chapter 8: using marketing channels to create value for customers

by Jeff Tanner and Mary Anne Raymondby Jeff Tanner and Mary Anne Raymond

Principles of Marketing

Chapter 8Chapter 8Using Marketing Channels Using Marketing Channels

to Create Value for Customers to Create Value for Customers

©2010 Flat World Knowledge, Inc.


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Learning Objectives1.Explain why marketing channel decisions can result in a product’s success or failure.2.Describe the different types of organizations that work together as channel partners and what each partner contributes.

Marketing Channels and Channel Marketing Channels and Channel PartnersPartners

Consumer BehaviorConsumer Behavior


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Today, consumers are used to getting:

or

Consumer BehaviorConsumer Behavior


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They buy a competing product!

requiresdistribution channels

Marketing ChannelsMarketing Channels

• The simplest marketing channel consists of a producer and a consumer.

• Most products involve other parties called intermediaries who are positioned between the producer and the consumer.

• These intermediaries perform useful functions benefitting both the producer and the consumer. These functions are called utilities such as:– form– time– place– possession– information exchange


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Channel partners are essential for marketing to achieve its objectives of having

Channel PartnersChannel Partners

Types of Channel PartnersTypes of Channel Partners

The most frequent partner types are:


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Types of Channel PartnersTypes of Channel Partners


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Nonstore RetailingNonstore Retailing

• Not all retailing is conducted through stores!

• There is a growing trend in:– door to door sales– party selling– interaction such as vending machines– TV – telemarketing (do not call data base)


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Key TakeawaysKey Takeaways

• How you get the product is a marketing channel.

• Channel decisions are as important as features and prices of products.

• Channel partners are firms that actively promote and sell products; producing companies try to get the best channels to get a competitive edge.


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Typical Marketing ChannelsTypical Marketing Channels

Learning Objectives1.Describe basic types of B2B and B2C

markets.2.Explain aspects of using multiple and

alternate channels.3.Explain the pros and cons of

disintermediation.4.Channels used to enter foreign markets.


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Direct vs. Indirect ChannelsDirect vs. Indirect Channels

There are two classes of distribution channels:


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DisintermediationDisintermediation

Cutting out the middleman:• Some companies take on the middleman's

role to reduce costs and improve profits.• The trend today is towards

disintermediation.• The Internet is a facilitator.• This is not always cost effective or

efficient.• It is not always possible, as Dell found out.


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Multiple and Alternate ChannelsMultiple and Alternate Channels

• Marketing channels can become complex and confusing.


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Multiple ChannelsMultiple Channels

Multiple channels can be effective, but it


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International Marketing ChannelsInternational Marketing Channels

Company growth requires participation in international markets.


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International Marketing ChannelsInternational Marketing Channels

Key concerns for distributing in other countries:

1.Unstable governments and corruption

2.Bribery as a way of doing business3.Foreign currency exchange rates4.Product features and cultures


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• Direct channel consists only of producer and user.

• Indirect channels employ intermediaries.• Multiple channels are used to reach more

customers and increase effectiveness.• Disintermediation removes channel

intermediaries to improve profits.• Other ways to participate are direct foreign

investment, franchising, joint ventures, and strategic alliances.


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Functions Performed by Channel Functions Performed by Channel PartnersPartners

Learning Objectives1.Describe the activities performed by

channels.2.Explain which organizations perform which

functions.


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Push Pull StrategiesPush Pull Strategies


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Push and pull are discussed in greater detail in Chapter 12.

Producer incents channels to move more product

Producer incents end user to request product

Channel FunctionsChannel Functions

Channel partners:• sort and regroup products• store and manage inventory• distribute products• assume ownership (take title) and take risk• extend credit—aid in possession• share marketing and other information• assure availability to end users


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Different organizations in a marketing channel are responsible for different value added activities.

Activities include:• disseminating marketing information• promoting brands• sorting and regrouping products• storing and managing inventory• distributing products• assuming risks of products


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Marketing Channel StrategiesMarketing Channel Strategies

Learning Objectives1.Describe the factors that affect a firm’s

channel decisions.2.Explain how intensive, exclusive, and

selective distribution differ from one another.

3.Explain why some products are better suited to some intensity-of-distribution strategies than others.


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Channel Selection FactorsChannel Selection Factors


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Channel Selection FactorsChannel Selection Factors

The business environment and technology• the state of the economy• foreign exchange rates• the enabling abilities of the Internet

Competing products’ marketing channels• How do competitors sell their product?• Sometimes a unique channel offers

competitive advantages.


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Modes of DistributionModes of Distribution

Intensive distributionThe objective is to maximize outlets for product to

assure the widest availability.

Selective distributionThe objective is to appeal to different markets.

Exclusive distributionThe objective is to appeal to a specific market and

control brand image.


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• Channel selection can mean the difference between success and failure.

• Channel selection depends on type of customer and products.

• Channel selection may be influenced by competitor channels.

• Decisions of intensity, selectivity, and exclusivity affect channel decisions.


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Channel DynamicsChannel Dynamics

Learning Objectives1.Explain channel power.2.Describe channel conflicts.3.Describe how channel members achieve

cooperation.


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Channel DynamicsChannel Dynamics

Channel power• Strong channel partners become leaders.• Leaders can call the shots, getting what they want.• Category killers have channel power.Channel conflict• Disputes among channel members.• Channel members have their own goals which may not be

shared.• Arises when producers compete with channel members.Vertical and horizontal conflict• Vertical conflict occurs when members are in same channel.• Horizontal conflict occurs when members are in separate

channels.©2010 Flat World Knowledge,

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Achieving Channel CooperationAchieving Channel Cooperation

Requires channel management• Emphasize the benefits of working together• Provide channel members with promotional

material• Educating channel members on the products

and selling techniques• Avoid channel stuffing, i.e., moving product into

the channel to record sales• Handle pricing issues in an ethical and legal

manner©2010 Flat World Knowledge,

Inc.31


• Channel leaders wield power.• Channel conflict occurs when channel

members have a dispute.• Vertical conflict occurs between in-channel

members.• Horizontal conflict occurs when channels

compete with each other.• Channel cooperation can be enhanced by

proper management of members.


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Marketing Channels vs. Supply Marketing Channels vs. Supply ChainsChains

Learning Objectives1.Understand the difference between

channels and supply chains.2.Describe the components of supply chains.


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Channels vs. Supply ChainsChannels vs. Supply Chains

The chain of supply is a holistic view of all of the entities involved in the sourcing, production, and distribution of products.


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Supply Chains and ManagementSupply Chains and Management

• Upstream suppliers are not considered channel partners.– They are not involved with selling the products.– Producers have begun looking at them, however, as they

are instrumental in the overall process.

• Also involved with success or failure of a producer are the transportation companies needed to move products and raw materials.

• Producers are constantly assessing their supply chains and making changes to improve efficiencies and effectiveness. This is called supply chain management.


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• All of the organizations that figure into any part of the process of producing, promoting, and delivering an offering to its user are part of the supply chain.

• Suppliers of raw materials and components, along with transportation companies, are not considered channel partners, as they are not involved in the process of selling.

• The process of managing and improving a supply chain is called supply chain management.


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chapter 8: using marketing channels to create value for customers

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