Marketing ChannelsLearning ObjectivesTimbuk 2Consumer and B2B ChannelsFunctions of Marketing ChannelsDirect Marketing ChannelsIndirect Marketing ChannelsVertical Marketing SystemsCorporate Channel SystemsContractual Channel SystemsFranchise ChannelsManaging Marketing ChannelsSlide 13Slide 14Slide 15Slide 16Slide 17Ethical Problems in Marketing ChannelsChannel ConflictSummaryC H A P T E RC H A P T E R© 2007 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinMarketing ChannelsMarketing Channels1313-2© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdLearning ObjectivesLearning ObjectivesLearning ObjectivesLearning ObjectivesAfter studying this chapter, you should be able to:Explain the functions and key activities of marketing channels.Discuss the role of intermediaries in marketing channels.Distinguish between direct and indirect marketing channels. Illustrate how some firms use multiple channels successfully.See how marketing channel decisions are related to other key marketing decision variables. Understand how power, conflict, and cooperation affect the operation of a marketing channel.Give examples of ethical and legal issues encountered in the operations of marketing channels.13-3© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdTimbuk 2Timbuk 2Timbuk 2Timbuk 2Timbuk2, a San Francisco–based manufacturer of urban shoulder bags, iPod holsters, tote bags, and yoga mat carriers, has learned that having the right channels for distributing its products is every bit as important for success as having cutting-edge products. When CompUSA agreed to carry Timbuk2 bags, CEO Mark Dwight thought his company had hit the jackpot. Four months later, Timbuk2 was hard pressed to keep up with the high volume demand and remain profitable given its low selling price to CompUSA.13-4© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdConsumer and B2B ChannelsConsumer and B2B ChannelsConsumer and B2B ChannelsConsumer and B2B ChannelsThe marketing channel is a combination of organizations and individuals who perform the required activities to link producers of products to users of those products to accomplish marketing objectives.Exhibit 13-113-5© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdFunctions of Marketing ChannelsFunctions of Marketing ChannelsFunctions of Marketing ChannelsFunctions of Marketing ChannelsBy performing five critical functions, marketing channels play an important role in accomplishing the key marketing activities.Exhibit 13-213-6© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdDirect Marketing ChannelsDirect Marketing ChannelsDirect Marketing ChannelsDirect Marketing ChannelsA direct channel describes movement of the product from the producer to the user without intermediaries.Exhibit 13-313-7© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdIndirect Marketing ChannelsIndirect Marketing ChannelsIndirect Marketing ChannelsIndirect Marketing ChannelsAn indirect channel requires intermediaries between the originator and the user to perform some functions related to buying or selling.Exhibit 13-413-8© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdVertical Marketing SystemsVertical Marketing SystemsVertical Marketing SystemsVertical Marketing SystemsVertical marketing systems. are centrally coordinated, highly integrated operations that work together to serve the ultimate consumer.The word vertical refers to the flow of the product from the producer to the customer. This flow is “down the channel” or “downstream,” meaning that the product flows down from the producer to the customer.Exhibit 13-513-9© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdCorporate Channel SystemsCorporate Channel SystemsCorporate Channel SystemsCorporate Channel SystemsBackwardBackwardIntegrationIntegrationBackward Integration aims to improve the efficiency and effectiveness of marketing channels through ownership of one or more of their suppliers, not their buyers.ForwardForwardIntegrationIntegrationA corporate channel system in which one channel member owns one or more of its buyers downstream is called forward integration.13-10© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdContractual Channel SystemsContractual Channel SystemsContractual Channel SystemsContractual Channel SystemsWholesaler-sponsored voluntary groups consist of independent retailers that operate under the name of a sponsoring wholesaler. Retailer-owned cooperative groups operate like wholesaler-sponsored voluntary groups, but the retailers actually own the wholesaler. The third type of contractual channel system is the franchise system. One party, the franchisor, grants another party, the franchisee, the right to distribute and sell specified goods and services.13-11© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdFranchise ChannelsFranchise ChannelsFranchise ChannelsFranchise ChannelsExhibit 13-613-12© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing ChannelsExhibit 13-713-13© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing ChannelsDevelopDevelopStrategyStrategyEvaluateEvaluateAlternativesAlternativesDetermineDetermineStructureStructureImplementImplementStrategyStrategyEvaluateEvaluatePerformancePerformanceChannel objectives should be specifically stated, measurable, and consistent with the firm’s marketing objectives. Channel strategy is an expression of a general action plan and guidelines for allocating resources to achieve the channel objectives.BuyerBuyerPreferencesPreferencesRelationshipRelationshipOrientationOrientationDegree of Degree of Market Market CoverageCoverage13-14© 2007 The McGraw-Hill Companies, Inc. All rights reserved. Bearden Marketing 5th EdDevelopDevelopStrategyStrategyManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing ChannelsManaging Marketing Channels1. Evaluation of Capabilities and