Chapter Eleven
PLACE AND DEVELOPMENT OF CHANNEL SYSTEMS
PLACE DECISIONS ARE AN IMPORTANT PART OF MARKETING STRATEGY
See exhibit 11-1, page 297
Channel of distribution: Any series of firms or individuals who participate in flow of goods from producer to final user
PLACE DECISIONS ARE GUIDED BY “IDEAL” PLACE OBJECTIVES
Must make sure goods/services are available in the right quantities and locations -- when consumers want them
Product classes help with place objectives as well as product life cycle
CHANNEL SYSTEM MAY BE DIRECT OR INDIRECT
Some firms prefer to distribute direct to final consumer:
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They are in control whole job |
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Are in direct contact with the customer |
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Middlemen may not be available |
When indirect channels are best -- middlemen can often help producers serve customer needs at a lower cost.
DISCREPANCIES AND SEPARATION REQUIRE CHANNEL SPECIALISTS
Specialists can provide crucial information about customer needs and provide insight
Middlemen assist with discrepancies of quantity and assortment
Channel specialists assist with 4 regrouping activities:
1. Accumulating: Collect from many small producers
2. Bulk breaking: Break down into smaller quantities
3. Sorting: Grades/quality
4. Assorting: Putting together products
CHANNELS AND RELATIONSHIP MUST BE MANAGED
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Need to have shared product market commitment |
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Traditional channel: Little commitment conflict is common (vertical and horizontal) |
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Need channel captain: To arrange for functions to be performed in most effective way. |
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Can have producer or retailer dominate channels -- see exhibit 11-2 |
VERTICAL MARKETING SYSTEMS FOCUS ON FINAL CUSTOMER
See Exhibit 11-3, page 308 for characteristics of vertical systems.
Whole channel focuses on same target market (3 types)
1. Corporate: company owns all. e.g. Sherwin Williams
2. Administered: informal cooperation. e.g. grocery
3. Contractual: by contract
THE BEST CHANNEL SYSTEM SHOULD ACHIEVE IDEAL MARKET EXPOSURE
Three forms of ideal exposure:
1) Intense: Selling to all wholesalers/retailer
2) Selective: Selling to only certain wholesalers/retailers
3) Exclusive: Selling to only one middleman in particular
Next Steps: Please review the PowerPoint Overview slides (1-22) for this chapter. Then proceed to the Lecture Notes for chapter thirteen.
