Chapter Twelve Marketing Channels Delivering Customer Value Copyright

Chapter Twelve Marketing Channels Delivering Customer Value Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide

What is a Distribution Channel? • A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. • Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 2

Why Use Marketing Intermediaries? • Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 3

Distribution Channel Functions Risk Taking Information Financing Promotion Physical Distribution Contact Negotiation Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Matching Chapter 12 - slide 4

Marketing Channels Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 5

Conventional vs. Vertical Marketing Channels Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 6

Vertical Marketing Systems (VMS) • A vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system • One channel member either owns the others, has contracts with them, or wields so much power that they all cooperate Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 7

Vertical Marketing Systems (VMS) • Corporate VMS combines successive stages of production and distribution under single ownership • Administered VMS coordinates successive stages of production and distribution through the size and power of the parties • Contractual VMS consists of independent firms at different levels of production and distribution who join through contracts to obtain economies or sales impact Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 8

Horizontal Marketing Systems (HMS) Horizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone. e. g. Joint R&D projects Joint Promotions Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 9

Channel Behavior and Organization Changing Channel Organization Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 10

Channel Design Decisions Identifying Major Alternatives Intensive distribution • Candy and toothpaste Exclusive distribution • Luxury automobiles and prestige clothing Selective distribution • Television and home appliance Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Chapter 12 - slide 11