Chapter 10: Marketing Channels & Intermediaries PDF

Chapter 10: Marketing channels and the role of intermediaries Chapter outline The benefits of marketing channels The functions of a marketing channel Marketing channel structures Utilising alternative marketing channel arrangements Factors that influence marketing channel st...

Chapter 10: Marketing channels and the role of intermediaries Chapter outline The benefits of marketing channels The functions of a marketing channel Marketing channel structures Utilising alternative marketing channel arrangements Factors that influence marketing channel strategies Levels of distribution intensity Chapter outline (continued) Potential channel conflict Causes of channel leadership The importance of physical distribution Retailing intermediaries The benefits of marketing channels Marketing channel: a large pipeline through which products, their ownership, communication, financing and payment, and accompanying risks, flow to the consumer. Products move through marketing channels by way of physical distribution Marketing channels and the distribution of products Needs filled by marketing channels: Specialisation and division of labour Overcoming discrepancies Providing contact efficiency The functions of a marketing channel Contacting and promoting Transactional Negotiating functions Risk taking Logistical Physically distributing functions Sorting Facilitating Researching functions Financing Marketing channel structures Direct channel Retailer channel Producer Producer Retailers Consumers Consumers Marketing channel structures (continued) Wholesale channel Agent/broker channel Producer Producer Agents/brokers Wholesalers Wholesalers Retailers Retailers Consumers Consumers Marketing channel structures (continued) The Internet as a channel of distribution Disintermediation: elimination of a channel intermediary Lower cost Higher speed Reintermediation: reintroduction of channel members Added value to customers Utilising alternative marketing channel arrangements Multiple channels: two or more channels Non-traditional channels: Internet, mail order, farmer’s markets Strategic channel alliances: use another’s channel Reverse channels: consumer back to manufacturer Factors that influence marketing channel strategies Factors affecting channel choice: Level of distribution intensity: Market factors Intensive distribution Product factors Selective distribution Producer factors Exclusive distribution Levels of distribution intensity Fewer outlets Exclusive distribution Selective distribution Intensive distribution More outlets Potential channel conflict Horizontal conflict: Develops among channel members at the same level E.g. retailer vs retailer Vertical conflict: Occurs between channel members at different levels E.g. Retailer vs manufacturer Causes of channel conflict Firms deal with channel conflict by gaining more control through: Forward integration: when a producer or manufacturer establishes/buys its own wholesaler/retailer Backward integration: when an intermediary establishes/buys a production facility The importance of physical distribution Physical distribution: All business activities concerned with stocking and transporting materials and parts or finished inventory so they arrive at the right place when needed and in usable condition, to meet consumer needs Logistics: A broad term encompassing physical distribution, including procuring and managing raw materials and component parts for production The classification of retail operations Types of ownership Types of merchandise sold Location Size of the market area Type of service rendered Relationship with other businesses The classification of retail operations 1. Types of ownership 1. Single outlet Independent ownership 2. Multiple outlets Chain stores, franchising, branches CNA 3. Retail Owned by manufacturers Forward vertical integration Queenspark, Pepstores 4. Shops owned by the state The classification of retail operations 2. Types of merchandise sold Types of shops Variety of Food-related merchandise Department store Convenience stores merchandise Supermarkets Specialty store Wide variety: Superstores Supermarket Department stores Hypermarkets (anchor tenants) Convenience store Warehouse shops Superstores Box shops Full-line discount store Hypermarkets General merchandise Warehouse club Full-line discount stores Specialty stores Off-price retailer Limited variety: Department stores Specialty stores Discount stores Fast-food outlets Catalogue showrooms Convenience food stores Factory shops The classification of retail operations 3. Location Regional shopping centres Community centres Neighbourhood centres Local centres The classification of retail operations 4. Size of the market Convenience goods shop: small area More mobile consumers: larger area Large shop floor area: large area Competitor distance far away: larger area The classification of retail operations 5. Type of service rendered Self-service: search and compare for themselves Self-selection retailing: search and compare themselves, with staff for advice/assistance Limited-service retailers: customers need more assistance e.g. furniture shops Full-service retailers: specialty products e.g. jewellery The classification of retail operations 6. Relationship with other businesses (continued) Types of franchise arrangements: Advantages of franchise arrangements: Original service/trademark holder-retailer Become businessperson with little capital Manufacturer-retailer Established product Manufacturer-wholesaler Technical training and managerial assistance Wholesaler-retailer Quality control standards Franchising features: Agreement between franchisor and franchisee Objectives to be achieved Promotion and entrenchment of image Support parties give each other Financial arrangements Reduction of risk The classification of retail operations 6. Relationship with other businesses (continued) Leased department: a portion of a retail shop that is rented to an outside party e.g. Steer’s outlets in Spar supermarkets Non-shop retailers: retailers whose interaction with customers is mainly by way of telephone, mail, television, newspapers, magazines and computer