Take action Exercise channel power
7/31/2019 Ch 01 Intro Handouts
22/25
Channel Coordination
Result of
Channel designed to meet service outputdemands of target end-user segments Application of channel power to ensure smooth
implementation of the channel design
Ongoing process
7/31/2019 Ch 01 Intro Handouts
23/25
Insights for Specific Channel Institutions
Retailers
Wholesalers Logistics firms Supply chain issues Franchises
7/31/2019 Ch 01 Intro Handouts
24/25
Key Terms
marketing channel
end-user sorting accumulation allocation
breaking bulk assorting continuous
replenishment
programs (CRP) marketing flows channel members channel captain
manufacturer
intermediary merchant wholesaler manufacturers
representatives
agents brokers specialized
intermediaries
internationalspecialists
channel design segmentation
7/31/2019 Ch 01 Intro Handouts
25/25
Key Terms
service outputs
channel structure channel intensity transactional
relationships
alliances vertical integration gap analysis demand side gaps
supply side gaps channel power channel conflict goal conflict
domain conflict
perceptual conflict retailers wholesalers logistics firms
supply chain franchises