What major types of marketing intermediaries occupy this sector ?
Chapter 1 Marketing Channel Concepts. Major Points for Ch. 1 1. Key Terms and Definitions 2. Why...
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Transcript of Chapter 1 Marketing Channel Concepts. Major Points for Ch. 1 1. Key Terms and Definitions 2. Why...
Chapter 1Chapter 1
Marketing Channel Concepts
Major PointsMajor Points for Ch. 1 for Ch. 1
1. Key Terms and Definitions
2. Why Marketing Channels and Intermediaries?**
3. Marketing Channels and other Marketing Concepts
4. The Flows in the Marketing Channels**
5. Basic Principles for Marketing Channels**
6. Evolution of Marketing Channel Concept
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Let’s Learn about:
Marketing Channels
Originally meant: Paths through which goods or materials can move from producers to users.
Cf) Distribution Channels vs. Marketing Channels
Middleman (Intermediaries)
create value by reducing the spatial separation* – the physical distance between the point of production and point of consumption
*A question
What is a marketing channel? What is a marketing channel? (Textbook version) (Textbook version)
Internal *& External contactual organization that management operates to achieve its distribution objectives
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Firm involved in negotiatory functions
What are the distribution objectives?**
Marketing Channels Act as Exchange Facilitators
We define a Marketing Channel as “exchange relationships that create customer value in the acquisition, consumption*, and disposition* of products and services”
Point 2: Why Marketing Channels and Intermediaries?**Create Higher Exchange Utility by Providing More Customer Value*
• Four Basic Components:
–Form Utility
–Place Utility
–Possession Utility
–Time Utility
• New Focus: Developing and Enhancing Customer Relationships
• Create utility by contributing to Contactual efficiency*
• Facilitating Routinization
• Simplifying Assortment
• Minimizing uncertainty within marketing channels
c r a M
Selling Directly (Without Intermediaries)
Manufacturers
Retailers
40 Contact Lines
FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES
Selling Through One Wholesaler
Manufacturers
Wholesaler
Retailers
14 Contact Lines
FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES
ex) one-stop shopping
Selling Through Two Wholesalers
Manufacturers
Wholesalers
Retailers
28 Contact Lines
FIGURE 1.6: CONTACT COSTS TO REACH THE MARKET WITH AND WITHOUT INTERMEDIARIES
WhyWhy the growing importance of the growing importance of marketing channels?marketing channels?
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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 costs
11.. 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 costs
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Yahoo! eBay
Amazon.com
The prediction:Disintermediation — reduction/deletion of number of intermediaries
The reality:Reintermediation — evolution of a new type of intermediary
The explosion of information technology and E-commerceThe explosion of information technology and E-commerce
1. 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 costs
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A greater difficulty in gaining a A greater difficulty in gaining a sustainablesustainable competitive advantage competitive advantage
Place (distribution), or Marketing
Channel Strategy Sustainable competitive advantage
Potential for gaining competitive advantage because place is more difficult for competitors
to copy
1. 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 distributors
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Power retailers as of consumer marketsgatekeepers
Act as buying agents for customers rather than as selling agents for manufacturers
Ex) Recent Changes in IT industry
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 4.4.
The need to reduce distribution costsThe need to reduce distribution costs
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Marketing channels are the most recent target for
reducing distribution costs.
The focus is on channel structure and management.
Point 3: 11
How does marketing channel strategy How does marketing channel strategy relate to the rest of the marketing mix?relate to the rest of the marketing mix?
Marketing Mixor
the four Ps
Challenges
Product Limited ability to gain and hold competitive advantage
Price Price wars erode profitability & provide unstable basis for sustaining competitive
advantage
Promotion Expensive and short-lived
Place (Distribution)
Marketing channels support & enhance other Ps to meet demands of target
markets
Marketing Channels
Originally defined as: Paths through which goods or materials can move from producers to users.
©McGraw-Hill Companies, Inc. 2002
Point 4: 11
Marketing Channel Flows**Marketing Channel Flows**
Product Flow*
Promotion Flow
Information Flow*
Ownership Flow
Negotiation Flow
* Unbundling Flows
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Product FlowProduct Flow
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers
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Manufacturer
Wholesalers
Retailers
Consumers
Negotiation FlowNegotiation Flow
Ownership FlowOwnership Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Information FlowInformation Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Transportation Company
Promotion FlowPromotion Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Advertising Agency
Physical PossessionOwnership
Promotion
Negotiation
Financing
Risking
Ordering
Payment
Physical PossessionOwnership
Promotion
Negotiation
Financing
Risking
Ordering
Payment
Physical PossessionOwnership
Promotion
Negotiation
Financing
Risking
Ordering
Payment
FIGURE : MARKETING FLOWS IN CHANNELS
Producers Wholesalers Retailers
ConsumersIndustrial
and Household
Commercial Channel Subsystem
Marketing Channel and Logistics Channel and Logistics Management: Same or Different?Management: Same or Different?
Part of distribution variable
• Concerned with entire process of starting and operating contactual organization
• Formulated before logistics management
Focused specifically on providing product availability at appropriate time & place
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Foundations on Distribution through Foundations on Distribution through intermediaries (Basic Principles)intermediaries (Basic Principles)
point 5:
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Economic Specialization &Considerations Division of Labor.*
Contactual Efficiency
New Technology New channels
Social Considerations Relationships
Factors that determine/influence the role of intermediaries
The Evolution of Marketing Channel Concepts
1. The Production Era And Distributive Practices
2. The Institutional Period And Selling Orientation
3. The Marketing Concept
4. Relationship Marketing Era
1900s
1940s
1950s
1990s
Point 6
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The change of focus on channel strategyThe change of focus on channel strategy
• Creates competitive advantage with long-term viability
• Builds strong relationships between manufacturers and (selected) channel members
• Use of Multichannel Strategy
• IT-enabled, open channel systems