1

MARKETING CHANNELS

Introduction

Berman Chapter 1

Version 3.0

2

Introduction

• 1. Marketing Channels defined

• 2. Functions Performed by Intermediaries

• 3. Alternative Channel Structures

• 4. Characteristics of Channel Relationships

• 5. Importance of Channel Management to the Firm

• 6. Importance of Channel Management to the Economy

3

1. Channel ManagementDefinition

• an organized network or system

• of agencies and institutions

• performing activities

• to link producers with users

4

1. Marketing ChannelsComponents

• organized network or system– sharing common objectives– concerning customer service and product image– independently owned / integrated strategy– long term contracts– common goals

5

1. Marketing ChannelsParticipants

• Channel Participants– agencies and institutions– intermediaries

• manufacturers

• wholesalers

• retailers

– facilitators• research, physical distribution, financing,

advertising

6

1. Marketing Channels Activities

• physical possession• ownership• promotion• negotiation

• financing• risking• ordering• payment

linkage of producers and users

conventional channelsfranchisescontract pricing

7

1. Marketing ChannelsRelationships

• Retailing - sales of goods and services to end users

• Wholesaling - sales for resale

• Physical Distribution - movement of finished goods inventory to channel members

8

2. Intermediary Functions

• sorting - breaking bulk and contactual efficiency

• mass distribution

• customer contact

• credit

• market research

9

2. Channel Functions

• can be shifted among members

• cannot be eliminated

• Bucklin’s system of service outputs– spatial convenience or market decentralization– lot size– product variety or assortment breadth– waiting or delivery time

10

3. Alternative Channel Structures

• channel specialization

• competitive advantage tasks– short (direct) vs long (indirect) channels– channel width - intensity

• intensive - selective - exclusive

– dual channels

11

4. Special Channel Characteristics

• member divided loyalty - suppliers and customers

• selling to (push) and selling through (pull)

• long term relationships

• relationship marketing ( partnering)

• high switching costs– direct and indirect

12

5. Channel Importance

• Competitive Advantage

• Channel Based Strategy

• Relationships of firms– areas of management levels, marketing, sales,

advertising, products, physical distribution, market research, legal, controller, manufacturing, production control, engineering, etc

13

5. Channel ImportanceCompetitive Advantage

• exclusive distribution

• dual channels

• non-traditional channels

• access to broad network

• technology

• superb customer service

• low cost distribution

• access to a specialized markets

14

6. Channel Management Importance to the Economy

• Product Planning

• Pricing Management

• Promotion Management

• Channel Values

• Employment

• Sales

15

6. Channel ImportanceProduct Planning

• new products / same channel

• new products / same members

• existing members / new channels

• channel members / product recall

• new products / shelf space

• products services/ franchises / image

• specialized products / small markets

• refusal to sell

16

6. Channel ImportancePricing Management

• wholesaler / retailer profit margins

• price reductions / retailers list price

• gray markets / transshipping

• quantity discounts / maximize share

• discounters pricing / full service retailers

• seasonal discount structure / retailer order

17

6. Channel ImportancePromotion Management

• push / pull budgeting

• advertising, public relations, sales promotion mix

• coop advertising plan

• sales contests, other promotions

• wholesaler quotas