In this chapter 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 Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Exchange and Marketing Pots Hats Hoes Baskets In very basic economic systems, each seller must meet directly with each buyer in order to exchange something of value As needs increase, the number of exchanges can soon become unmanageable for one person Knives Ten exchanges are required when a central market is not used Exhibit 112 (A) 112 For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Marketing Facilitates Production and Consumption Production Sector Specialization and division of labour = heterogeneous supply capabilities Spatial Separation Discrepancies of Quantity Marketing needed to overcome discrepancies and separations Separation in Time Separation of Information Separation in Values Discrepancies of Assortment Separation of Ownership Consumption Sector Heterogeneous demand for form, task, time, place, and possession utility Exhibit 113 113 For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Model of Market-Directed Macro-Marketing System Many Individual Producers intermediaries Facilitators Perform universal marketing functions Monitoring by government(s) and public interest groups To overcome discrepancies and separations To create utility and direct flow of need-satisfying goods and services Exhibit 114 114 Many Individual Consumers For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Regrouping Activities Accumulating Accumulating Sorting Sorting 115 BulkBulkBreaking Breaking Assorting Assorting For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Strategic Decision Areas in Place Place objectives Customer service level desired Type of channel Direct Degree of market exposure desired 116 Indirect Type of physical distribution facilities needed Intermediaries/ facilitators needed How to manage channels For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited 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 117 Quicker QuickerResponse Responseor or Change Changein inMarketing MarketingMix Mix Suitable SuitableIntermediaries Intermediaries Not NotAvailable Available For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited 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 118 For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited 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 channel of “independents” General Electric McDonald’s Florsheim Amount of cooperation Exhibit 115 119 For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Market Exposure Intensive What Market Exposure Fits the Marketing Objectives Selective Exclusive 1110 For use only with Shapiro, Wong, Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited ... capabilities Spatial Separation Discrepancies of Quantity Marketing needed to overcome discrepancies and separations Separation in Time Separation of Information Separation in Values Discrepancies... Perreault, and McCarthy text Copyright © 2002 McGraw-Hill Ryerson Limited Model of Market-Directed Macro-Marketing System Many Individual Producers intermediaries Facilitators Perform universal marketing... Direct Direct Channels Channels 117 Quicker QuickerResponse Responseor or Change Changein inMarketing MarketingMix Mix Suitable SuitableIntermediaries Intermediaries Not NotAvailable Available For