Marketing Exam 3 Chapter 13 Marketing Channel a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer Channel Members all parties in the marketing channel who negotiate with one another buy and sell products and facilitate the change of ownership between buyer and seller in the course of moving the product from the manufacturer into the hands of the final consumer Middleman most take title carry inventory take responsibility for selling and distribution after sale service Retailer a channel intermediary that sells mainly to consumers may have their own warehouse instead of a wholesaler ex Giant has giant warehouses to store excess goods Wholesaler buys goods from manufacturers takes title to them stores in warehouse and later ships to retailers Agents and Brokers external sales force who do not take title to goods but facilitate sale between retailers wholesalers and manufacturers Channels for Consumer Products Direct Channel a distribution channel in which producers sell directly to consumers ex online shopping catalog orders telemarketing Retailer Channel when the product moves from a manufacturer to a retailer to a consumer common when the retailer is large and can buy in large quantities ex Giant has its own distribution center Walmart car dealers Wholesaler Channel when the product moves from a manufacturer to a wholesaler to a retailer to a consumer for low cost items that are frequently purchased ex cigarettes candy magazines Agent Broker Channel when an agent broker brings manufacturers and wholesalers together for negotiations but they do not take title to the merchandise products passes through wholesaler retailer then consumer used in markets with many small manufacturers and many retailers that lack the resources to find each other ex food brokers represent buyers and sellers of grocery products they negotiate the sale of a manufacturer s product to wholesalers who then sell to grocery stores Influenced By Market Factors what customers expect who retailers expect to buy from ex drug stores don t want lots of sales reps selling to them they would rather buy from a wholesalers ex Walmart wants direct contact with manufacturers Product Characteristics perishable products need a shorter channel don t want to use a wholesaler ex complex customized products use a direct channel ex Dell Producer Factors amount of control the producer wants in the distribution channel ex Fritolay uses retailer without distribution center will not ship to Giant s warehouse reps go into the store and control in store marketing Problems once passed to the middleman producers lose control of marketing ex displays placement etc to fix shorten the distribution channel Channels for Business Products Direct Channel business users manufacturers buy large quantities of raw materials major equipment processed materials and supplies directly from other manufacturers used when manufacturers require suppliers to meet detailed technical specifications ex Apple buying memory chips government buyers Distributor Channel uses a distributor which is similar to a wholesaler from the consumer channel industrial distributors keep inventories of their products and sell and service them small manufacturers use when they cannot afford their own sales force ex restaurants buy from Cysco distributor Agent Broker Channel a business user negotiates through an agent broker Agent Broker Distributor Channel a producer and distributor negotiate through a broker and the distributor then sells to a business user Factors Influencing a Distributor s Decision to carry a Product middleman s decision about which brands to carry ex Andersen v Pella windows Sales and Profit Expectations Margins incentives offered by supplier Slotting Allowances fees paid to retailer to get product on shelf Volume Discounts lower prices for buying higher quantities Relationship with supplier previous transactions personal connections Relationship with Competitive Suppliers manage appropriate product mix for customers differentiate ex Pella v Andersen windows suppliers relationship with competitors ex Home Depot only sells Andersen Shelf Inventory Space supplier expectations for shelf space Fit with Distributor s Target Customer which brand is more less likely to sell to target market Levels of Distribution depends on cost and amount of control Intensive Distribution a form of distribution aimed at having a product available in every outlet where target customers might want to buy it objective is to achieve mass market selling by using many intermediaries gives producers less control ex convenience goods such as candy Selective Distribution objective is to work with selected intermediaries used when you want to carefully control the image of the product ex Under Armour does not sell to Kohl s Target Walmart etc Exclusive Distribution objective is to work with a single intermediary to have more control over marketing retailers are chosen to fit image of the product ex specialty goods industrial equipment high end jewelry Push Strategy using channel member to push product through the channel uses sales force and trade promotions targeting channel member middlemen Pull Strategy targeting consumer to pull product through the channel uses ads and sales promotions targeting end customer More money should be allocated to push strategies and less towards pull reason is retailer power ex Walmart demanding more money to carry products Social Dimensions of Channels Channel Partnering Coordination working together to ensure that both retailer and producer are satisfied unrealistic Channel Conflict channel members conflicting goals and failure to meet expectations ex lower sales than expected differing perceptions of reality ex pricing displays etc Channel Power ability of one channel member to get another member to do what it wants intermediary has power over a manufacturer when they are a large retailer ex Walmart the product has low brand equity ex Salazon Chocolate intermediary has low switching costs ex Whole Foods can easily switch from Salazon Chocolate intermediary has better information than the manufacturer retailer usually has more information about product competition sales etc ex Walmart requires manufacturers to give more money and lower prices Hefty was pulled from Walmart because they refused to cut prices Walmart suffered because of this Salazon Chocolate organic
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