Principles of Marketing Chapter 14

Study Notes

Principles of Marketing, Arab World Edition - Chapter 14: Managing Marketing Channels

Marketing Channels (Distribution Channels): A set of interdependent organizations that facilitate product or service availability for consumers or business users.
Supply Chains and the Value Delivery Network:
- Upstream Partners: Raw material suppliers, components, information, finance, and expertise that create products or services.
- Downstream Partners: Marketing or distribution channels that connect with customers.
The Nature and Importance of Marketing Channels - How Channel Members Add Value:
- Transform products into desired assortments for customers.
- Match supply and demand.
- Overcome time, place, and possession gaps between goods/services and users.
- Provide functions like information, promotion, contact, matching, negotiation, physical distribution, financing, and risk-taking.
Channel Transactions: Adding a distributor reduces the number of contacts between producers and final customers.
- Without a distributor: (Manufacturer x Customer) = 3 x 3 = 9 contacts
- With a distributor: (Manufacturer + Customer) = 3 + 3 = 6 contacts
Channel Behavior and Organization:
- Channel Conflict: Disagreements among channel members over goals, roles, and rewards.
  - Horizontal Conflict: Disagreements among channel members at the same level (e.g., two retailers).
  - Vertical Conflict: Disagreements among channel members at different levels (e.g., manufacturer and retailer).
- Vertical Marketing Systems (VMS): A unified system where producers, wholesalers, and retailers work together with a unified leadership.
  - Types:
    - Corporate VMS
    - Contractual VMS
    - Administered VMS
- Horizontal Marketing Systems: Two or more companies at one level join together to pursue a shared marketing opportunity. Resources are combined for greater effect than could be achieved independently.
- Multichannel Distribution Systems (Hybrid Marketing Channels): Companies use multiple marketing channels to reach different customer segments. Examples include catalogs, online sales, retailers, dealers, and direct sales forces.
Changing Channel Organization - Disintermediation:
- Producers eliminate intermediaries, interacting directly with buyers.
- New types of intermediaries may replace traditional ones; this is a phenomenon driven by emerging technologies.