Marketing article assignment

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CHAPTER 1 Marketing Channel Concepts

Part 1: Marketing Channel Systems

©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.©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.

Le ar

ni ng

O bj

ec tiv

es ①The growing importance of marketing channels

② The definition of marketing channels

③How marketing channels relate to strategic variables in the marketing mix

④The flows in the marketing channels and their relationship to channel management

⑤The principles of specialization, division of labor, and contactual efficiency

⑥The difference between the concepts of channel structure and of ancillary structure

Objective Why the growing importance of marketing channels?

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

The prediction: Disintermediation – reduction of number of intermediaries

The reality: Reintermediation – evolution of a new type of intermediary

Yahoo! eBay

Amazon.com

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

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

Place (distribution), or Marketing Channel

Strategy

Potential for gaining competitive advantage because place is more difficult for competitors

to copy

Sustainable competitive advantage

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

Power retailers as of consumer markets

Act as buying agents for customers rather than as selling agents for manufacturers

Gatekeepers

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

Marketing channels are the most recent target for

reducing distribution costs.

The focus is on channel structure and

management.

Objective

What is a marketing channel?

2 Outside the firm Firm involved in

negotiatory functions

Management’s involvement

in the process

Goals that change, causing variations in contactual organization & the way in

which management operates it

External contactual organization that management operates to achieve its distribution objectives

What is a channel manager?

Anyone in a firm or organization who is

involved in marketing channel decision making

Objective How does marketing channel strategy relate to the

rest of the marketing mix? Marketing

Mix or

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

The change of focus to channel strategy

• Creates competitive advantage with long-term viability

• Builds strong relationships between manufacturers and channel members

• Based on trust, confidence, and people power

Channel Strategy and Logistics Management

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

Objective Marketing Channel Flows

Product Flow

Promotion Flow

Information Flow

Ownership Flow

Negotiation Flow

Product Flow

Manufacturer

Transportation Company

Wholesalers

Retailers

Consumer

Negotiation Flow

Manufacturer

Wholesalers

Retailers

Consumer

Ownership Flow

Manufacturer

Wholesalers

Retailers

Consumer

Information Flow

Manufacturer

Transportation Company

Wholesalers

Retailers

Consumer

Promotion Flow

Manufacturer

Advertising Agency

Wholesalers

Retailers

Consumer

Objective

Distribution through intermediaries

Technology The Internet

Economic Specialization & Considerations Division of Labor

Contactual Efficiency

Factors that determine the role of intermediaries

Specialization & Division of Labor

Distribution Tasks Production Tasks

Distributed Inter-organizationally

Distributed intraorganizationally

Contactual Efficiency Granada Guitar Co.

Negotiation Effort

Estimated Dollar Costs of Inputs

Distribution Objective (Output)

Contactual Efficiency

100 sales visits 100 phone calls 20 magazine

ads

@ $50 = $5,000 @ 3 = 300 @1,000 = 20,000

$25,300

Get 500 music stores to carry new guitar line

Negotiation effort in dollar terms relative to achieving the distribution objective = $25,300

Objective Channel Structure v. Ancillary Structure

Channel Structure

The group of channel members to which a

set of distribution tasks has been allocated

Ancillary Structure

The group of institutions that assist channel members in performing

distribution tasks

Why are single- channel

structures currently the exception?

Why is managing the ancillary

structure most likely to be less complex than managing the channel structure?

Growth in online retail sales has been outstripping conventional sales in retail stores. This online sales growth might be enhanced significantly by the latest online sales phenomenon of mobile commerce—shopping via mobile smart phones such as Apple’s iPhone, Research in Motion’s Blackberry, or Google’s NexusOne. But so far, of the almost 50 million smart phone users that have access to the Internet, only about 7 million (under 15%) have actually bought something through their phones during the course of a year.

Do you think mobile commerce via smart phone will grow rapidly in the future? Why or why not?

Discussion Question #3