Gilbert A. Churchill, Jr. J. Paul Peter

1
Marketing
Chapter 14
Managing Distribution Channels
Gilbert A. Churchill, Jr. J. Paul Peter
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Channel of Distribution
Slide 14-1
Source
Definition
Lamb, Hair, and McDaniel
A set of interdependent organizations that
facilitate the transfer of ownership as products
move from producer to business user or consumer
An array of exchange relationships that create
customer value in the acquisition, consumption,
and disposition of products and services
Pelton, Strutton, and Lumpkin
An organized network (system) of agencies and
institutions that perform all the functions
required to link producers with end users to
accomplish the marketing task
Churchill and Peter
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How Intermediaries Improve Channel Efficiency
Slide 14-2
Figure 14.1
Sales Contacts without an Intermediary
Sales Contacts with an Intermediary
Bike Shop
Intermediary
Manufacturers of Bicycle Helmets
Bike Riders
Manufacturers of Bicycle Helmets
Bike Riders
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Essential Channel Functions
Slide 14-3
Transactional Functions
Contacting and Promoting
Negotiating

Risk Taking
Logistical Functions
Physical Distribution
Sorting
Sorting out
Accumulation
Assorting
Allocation
Facilitating Functions
Research
Financing
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Common Channels for Consumer Goods
Slide 14-4
Figure 14.2
Direct Channel
Consumer
Producer
Indirect Channels
Consumer
Retailers
Producer
Consumer
Retailers
Wholesalers
Producer
Consumer
Retailers
Wholesalers
Agents
Producer
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Common Channels for Consumer Goods - Examples
Slide 14-5
CorkysBar-B-Q
Consumer
Consumer
Safeway
Frito Lay
InterstateBeverage Corporation
Soft DrinkRetailers
Consumer
Snapple
SmallHouseplantGrower
WillowRum
RetailFlorists
WholesaleFlorists
Consumer
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Common Channels for Organizational Goods
Slide 14-6
Figure 14.3
Direct Channel
Organizational buyer
Producer
Indirect Channels
Organizational buyer
Producer
Distributors
Organizational buyer
Agents
Producer
Organizational buyer
Agents
Distributors
Producer
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Alternative Channel of Distribution
Slide 14-7
Definition
Example
Type
Multiple/dual channel
Penn. tennis Balls, Cdico caller Id equipment
a manufacturer distributing the same product to
target market through two or more channels
Nontraditional channel
channels used to differentiate itself from the
competition
Internet, infomercial
using one manufacturers already established
channel to reach customers
Blockbuster and Coca-Cola
Strategic alliance channel
Recycling (plastics, batteries), product recalls
Reverse/backward channel
products move in the opposite direction to
traditional channels
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Types of Vertical Marketing Systems
Slide 14-8
Figure 14.5
VerticalMarketingSystems (VMSs)
AdministeredVMSs
CorporateVMSs
ContractualVMSs
Wholesalers Sponsored Cooperatives
Retailer Sponsored Cooperatives
Franchising
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Three Categories of Contractual Vertical
Marketing Systems
Slide 14-9
McDonalds
Franchises
WholesalerSponsoredCooperatives
RetailerSponsoredCooperatives
True-ValueHardware
Independent GrocersAlliance (IGA)
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Factors to Evaluate for Selecting a Distribution
Channel
Slide 14-10a
Figure 14.6
CustomerCharacteristics
ProductCharacteristics
IntermediaryCharacteristics
NumberGeographic DispersionChannel
PreferencesBuying BehaviorUse of Technology
Cost per UnitPershabilityBulkinessStandardizati
onNeed for Installation and Maintenance
AvailabilityWillingness to Carry
ProductMarket ServicedDistribution
Functions PerformedPotential for Conflict and
CooperationOther Product OfferingsFinancial
ConditionStrengths and Weaknesses
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Factors to Evaluate for Selecting a Distribution
Channel
Slide 14-10b
Figure 14.6
CompetitorCharacteristics
EnvironmentalCharacteristics
OrganizationCharacteristics
Number and SizeDistribution StrategiesFinancial
ConditionsSizes of Product Lines, Product
MixesObjectives, Strategies and
BudgetsStrengths and Weaknesses
Economic ConditionsPolitical IssuesLaws,
Regulations and EthicsCultural and Social
Changes Technological Changes
Size and Market ShareFinancial ConditionSize of
Product Lines, Product MixAbility to Perform
Distribution Functions Objectives, Strategies
and BudgetsChannel ExperienceStrengths and
Weaknesses
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Levels of Market Coverage
Slide 14-11
Table 14.2
Number ofIntermediariesin Trading Area
Level
Objective
Examples
Exclusive
One
Work with a single intermediary for a product
that requires special resources or positioning
distribute luxury goods effectively.
Electronic Liquid Fillers packaging systems
Rolex watches
Selective
Several
Work closely with intermediaries who meet certain
criteria distribute shopping goods effectively.
Bose speakers Compaq computer systems
Intensive
Many
Classic Coke disposable writing pens
Support mass selling distribute convenience
goods effectively.
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Channel Leadership
Slide 14-12
Information
Reward
Expert
Channel
Power
Captain
Coercive
Referent
Legitimate
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Channel Options for Global Markets
Slide 14-13
Table 14.8
DomesticManufacturers
Least Control
Most Control
License Foreign Manufacturers
License Foreign Manufacturers
DomesticExporters
GlobalIntermediaries
GlobalBranches
Global Markets
Global Markets
Global Markets
Global Markets
Global Markets
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Legal, Political and Ethical Issues
Slide 14-14
Exclusive Dealing A restriction imposed by a
supplier on a customer forbidding the customer
from purchasing some type of product from any
other supplier. Closed Sale Territories A
producer specifies a geographic area and assigns
one intermediary to serve it. Tying Contracts An
agreement under which a marketer sells a
particular product only if the buyer also
purchases another specific product. Full Line
Forcing A type of tying arrangement in which an
intermediary that wants to carry a particular
product must buy the entire line. Gray Market The
situation in which foreign distributors sell
foreign versions of U.S. products in the United
States. Slotting Allowances A fee paid by a
manufacturer for space in a retail store.