Marketing Channels Part 1 Marketing Channel Systems A

Marketing Channels Part 1: Marketing Channel Systems A Management View 8 e Rosenbloom 3 The 3 Environment of Marketing The Environment of Channels Marketing CHAPTER Part 1: Marketing Channel Systems CHAPTER © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objectives ① The external environment – five factors ② The economic environment ③ The competitive environment ④ Types of competition ⑤ The sociocultural environment ⑥ The technological environment ⑦ The legal environment ⑧ Legal issues in channel management 2 © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 1 The External Environment – 5 Factors Consists of all external uncontrollable factors within which marketing channels exist Affects channel members and nonmembers, such as facilitating agencies = All channel participants © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

The Environment Member participants Producers & Manufacturers Locus of channel management Intermediaries 1. Economic 2. Sociocultural 3. Competitive 4. Technological 5. Legal Target Markets Nonmember participants Facilitating agencies © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 2 The Economic Environment Recession Inflation Major Economic Forces Deflation © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Recession = 2 consecutive quarters of decline in the GDP, stagnant, increased very slow Consumer and/or Corporate spending = Reduced sales volume Reduced profitability Firms caught with large inventories Channel strategy: Manufacturers provide channel member support by financing high inventory costs © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Inflation= A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services. Continued high spending OR Drop-offs in spending, fueling a recession Possible channel strategies: 1. Reduce manufacturer’s product mix from higherprice to lower-price products 2. Reduce inventory burden on members with: • Streamlined product line • Faster order processing & delivery • Higher inventory turnover through stronger promotional support © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Deflation Prices Challenge: Pass cost-induced price increases through channel when built-in cost pressures from labor contracts were negotiated several years earlier © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Other Economic Factors 1. Real interest rates = Demand Costs 2. Strong U. S. Dollar Difficult to sell products through channel members = U. S. products less competitive © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 3 The Competitive Environment Global in scope: “No longer is it realistic for domestic firms to focus only on rivals within the boundaries of their own country. ” Global marketplace, global arena, global competition; terms that describe today’s market. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 4 Types of Competition Vertical Horizontal Channel System Intertype © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Horizontal Competition M M W W R R © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Intertype Competition M M W W R R © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Vertical Competition M W R © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Channel System Competition M M M © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 5 The Sociocultural Environment Pervades all aspects of a society Influences both national and international marketing channels Influences wide variations among channel structures worldwide © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Sociocultural Developments Population Age Patterns Ethnic Mix Educational Trends Family or Household Structure Role of Women U. S. pop. Becoming both younger & older # of minority-owned businesses Levels = people more demanding Smaller & more varied # = changing shopping needs © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 6 The Technological Environment Scanners & EDI Computerized inventory management & Portable computers Help retailers & wholesalers closely monitor success or failure of products they handle © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

The Technological Environment EDI - Electronic Data Interchange = Enhanced Distribution Efficiency • Links together channel information systems • Provides real-time responses • Enhanced by Internet © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

The Technological Environment “Computer sales People” Mobile robots Accelerating technology 3 -D modeling Ultra-wideband technology © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 7 The Legal Environment The set of laws that impact marketing channels • Continually evolving • Affected by changing values, norms, politics, & precedents • Knowledge of basics helps channel manager avoid serious & costly legal problems © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Legislation Affecting Marketing Channels Sherman Antitrust Act 1890; Fundamental antimonopoly law Public welfare best served through competitio Clayton Act 1914; Strengthen Sherman Antitrust Act Prohibits specific practices among competing Federal Trade Commission Act 1914; Established FTC Power to investigate & enforce © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Legislation Affecting Marketing Channels Robinson-Patman Act 1936; Amendment to Clayton Act Prohibits price discrimination Allows price differentials to different customers under specific circumstances Celler-Kefauver Act 1950; Amendment to Clayton Act Prohibits vertical mergers & acquisitions © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 8 Legal Issues in Channel Management • Dual Distribution, or multi-channel distribution Producer or manufacturer uses 2 or more different channel structures for distributing the same product • Exclusive Dealing Supplier requires its channel members to sell only its products or to refrain from selling directly to competitive suppliers • Full-Line Forcing Supplier requires channel members to carry a full-line of its products in order to sell any particular products in supplier’s line © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Legal Issues in Channel Management • Price Discrimination Supplier sells at different prices to the same class of channel members • Price Maintenance Supplier dictates prices charged by channel members to their customers • Refusal to Deal Supplier has right to refuse to deal with whomever they want as channel members © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Legal Issues in Channel Management • Resale Restrictions Manufacturer attempts to stipulate to whom and in what geographical market channel members may resell the manufacturer’s products • Tying Agreements Supplier sells a product to a channel member on condition that the channel member also purchase another product • Vertical Integration Firm owns and operates organizations at other levels of the distribution channel © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,