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SIU MKTG 305 - Exam 2 Study Guide
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MKTG 329 1st EditionExam # 2 Study Guide Lectures: 11 - 19Lecture 11Defining the marketing channel:Marketing channel- the external contactual organization that management operates to achieve its distribution goals- The channel is outside of the firm, and requires working with more than one contact - The members of the channel do not include the ancillary structure of facilitators (other firms that do tasks such as transportation, advertising, financial loans, etc.) Movement Along the Channel:A good way to think of the channel would be similar to a pyramid. At the top you have the point of origin (producers who create goods and providers who provide services) moving on to an intermediary (which could be a wholesaler that sells to retailers, or a retailer that sells to consumers) and from then moving on to the point of consumption.Point of originWholesalerConsumer (End user)RetailerEnd User/ Point of consumptionRetailerEnd user/ Point of consumptionLecture 12Types of Channels:There are two main structures of channels; they are either direct or indirect. A direct channel is a straight shot from the originator to the end user. There are no intermediaries in between the two. This is a two-level channel. It can be said that this process has gone through “disintermediation,” or gotten rid of the middle-man.Any channel with intermediaries uses a “multi-channel strategy” and is indirect.Channels can also be internal or external. For example, Sherwin Williams not only owns the factories where they make their products, they also own the stores where those products are sold. An example of using external channels would be Walmart. Walmart is the “retailer” within a channel of many producers creating many products and selling them to Walmart rather than selling them in internally owned stores. OriginEnd userOriginIntermediaryEnd UserChannel Limits:There are things that may limit the extent of what a channel can accomplish. Economic- this includes things like not having enough capital to open another plant, or banks not being willing to make loansGeographic-this depends on where the member is located. Compare Chicago to Carbondale. The demand in Chicago is very different than it is in Carbondale. The populations are vastly different and the infrastructure of Carbondale could never support Chicago. Human- this depends on who is available to work for you. This can include education level, relationships, and the labor pool. Channel Flow:Channels can flow forward, backward, or in both directions, both in terms of product and information.Ex. Product moves forward from the producer to the retailer and from the retailer to the consumer.Ex. The retailer pays the producer, and the consumer pays the retailer.Ex. The consumer buys a product from the retailer, and the calls the producer to do a review about the product. Lecture 13Distribution:Distribution covers not only channel strategy but also logistics. However, in order for logistics to be applied, there needs to be a formulated plan for the channel strategy. Channel strategy is the broader of the two, and it includes deciding which payment structures will be used, inventory level, contact between companies and just about every other detail that would be required to successfully distribute products/services. Logistics is the process that takes place when all the ground work is laid and the actual movement of products is taking place. There are two parts to logistics: materials management(which starts the moment that a shipment is offloaded) and physical distribution (which is the actual movement of a product from one point to another.) It is important to remember that changes and costs for transportation and distribution are not all covered by the consumer. If the price to distribute the goods goes down, a company may keep the price they are selling to the customer the same and just take the increased profit margin. Also, a lot of the way the company handles logistics depends on other factors. If they want to serve people who are looking for things out of convenience the company may have a smaller store in a different location than if they wanted to have every product available. When buying inbulk, wait times may be less relevant to the consumer, etc.Product Assortment:Product assortment takes place within the distribution functions.For example, a warehouse has a large number of red footballs but they want to distribute them to 5 different stores. They need to divide the red footballs into allocated groups. If the warehouse had a large lot of red and green balls and the 5 smaller stores only wanted onecolor each, they would need to sort out the different colored balls into smaller groups of red balls and smaller groups of green balls.If a warehouse received a shipment of red balls and a separate shipment of green balls, they may need to assort the two shipments together to send one large order of red and green balls to the next member in the channel. If a warehouse needed to send one large shipment of red balls to the next member in the channel, but they did not have a large enough number for the order in one place, they would need to accumulate multiple smaller groups of red balls together in one big group.Things to Remember:Companies are always looking for the most economical way of doing things. In some cases it may be cheaper for them to buy in bulk if they have the storage space for it. However, some companies may not have the room to store the extra merchandise, so buying in bulk for them would not be more economical. The more things a company takes on, the harder it is to do them all right. Because of this, some companies may choose to have another company handle what they do better. Ex. Retail displays are often left up to the producer of a product, while the retailer depends on the producer to handle it.Lecture 14Routinization:One way that companies make sure that they are saving time and performing the proper jobs in the most efficient way possible it through routinization. By creating a routine and making sure that they stick with it at all times, all the members within the marketing channel can expect the same process every time. Ex. If one member in the channel decided to change the routine and deliver a product early, it is possible that the next member would not have the resources yet to handle it, or employees to move the product.Consider the way that Walmarts are laid out. Just about every Walmart uses the


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SIU MKTG 305 - Exam 2 Study Guide

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