Chapter 14

Marketing Channels

MKTG9
Lamb, Hair, and McDaniel

© 2016 Cengage Learning. All Rights Reserved.

LEARNING OUTCOMES
14-1 Explain what marketing channels and channel
intermediaries are, and describe their functions
and activities

14-2 Describe common channel structures and

strategies, and the factors that influence their
choice

14-3 Discuss channel relationship types and roles,

and their unique benefits and drawbacks

© 2016 Cengage Learning. All Rights Reserved. 2

LEARNING OUTCOMES
14-4 Discuss multichannel and omnichannel
marketing in both B2B and B2C structures
and explain why these concepts are
important

14-5 Discuss new developments in channel

management and the effects on existing
channel activities and structures

© 2016 Cengage Learning. All Rights Reserved. 3

 Marketing Channels and
14-1
Channel Intermediaries

Explain what marketing

channels and channel
intermediaries are, and
describe their functions
and activities

© 2016 Cengage Learning. All Rights Reserved.

 Marketing Channel
A set of interdependent organizations that
eases the transfer of ownership as products
move from producer to business user or
consumer.

Channel Members
Negotiate with one another, buy and sell products,
and facilitate the change of ownership between buyer
and seller in the course of moving the product from
the manufacturer into the hands of the final
consumer.

© 2016 Cengage Learning. All Rights Reserved. 5

Marketing Channel Functions

Specialization
Specializationand
anddivision
divisionof
of labor
labor

Overcoming
Overcoming discrepancies
discrepancies

Providing
Providingcontact
contactefficiency
efficiency

© 2016 Cengage Learning. All Rights Reserved. 6

 Specialization and
Division of Labor
 Creates greater efficiency
 Provides lower production
costs
 Create time, place, form, and
exchange utility

© 2016 Cengage Learning. All Rights Reserved. 7

 Contact Efficiency

Retailer
Firms in the channel that sell
directly to customers

Retailers simplify distribution by cutting

the number of transactions required by
consumers, making an assortment of
goods available in one location.

© 2016 Cengage Learning. All Rights Reserved. 8

 How Marketing Channels Reduce
14.1 the Number of Required
Transactions

© 2016 Cengage Learning. All Rights Reserved. 9

 Channel Intermediaries

An
An institution
institution that
that buys
buys goods
goods
Merchant
Merchant from
from manufacturers,
manufacturers, takes
takes
Wholesaler
Wholesaler title
title to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.
Wholesaling
Wholesaling intermediaries
intermediaries
Agents
Agents and
and who
who facilitate
facilitate the
the sale
sale of
of aa
Brokers
Brokers product
product by
by representing
representing
channel
channel members.
members.

© 2016 Cengage Learning. All Rights Reserved. 10

Channel Intermediaries
Agents
Agents Merchant
Merchant
and
and Wholesalers
Wholesalers
Brokers
Brokers

Do
DoNOT

Take
Take Title
NOTTake
TakeTitle

Title to
Titleto

toGoods
Goods
toGoods
Goods

© 2016 Cengage Learning. All Rights Reserved. 11

 Factors Suggesting Type of
Wholesaling Intermediary to Use

Product
Productcharacteristics
characteristics

Buyer
Buyerconsiderations
considerations

Market
Marketcharacteristics
characteristics

© 2016 Cengage Learning. All Rights Reserved. 12

 Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Transactional Negotiating
Functions
Functions
Risk Taking

Physically distributing
Logistical
Logistical Storing
Functions
Functions
Sorting

Facilitating Researching
Facilitating
Functions
Functions Financing

© 2016 Cengage Learning. All Rights Reserved. 13

14-2 Channel Structures

Describe common
channel structures and
strategies, and the
factors that influence
their choice

© 2016 Cengage Learning. All Rights Reserved.

 Marketing Channels for
14.2 Consumer Products

© 2016 Cengage Learning. All Rights Reserved. 15

 Channels for Business
14.3 and Industrial Products

© 2016 Cengage Learning. All Rights Reserved. 16

Alternative Channel
Arrangements

Dual or multiple distribution

Nontraditional channels

Strategic channel alliances

© 2016 Cengage Learning. All Rights Reserved. 17

Factors Affecting Channel
Choice

Market
Market Factors
Factors

Product
Product Factors
Factors

Producer
Producer Factors
Factors

© 2016 Cengage Learning. All Rights Reserved. 18

 Market Factors

© 2016 Cengage Learning. All Rights Reserved. 19

 Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
ProductStandardization
Standardization

Product
Product Product
Product Life
LifeCycle
Cycle
Factors
Factors
That
That Affect
Affect
Channel
Channel Product
ProductDelicacy
Delicacy
Choices
Choices

© 2016 Cengage Learning. All Rights Reserved. 20

 Producer Factors

Producer
ProducerResources
Resources

Number
Numberof
of Product
Product Lines
Lines
Producer
Producer
Factors
Factors
That
That Affect
Affect Desire
Channel Desirefor
forChannel
Channel
Channel Control
Choices
Choices Control

© 2016 Cengage Learning. All Rights Reserved. 21

Levels of Distribution Intensity

AAform
formof
ofdistribution
distributionaimed
aimedat at
Intensive
Intensive having
havingaaproduct
productavailable
availableinin
every
everyoutlet.
outlet.

AAform
formofofdistribution
distributionachieved
achieved
Selective
Selective by
byscreening
screeningdealers
dealerstotoeliminate
eliminate
all
allbut
butaafew
fewininany
anysingle
singlearea.
area.

AAform
formofofdistribution
distributionthat
that
Exclusive
Exclusive established
establishedone
oneor oraafew
few
dealers
dealerswithin
withinaagiven
givenarea.
area.

© 2016 Cengage Learning. All Rights Reserved. 22

 Levels of Distribution Intensity
Intensity Number of
Objective
Level Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Shopping and some Several
specialty goods.
Work with single
intermediary. Specialty
Exclusive goods and industrial
One
equipment.

© 2016 Cengage Learning. All Rights Reserved. 23

 Emerging Distribution
Structures

In recent years, rapid changes in

technology and communication
have led to the emergence of
new, experimental distribution
methods and channel structures.

© 2016 Cengage Learning. All Rights Reserved. 24

 Types of Channel
14-3
Relationships

Describe channel
relationship types and
roles, and their unique
benefits and
drawbacks

© 2016 Cengage Learning. All Rights Reserved.

 Types of Channel Relationships
Benefits Hazards

Arm’s Length Fulfills a one time or Parties unable to

Relationship unique need; low develop relationship;
involvement/risk low trust level

Cooperative Formal contract without Some parties may

Relationship capital need more relationship
investment/long-term definition
commitment; “happy
medium”
Integrated Closely bonded High capital
Relationship relationship; explicitly investment; any failure
defined relationships could affect every
channel member

© 2016 Cengage Learning. All Rights Reserved. 26

 Co-opetition

Co-opetition mixes elements of

cooperation and competition
between two partners. Two
companies work together on
some initiatives while still
competing in other areas.

© 2016 Cengage Learning. All Rights Reserved.

 Four Basic Channel
Configurations
Manufacturers and retailers can be
arranged into four basic channel
configurations:
1.Bilateral monopoly
2.Retailer monopoly
3.Manufacturing monopoly
4.Multiple manufacturers and retailers working
together and competing with one another for
customers

© 2016 Cengage Learning. All Rights Reserved.

Global Channel Relationships

Global
GlobalChannel
Channel
Development
Development

Channel
Channel “Gray”
“Gray”marketing
marketing
policies
policies differ
differ channels
channels

© 2016 Cengage Learning. All Rights Reserved.

Social Influences in Channels

Power
Power

Control
Control

Leadership
Leadership

Conflict
Conflict

© 2016 Cengage Learning. All Rights Reserved. 30

 Channel Power, Control,
and Leadership

AAchannel
channelmember’s
member’scapacity
capacitytotocontrol
control
Channel
Channel or
orinfluence
influencethe
thebehavior
behaviorof
ofother
otherchannel
channel
Power
Power members.
members.

AAsituation
situationthat
thatoccurs
occurswhen
whenoneonemarketing
marketing
Channel
Channel channel
channelmember
memberintentionally
intentionallyaffects
affectsanother
another
Control
Control member’s
member’sbehavior.
behavior.

AAmember
memberofofaamarketing
marketingchannel
channelthat
that
Channel
Channel exercises
exercisesauthority
authorityand
andpower
powerover
overthe
the
Captain
Captain activities
activitiesofofother
othermembers.
members.

© 2016 Cengage Learning. All Rights Reserved. 31

 Channel Conflict

Inequitable channel relationships

often lead to channel conflict, which
is a clash of goals and methods
among the members of a distribution
channel.

© 2016 Cengage Learning. All Rights Reserved. 32

 Multichannel and
14-4
Omnichannel Marketing

Discuss multichannel and

omnichannel marketing
in both B2B and B2C
structures and explain
why these concepts are
important

© 2015 by Cengage Learning Inc. All rights reserved

 Multichannel Marketing
Customers are offered information, goods,
services, and/or support through one or
more synchronized channels.

While it can promote better consumer

behavior, the multichannel design also
creates redundancy and complexity in the
firm’s distribution system.

© 2016 Cengage Learning. All Rights Reserved. 34

 Omnichannel Marketing
Retailers make their inventory data
available to customers in real time,
effectively merging their distribution
channels.

This creates greater customer control over

the shopping experience, leading to
greater satisfaction and loyalty.

© 2016 Cengage Learning. All Rights Reserved. 35

 New Developments in
14-5
Channel Management

Discuss new
developments in channel
management and the
effects on existing
channel activities and
structures

© 2015 by Cengage Learning Inc. All rights reserved

 M-commerce

Purchasing
Purchasinggoods
goods
M-commerce
M-commerce through
throughmobile
mobile
devices.
devices.

Online retailers offer greater variety of

options for delivery, including one-use
package delivery boxes.

© 2015 by Cengage Learning Inc. All rights reserved 37

 Chapter 14 Video
New Balance Hubway
New Balance Hubway is a bike sharing system in
the Boston area that uses automated stations to
provide a bike service to people looking to go short
distances. In this clip, employees discuss how the
retailing model works for Hubway, and how the
difference between brick and mortar and e-
business models allowed them to succeed in the
Boston area.

CLICK TO PLAY VIDEO

38 © 2015 by Cengage Learning Inc. All rights reserved