Chapter 10 Notes: Place and Development of Channel Systems

Chapter 10 Notes PLACE AND DEVELOPMENT OF CHANNEL SYSTEMS PLACE DECISIONS ARE AN IMPORTANT PART OF MARKETING STRATEGY PLACE--making goods and services available in the right quantities and locations--when customers want them. CHANNEL OF DISTRIBUTION--any series of firms or individuals who participate in the flow of products from producer to final user or consumer. PLACE DECISIONS ARE GUIDED BY "IDEAL" PLACE OBJECTIVES • Product classes suggest Place objectives • Place system is not automatic • Place decisions have long-run effects CHANNEL SYSTEM MAY BE DIRECT OR INDIRECT • The Internet makes direct distribution easier • Direct contact with customers • Suitable middlemen are not available • Common with business customers and services DIRECT MARKETING--direct communication between a seller and an individual customer using a promotion method other than face-to-face personal selling. CHANNEL SPECIALISTS MAY REDUCE DISCREPANCIES AND SEPARATIONS DISCREPANCY OF QUANTITY--the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want. DISCREPANCY OF ASSORTMENT--the difference between the lines a typical producer makes and the assortment final consumers or users want. • Channel specialists adjust discrepancies with regrouping activities REGROUPING ACTIVITIES--adjusting the quantities or assortments of products handled at each level in a channel of distribution. -Adjusting quantity discrepancies by accumulating and bulkbreaking ACCUMULATING--collecting products from many small producers. BULK-BREAKING--dividing larger quantities into smaller quantities as products get closer to the final market. SORTING--separating products into grades and qualities desired by different target markets. ASSORTING--putting together a variety of products to give a target market what it wants. CHANNEL RELATIONSHIP MUST BE MANAGED • Marketing manager must choose type of channel relationship • The whole channel should have a product-market commitment TRADITIONAL CHANNEL SYSTEMS--a channel in which the various channel members make little or no effort to cooperate with each other. CHANNEL CAPTAIN--a manager who helps direct the activities of a whole channel and tries to avoid--or solve--channel conflicts. • Some producers lead their channels • Some middlemen are channel captains VERTICAL MARKETING SYSTEMS--channels systems in which the whole channel focuses on the same target market at the end of the channel. CORPORATE CHANNEL SYSTEMS--corporate ownership all along the channel. VERTICAL INTEGRATION--acquiring firms at different levels of channel activity. ADMINISTERED CHANNEL SYSTEMS--various channel members informally agree to cooperate with each other. CONTRACTUAL CHANNEL SYSTEMS--various channel members agree by contract to cooperate with each other. • Vertical marketing systems—dominant force in the marketplace IDEAL MARKET EXPOSURE--when a product is available widely enough to satisfy target customers' needs but not exceed them. INTENSIVE DISTRIBUTION--selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product. SELECTIVE DISTRIBUTION--selling through only those middlemen who will give the product special attention. EXCLUSIVE DISTRIBUTION--selling through only one middleman in a particular geographic area. • Intensive distribution--sell it where they buy it • Selective distribution--sell it where it sells best • Reduce costs and get better partners • Get special effort from channel members • Selective often moves to intensive as market grows • Exclusive distribution sometimes makes sense MULTICHANNEL DISTRIBUTION—(sometimes called DUAL DISTRIBUTION) when a producer uses several competing channels to reach the same target market--perhaps using several middlemen in addition to selling directly. REVERSE CHANNELS--channels used to retrieve products that customers no longer want.