1. Chapter 13: Marketing Channels
Prepared by Amit Shah, Frostburg State University
Designed by Eric Brengle, B-books, Ltd.
Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1
2. Learning Outcomes
2
LO1
LO2
LO3
Explain what a marketing channel is and why
intermediaries are needed
Define the types of channel intermediaries and
describe their functions and activities
Describe the channel structures for consumer
and business products and discuss alternative
channel arrangements
Copyright 2010 by Cengage Learning Inc. All Rights Reserved
3. Learning Outcomes
3
Discuss the issues that influence channel
strategy
Describe the different channel relationship
types and their unique costs and benefits
Explain channel leadership, conflict, and
partnering
LO5
LO6
LO4
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4. Learning Outcomes
4
Discuss channels and distribution decisions
in global markets
Identify the special problems and
opportunities associated with distribution
in service organizations
LO8
LO7
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5. 5
Marketing Channels
Explain what a marketing
channel is and why
intermediaries are needed.
LO1
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6. 6
Marketing Channels
A set of
interdependent organizations
that ease the transfer of
ownership as products move
from producer to business
user or consumer.
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7. 7
Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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8. 8
Specialization and Division of Labor
Creates greater efficiency
Provides lower costs
Achieves economies of scale
Aids producers who lack resources to
market directly
Builds good relationships with customers
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12. 12
Review Learning Outcome
Marketing Channels
LO1
Providing Specialization
and Division of Labor
Overcoming
Discrepancies
Providing Contact
Efficiency
Marketing
Channel
Supply
Chain
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13. 13
Channel Intermediaries
Define the types of channel
intermediaries and describe
their functions and activities.
LO2
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14. 14
Channel Intermediaries
Retailer
A channel intermediary that
sells mainly to customers.
Merchant
Wholesaler
An institution that buys goods
from manufacturers, takes title
to goods, stores them,
and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries who
facilitate the sale of a product from
producer to end user by representing
retailers, wholesalers, or
manufacturers.
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16. 16
Factors Suggesting Type of
Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
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17. 17
Channel Functions Performed
by Intermediaries
Contacting/Promotion
Negotiating
Risk Taking
Researching
Financing
Physically distributing
Storing
Sorting
Facilitating
Functions
Transactional
Functions
Logistical
Functions
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18. 18
Logistics
The efficient and cost-effective
forward and reverse flow as
well as storage of goods, services, and
related information, into, through, and
out of channel member companies.
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19. 19
Review Learning Outcome
Channel Intermediaries and Functions
LO2
CHANNEL
INTERMEDIARIES
Retailers
Wholesalers
Agents and Brokers
CHANNEL
FUNCTIONS
Transactional
Logistical
Facilitating
Perform
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20. 20
Channel Structures
Describe the channel
structures for consumer
and business products
and discuss alternative
channel arrangements.
LO3
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21. 21
Channels for Consumer Products
Direct Channel - A distribution
channel in which producers
sell directly to consumers.
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22. 22
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents or
Brokers
Wholesaler
Channel
Retailer
Channel
Direct
Channel
Agent/Broker
Channel
Channels for Consumer Products
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23. 23
Channels for Business Products
Producer
Industrial
User
Direct
Channel
Producer
Govt.
Buyer
Direct
Channel
Producer Producer Producer
Industrial
User
Industrial
User
Industrial
User
Industrial
Distributor
Industrial
Distributor
Agents or
Brokers
Agents or
Brokers
Agent/Broker
Channel
Industrial
Distributor
Agent/Broker
Industrial
Channel
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24. 24
Business Exchanges on the Internet
Agents link buyers and sellers
Companies drop the intermediary from
the supply chain
“Private exchanges” with select suppliers
automate the supply chain
Online
http://www.sherwinwilliams.com
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26. 26
Review Learning Outcome
Channel Structures
LO3
CONSUMER
CHANNELS
Direct
Retail
Wholesaler
Agent/broker
BUSINESS
CHANNELS
Direct
Industrial
Agent/broker
Agent/broker
industrial
ALTERNATIVE
CHANNELS
Multiple
Nontraditional
Strategic
alliances
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27. 27
Making Channel Strategy Decisions
Discuss the issues that
influence channel strategy.
LO4
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32. 32
Levels of Distribution Intensity
Intensive
A form of distribution aimed at
having a product available
in every outlet
Selective
A form of distribution achieved
by screening dealers to eliminate
all but a few in any single area
Exclusive
A form of distribution that
established one or a few
dealers within a given area
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33. 33
Levels of Distribution Intensity
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Exclusive
Work with selected
intermediaries.
Shopping and some
specialty goods.
Work with single
intermediary. Specialty
goods and industrial
equipment.
Several
One
Intensity
Level
Objective
Number of
Intermediaries
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34. Review Learning Outcome
Issues Influencing Channel Strategy
34
LO4
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35. 35
Types of Channel Relationships
Describe the different channel
relationship types and their
unique costs and benefits.
LO5
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36. 36
Types of Channel Relationships
Cooperative
Integrated
Arm’s Length
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37. 37
Arm’s Length and Integrated Relationships
Arm’s Length Relationship- A
relationship between companies
that is loose, characterized by
low Relational investment and
trust, and usually taking the form
of a series of discrete
transactions with no/low
expectation of future interaction
or service.
Integrated Relationship- A relationship
between companies that is tightly
connected, with linked processes across
and between firm boundaries, and
high levels of trust and inter-firm
commitment.
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38. 38
Cooperative Relationships
A relationship between companies
that takes the form of informal
partnership with moderate levels of
trust and information sharing as
needed to further each company’s
goals.
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42. 42
Channel Power, Control, and Leadership
Channel
Power
The capacity of a particular
marketing channel member to
control or influence the behavior
of other channel members
Channel
Control
A situation that occurs when
one marketing channel member
intentionally affects another
member’s behavior
Channel
Leader
(channel captain)
A member of a marketing
channel that exercises
authority/power over the
activities of other members
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43. 43
Channel Conflict and Partnering
Channel Conflict – A clash of
goals and methods between
distribution channel members.
Channel Partnering (Channel Cooperation) –
The joint effort of all channel
members to create a supply
chain that serves customers and
creates a competitive advantage.
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44. 44
Channel Conflict
Conflicts may occur if channel members:
• Have conflicting goals
• Fail to fulfill expectations of other channel members
• Have ideological differences
• Have different perceptions of reality
Copyright 2010 by Cengage Learning Inc. All Rights Reserved
46. Review Learning Outcome
Channel Leadership, Conflict, & Partnering
46
LO6
Channel
Relationship
Synergy
Channel Conflict
Horizontal Vertical
Channel Power,
Control, Leadership
Channel
Partnering
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47. 47
Channels and Distribution Decisions
for Global Markets
Discuss channels and
distribution decisions
in global markets.
LO7
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48. 48
Channels and Distribution Decisions
for Global Markets
Global Channel
Development
Channel structure
and type differ
Gray marketing channels
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49. Review Learning Outcome
49
LO7
Global Market Channel & Distribution Decisions
Distribute directly or through
foreign partners
Different channel structures than in
domestic markets
Illegitimate “gray”
marketing channels
Legal and infrastructure differences
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50. 50
Channels and Distribution Decisions
for Services
Identify the special problems
and opportunities
associated with distribution
in service organizations
LO8
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51. 51
Channels and Distribution Decisions
for Services
Minimizing wait times
Managing service capacity
Improving service delivery
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