marketing channel structure and function
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Good for MarketingTRANSCRIPT
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Marketing Channel Introduction
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Marketing Channel Introduction
Definition: a marketing channel is viewed as an interorganizational system involved with making goods, services, and concepts available for consumption by enhancing their time, place, and possession utilities. The essence of this course is how institutions can transmit items of value from points of conception, extraction, and/or production to points of consumption.
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Marketing Channel Introduction
Part of every product and service purchased Complexity continuum – from highly complicated to simpleDifferent groups work together, sometimes unknowingly, to deliver products and servicesChannel Examples?
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Marketing Channel Introduction
Channel management – ongoing processEvaluation – why is evaluation important? How is a channel evaluated?
Is there a formula?Can all channels be evaluated the same way?Is goodwill important?
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Marketing Channel Introduction
Analyzing the previous channel:A wholesaler could “clean up” on economies of scale that the manufacturers are ignoringOR…the manufacturers could strive to reduce their costs of distribution by working together in the channel
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Marketing Channel Introduction
Why channels/why change?Demand side
Facilitation of SearchAssortment
Supply sideRoutinizing transactionsReducing contact points
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Marketing Channel Introduction
Demand Side:Facilitation of Search: uncertainty on the part of buyers and sellersAssortment Discrepancy: difference between the assortment of goods and services desired by the end user and the assortment of goods and services provided
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Marketing Channel Introduction
Assortment DiscrepancySorting Out AccumulationAllocation Assorting
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Marketing Channel IntroductionSupply Side
Routinization of Transactions: each transaction involves ordering, valuating, and payment. Must be agreement on amount, mode, and timing of payment
i.e. EDI, CRPInventory Turnover = COGS/Inventory (average)
Reduction in number of Contacts: Without channel intermediaries, every buyer would have to interact directly with every seller, or at lease every seller with whom interaction was required
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Selling DirectlyManufacturers
Retailers
40 Contact Lines
Selling Through One Wholesaler
Manufacturers
Wholesaler
Retailers 14 Contact Lines
Selling Through Two Wholesalers
Manufacturers
Wholesalers
Retailers
28 Contact Lines
Contact Complexity with/without Intermediaries
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Marketing Channel Introduction
The work of the channelFlows, not activitiesReason? The whole point of the channel is to move product and services.
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Marketing Channel IntroductionConsider: SCA Tissue – participation in more than
one channelSvenska Cellulosa Aktiebolaget, SCA (formerly Wisconsin Tissue Mills)Hygiene Products; tissue products, incontinence care products, baby diapers and feminine hygiene products.Packaging; corrugated board, containerboard, customized protective and specialty packaging.Forest Products; publication papers, pulp, timber and solid-wood products.
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Performance of Marketing Flows
Physical Physical PhysicalPossession Possession Possession
Ownership Ownership Ownership
Promotion Promotion Promotion
Negotiation Negotiation Negotiation Consumers Producers Wholesalers Retailers Industrial
Financing Financing Financing andHousehold
Risking Risking Risking
Ordering Ordering Ordering
Payment Payment Payment
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Marketing Channel Introduction
Performance of flows is correlated to other flowsConcept: members of the channel can be shifted/changed/eliminated, however the flows that they represent cannot.
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Marketing Channel Introduction
Manufacturers: Branded production
• Ford example in textbook (12) – is a “Ford” still only/exclusively a Ford?
Production contracted out• i.e. Packard Company, 1940
Selling under a variety of names• Jeans
Product “package”• i.e. Mutual Funds
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Marketing Channel Introduction
Intermediaries – between the manufacturer and the end user
Wholesale• Walkers Auto Body Supply
Retail• Staples
Specialized• CIT Financial – large client financial
services
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Marketing Channel Introduction
End UsersIn consuming products & services, we often perform channel flowsPossession, ownership, risking, etc
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Marketing Channel Introduction
Analyzing the channelThere is no one “right” way to design a marketing channel
Without a reference or framework, we overlook important aspects of the channel and design it poorly or in a cost-ineffective manner
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Marketing Channel IntroductionQuestions for Group Discussion
TB pg. 17 #1,2,3,4,5 – 10 minutes. In groups of 4, select 1 question, discuss, take point notes, and be prepared to present your answers. Be sure to include all group members’ names
Volunteer needed to:1 – take attendance2 – collect all point notes to enter & email to me
so that I can make them available on the website.