Chapter 1Major Points for Ch. 1Marketing ChannelsMiddleman (Intermediaries)What is a marketing channel? (Textbook version)Marketing Channels Act as Exchange FacilitatorsPoint 2: Why Channels and Intermediaries?** Create Higher Exchange Utility by Providing More Customer Value*Slide 8Slide 9Slide 10Slide 11Why the growing importance of marketing channels?The explosion of information technology and E-commerceA greater difficulty in gaining a sustainable competitive advantageThe growing power of distributorsThe need to reduce distribution costsHow does marketing channel strategy relate to the rest of the marketing mix?Slide 18Marketing Channel Flows**Product FlowNegotiation FlowOwnership FlowInformation FlowPromotion FlowSlide 25Marketing Channel and Logistics Management: Same or Different?Foundations on Distribution through intermediaries (Basic Principles)The Evolution of Marketing Channel ConceptsThe change of focus to channel strategyChapter 1Chapter 1 Marketing Channel ConceptsMajor PointsMajor Points for Ch. 1 for Ch. 11. Key Terms and Definitions 2. Why Marketing Channels and Intermediaries?**3. Marketing Channels and other Marketing Concepts4. The Flows in the Marketing Channels** 5. Basic Principles for Marketing Channels**6. Evolution of Marketing Channel Concept11Let’s Learn about:Marketing ChannelsOriginally defined as: Paths through which goods or materials can move from producers to users.Cf) Distribution ChannelsMiddleman (Intermediaries)create value by reducing the spatial separation – the physical distance between the point of production and point of consumptionWhat is a marketing channel? What is a marketing channel? (Textbook version) (Textbook version) Internal & External contactual organization that management operates to achieve its distribution objectives11Firm involved in negotiatory functionsWhat are the distribution objectives?Marketing Channels Act as Exchange FacilitatorsWe define a Marketing Channel as “exchange relationships that create customer value in the acquisition, consumption, and disposition of products and services”Point 2: Why Channels and Intermediaries?**Create Higher Exchange Utility by Providing More Customer Value*•Four Basic Components:–Form Utility–Place Utility–Possession Utility–Time Utility•New: Developing and Enhancing Customer Relationships•Create utility by contributing to Contactual efficiency*•Facilitating Routinization•Simplifying Assortment•Minimizing uncertainty within marketing channelsc r a MSelling Directly (Without Intermediaries)ManufacturersRetailers 40 Contact LinesFIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIESSelling Through One WholesalerManufacturersWholesalerRetailers 14 Contact LinesFIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIESex) one-stop shoppingSelling Through Two WholesalersManufacturersWholesalersRetailers 28 Contact LinesFIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIESWhyWhy the growing importance of the growing importance of marketing channels?marketing channels? 11 1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs11.. 2. A greater difficulty in gaining a sustainable competitiveadvantage 3. The growing power of distributors, especially retailersin marketing channels 4. The need to reduce distribution costs11 Yahoo! eBay Amazon.comThe prediction:Disintermediation — reduction of number of intermediariesThe reality:Reintermediation — evolution of a new type of intermediary The explosion of information technology and E-commerceThe explosion of information technology and E-commerce1. The explosion of information technology and E- commerce 2.2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs11 A greater difficulty in gaining a A greater difficulty in gaining a sustainablesustainable competitive advantage competitive advantagePlace (distribution), or MarketingChannel Strategy Sustainable competitive advantagePotential for gaining competitive advantage because place is more difficult for competitorsto copy1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3.3. 4. The need to reduce distribution costs The growing power of distributorsThe growing power of distributors11Power retailers as of consumer marketsgatekeepers Act as buying agents for customers rather than as selling agents for manufacturersEx) Recent Changes in IT industry1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors 4.4. The need to reduce distribution costsThe need to reduce distribution costs11Marketing channels are the most recent target for reducing distribution costs.The focus is on channel structure and management.Point 3:11How does marketing channel strategy relate to the How does marketing channel strategy relate to the rest of the marketing mix?rest of the marketing mix? Marketing Mixor the four Ps ChallengesProduct Limited ability to gain and hold competitive advantagePrice Price wars erode profitability & provide unstable basis for sustaining competitive advantagePromotion Expensive and short-livedPlace (Distribution)Marketing channels support & enhance other Ps to meet demands of target marketsMarketing ChannelsOriginally defined as: Paths through which goods or materials can move from producers to users.©McGraw-Hill Companies, Inc. 2002Point 4:11Marketing Channel Flows**Marketing Channel Flows** Product Flow* Promotion Flow Information Flow* Ownership Flow Negotiation Flow* Unbundling Flows11Product FlowProduct FlowManufacturerTransportation CompanyWholesalersRetailersConsumers11ManufacturerWholesalersRetailersConsumersNegotiation FlowNegotiation FlowOwnership FlowOwnership Flow11ManufacturerWholesalersRetailersConsumersInformation FlowInformation Flow11ManufacturerWholesalersRetailersConsumersTransportation CompanyPromotion FlowPromotion Flow11ManufacturerWholesalersRetailersConsumersAdvertising AgencyPhysical