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In chapter 11 you will understand how and why marketing specialists develop to make channel systems more effective. Understand the universal functions of marketing. Understand why some firms use direct channel systems while others rely on intermediaries and indirect systems. Understand how to develop co-operative relationships - and avoid conflict - in channel systems.
Chapter 11: Place and Development of Channel Systems For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 11 Objectives When you finish this chapter, you should 1. Understand what product classes suggest about Place objectives 2. Understand why some firms use direct channel systems while others rely on intermediaries and indirect systems 3. Understand how and why marketing specialists develop to make channel systems more effective 4. Understand how to develop cooperative relationships— and avoid conflicts—in channel systems 112 5. Know how channel members in vertical marketing systems shift and share functions—to meet customer needs 6. Understand the differences between intensive, selective, and exclusive distribution 7. Understand the important new terms For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Strategy Decision Areas in Place Place objectives Customer service level desired Type of channel Direct Degree of market exposure desired Indirect Type of physical distribution facilities needed Middlemen/ facilitators needed How to manage channels Exhibit 111 113 For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Why a Firm May Want to Use Direct Channels Greater GreaterControl Control Lower LowerCost Cost Value Valueadded addedsubsequent subsequentto to production process production process Direct Directcontact contactwith with Customer CustomerNeeds Needs Some Some Reasons Reasons for for Choosing Choosing Direct Direct Channels Channels 114 Quicker QuickerResponse Responseor or Change Changein inMarketing MarketingMix Mix Suitable SuitableMiddlemen MiddlemenNot Not Available Available For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Regrouping Activities Accumulating Accumulating Sorting Sorting 115 BulkBulkBreaking Breaking Assorting Assorting For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Managing Channel Relationships Choosing the Type of Relationship Whole-Channel ProductMarket Commitment Key Issues in Channel Management Conflict Handling Common Objectives Role of Channel Captain 116 For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Vertical Marketing Systems Type of channel Characteristics Vertical marketing systems Traditional Administered Contractual Corporate Little or none Some to good Fairly good to good Complete Control maintained by None Economic power and leadership Contracts One company ownership Examples Typical “independents” General Electric McDonald’s Florsheim Amount of cooperation Exhibit 113 117 For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Market Exposure Intensive What Market Exposure Fits the Marketing Objectives Exclusive 118 Selective = number of outlets For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Key Terms Place Channel of Distribution Direct Marketing Discrepancy of Quantity Discrepancy of Assortment Regrouping Activities Accumulating BulkBreaking Sorting Assorting Traditional Channel Systems Channel Captain Vertical Marketing Systems Corporate Systems Vertical Integration Administered Systems Contractual Systems Ideal Market Exposure Intensive Distribution Selective Distribution Exclusive Distribution Dual Distribution Reverse Channels For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill ... Not Available Available For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Regrouping Activities Accumulating Accumulating Sorting Sorting 11 5... Middlemen/ facilitators needed How to manage channels Exhibit 11 1 11 3 For use only with Perreault and McCarthy texts © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Why a Firm May Want to Use... The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Vertical Marketing Systems Type of channel Characteristics Vertical marketing systems Traditional Administered Contractual Corporate Little