CHANNEL FLOWS AND EFFICIENCY l l Generic channel

l l l l Physical possession Ownership Promotion Negotiation Financing Risking Ordering Payment BSAD

Ownership and Possession l Physical possession – – – BSAD 113 Has physical custody

Promotion and Negotiation l Promotion – Advertising for product l l – – –

Financing and Risk Taking l Inventory financed by – – – l l Seller

Ordering and Payment l Ordering – – – l Automatic Routine—review of whether to

Zero-Based Channel Design l l l Achieves target segment’s requirements Least expensive method of

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CHANNEL FLOWS AND EFFICIENCY l l Generic channel flows Sharing of tasks among – – l Manufacturers Intermediaries Retailers Consumers Rewards and terms to participants BSAD 113 CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 1

l l l l Physical possession Ownership Promotion Negotiation Financing Risking Ordering Payment BSAD 113 COLA Generic Channel Flows CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 2

Ownership and Possession l Physical possession – – – BSAD 113 Has physical custody Carries holding costs Probably responsible for damage or loss l Ownership – – – Holds title Has not yet been paid but may collect finance charge May or may not have to accept returns CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 3

Promotion and Negotiation l Promotion – Advertising for product l l – – – BSAD 113 Through media Point-of-Purchase (POP) l Negotiation – Settling terms of deal l l Demonstrations Display/shelf space Personal selling CHANNEL FLOWS AND EFFICIENCY Price Responsibilities of each side Promotion – Quantities sold and offered – Delivery schedule – Miscellaneous (e. g. , replacement of spoilage) – Lars Perner, Instructor 4

Financing and Risk Taking l Inventory financed by – – – l l Seller (manufacturer) Buyer (e. g. , wholesaler or retailer) Third party (e. g. , bank holds title to cars on dealer lot) l Risk taking – – – Damage, spoilage Obsolescence Over-estimated demand Terms (e. g. , discount for prompt payment) Ability to raise capital and cost of capital BSAD 113 CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 5

Ordering and Payment l Ordering – – – l Automatic Routine—review of whether to do straight reorder Re-evaluated Payment – – Timeliness Method l l Cash/certified check Check/electronic transfer Credit cards (small retailers) Payment by third party Financier – Customer – – BSAD 113 Flow through channel CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 6

Zero-Based Channel Design l l l Achieves target segment’s requirements Least expensive method of achieving objectives Equity principle: Rewards should be given proportionally to share of functions performed BSAD 113 CHANNEL FLOWS AND EFFICIENCY Lars Perner, Instructor 7