Chapter 13 Marketing Exam 4 – Flashcards

a set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer -channels facilitate the physical movement of goods from location to location

all parties in the marketing channel that 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

breaking down a complex task into smaller, simpler ones and allocating them to specialists will create greater efficiency and lower average production costs -manufacturers achieve economies of scale through the use of efficient equipment capable of producing large quantities of a single product -also attain economies of scale through specialization and division of labor by aiding producers who lack the motivation, financing, or expertise to market directly to end users or consumers

-marketing channels also aid in overcoming discrepancies of quantity, assortment, time, and space created by economies of scale in production

the difference between the amount of product produced and the amount an end user wants to buy

the lack of all the items a customer needs to receive full satisfaction from a product or products

a situation that occurs when a product is produced but a customer is not ready to buy it

the difference between the location of a producer and the location of widely scattered markets

-third need fulfilled by marketing channels is they provide contact efficiencies by reducing the number of stores customers must shop in to complete their purchases -channels simplify distribution by cutting the number of transactions required to get products from manufacturers to consumers and making an assortment of goods available in one location

-providing specialization and division of labor -overcoming discrepancies -providing contact efficiency

a channel intermediary that sells mainly to consumers

an institution that buys goods from manufacturers and resells them to businesses, government agencies and other wholesalers or retailers and that receives and takes title to goods, stores them in its own warehouses, and later ships them

wholesaling intermediaries who do not take title to a product but facilitate its sale from producer to end user by representing retailers, wholesalers, or manufacturers

1) product characteristics -whether the product is standardized or customized, the complexity of the product, and the gross margin of the product 2) buyer considerations -affecting the wholesaler choice include how often the product is purchased and how long the buyer is willing to wait to receive the product 3) market characteristics -how many buyers are in the market and whether they are concentrated in a general location or are widely dispersed

Transactional Functions: -contacting and promoting -negotiating -risk taking Logistical Functions: -physically distributing -storing -sorting (sorting out: breaking down a heterogenous supply into separate homogenous stocks accumulating: combining similar stocks into larger homogenous supply allocating: breaking a homogenous supply into smaller and smaller lots "breaking bulk" assorting: combining products into collections or assortments that buyers want available at one place) Facilitating Functions: -researching: provides information about channel members and consumers by getting answers to key questions -financing: ensures channel members have the money to keep products moving through the channel to the ultimate consumer

-the efficient and cost-effective forward and reverse flow as well as storage of goods, services, and related information, into, through, and out of channel member companies -logistics functions typically include transportation and storage of assets, as well as their sorting, accumulation, consolidation, and/or allocation for the purpose of meeting customer requirements

channel intermediaries (retailers, wholesalers, agents & brokers) perform---> channel functions (transactional, logistical, facilitating)

direct channel, retailer channel, wholesaler channel, agent/broker channel

*producer-->consumers -a distribution channel in which producers sell directly to consumers -direct marketing activities include: telemarketing, mail-order and catalog shopping, and forms of electronic retailing like online shopping and shop-at-home television networks

producer-->retailer-->consumer

producer-->wholesalers-->retailers-->consumers

*producer--> agents or brokers-->wholesalers-->retailers-->consumers -involves a fairly complicated process -typically used in markets with many small manufacturers and many retailers that lack the resources to find each other -bring manufacturers and wholesalers together for negotiations, but they do not take title to merchandise -ownership passes directly to one or more wholesalers and then to retailers -finally, retailers sell to the ultimate consumer of the product (example: food broker represents buyers and sellers of grocery products. The broker acts on behalf of many different producers and negotiates the sale of their products to wholesalers that specialize in foodstuffs.)

-direct channels are typical in business and industrial markets -manufacturers buy large quantities of raw materials, major equipment, processed materials, and supplies directly from other manufacturers -manufacturers that require suppliers to meet detailed technical specifications often prefer direct channels -companies selling standardized items of moderate or low value often rely on industrial distributors -in many ways, an industrial distributor is like a supermarket for organizations -industrial wholesalers are channel members that buy and take title to products -they keep inventories of their products and sell and service them -often small manufacturers cannot afford to employ their own sales force so they rely on manufacturer's representatives or selling agents to sell to either industrial distributors or users

-direct channel (producer--> government buyer) -direct channel (producer-->industrial user -industrial distributor (producer-->industrial distributor-->industrial user) -agent/broker channel (producer-->agent/broker-->industrial user) -agent/broker-industrial distributor (producer-->agents/brokers-->industrial distributor--> industrial user)

-manufacturers are getting bigger due to growth, mergers, and consolidation -technology allows manufacturers and customers to have access to information that in the past only the distributor had

*the internet has enabled virtual distributors to emerge and forced traditional industrial distributors to expand their business model -internet has led to the emergence of three other new forms of industrial distribution 1st: some companies serve as agents that link buyers and sellers and charge a fee (ex: Expedia links business traverls to airlines, hotels ect.) 2nd: developed by existing companies looking for a way to drop the intermediary from the channel (ex: the Worldwide Retail Exchange is a marketplace created by 17 major retailers such as target ect. The retailers use the exchange to make purchases that in the past would have required telephone, fax, or face-to-face sales calls... using the exchange saves 15% in purchasing costs) 3rd: private exchange -allows companies to automate their channels while sharing information only with select suppliers (ex: Ace Hardware and HP, use private exchanges to manage their inventory supplies)

-the use of two (or more) channels to distribute the same product to target markets -as more people have access to the internet and embrace online shopping, an increasing number of retailers are using multiple channels of distribution

-help differentiate a firm's product from the competition (ex: manufacturers may decide to use nontraditional channels such as the Internet, mail-order channels, or infomercials to sell products instead of going through traditional retailer channels) -they may limit a brand's coverage, but they can give a producer serving a niche market a way to gain market access and customer attention without having to establish channel intermediaries

a cooperative agreement between business firms to use the other's already established distribution channel -used most often when the creation of marketing channel relationships may be too expensive and time-consuming (ex: Starbucks didn't want to develop a new channel from scratch so they signed an agreement with pepsi to develop and bottle a starbucks brand of ready to drink coffee, a category that had been extremely difficult to develop)

CONSUMER CHANNELS: direct, retail, wholesaler, agent/broker BUSINESS CHANNELS: direct, industrial, agent/broker, agent/broker industrial ALTERNATIVE CHANNELS: multiple, nontraditional, strategic alliances

Market Factors Product Factors Producer Factors

*most important are target customer considerations -choice of channel depends on whether the producer is selling to consumers or to industrial customers -industrial customers buying habits are different than consumers (industrial tend to buy larger quantities and require more customer service) -geographic location and size of the market are also important to channel selection *rule: if the target market is concentrated in one or more specific areas, then direct selling through a sales force is appropriate -when markets are more widely dispersed, intermediaries woudl be less expensive -larger markets require more intermediaries

-products that are more complex, customized, and expensive tend to benefit from shorter and more direct marketing channels -sell better through a direct sales force (ex: pharmaceuticals, scientific instruments, airplanes, computer systems) -more standardized a product is, the longer its distribution channel can be and the greater the number of intermediaries that can be involved (ex: with the exception of flavor and shape, the formula for chewing gum is about the same from producer to producer.. its also INEXPENSIVE... as a result, the distribution channel for gum tends to involve many wholesalers and retailers) -product life is also an important factor in choosing a marketing channel -the choice of channel may change over the life of the product (ex: photocopiers were first sold by a direct sales force, now they are found in several places or Gatorade was originally sold to sports teams, now available to everyone everywhere) -delicacy of a product is another factor *perishable products like veggies and milk have short life span where fragile products like china and crystal require a minimum amount of handling *therefore both require fairly short marketing channels

-several factors pertaining to the producer itself are important to the selection of a marketing channel -producers with large financial, managerial, and marketing resources are better able to use more direct channels *these producers have the ability to hire and train their own sales force, warehouse their own goods, and extend credit to their customers -a producers desire to control pricing, positioning, brand image, and customer support also tends to influence channel selection (gucci, godiva, may sell their ares only in expensive stores, in order to maintain an image of exclusivity)

-a form of distribution aimed at having a product available in every outlet where target customers might want to buy it distribution intensity objective: -achieve mass-market selling; popular with health and beauty aids and convenience goods that must be available everywhere number of intermediaries in each market: -Many *examples: -pepsi-cola, frito-lay potato chips, huggies diapers, dog food, crayola crayons

-a form of distribution achieved by screening dealers to eliminate all but a few in any single area distribution intensity objective: -work closely with selected intermediaries who meet certain criteria; typically used for shopping goods and some specialty goods number of intermediaries in each market: -Several *examples: -HP printers, burton snowboards, donna karan clothing, aveda aromatherapy products

-a form of distribution that establishes one or a few dealers within a given area distribution intensity objective: -work with a single intermediary for products that require special resources or positioning; typically used for specialty goods and major industrial equipment number of intermediaries in each market: -One *examples: -BMW cars, Rolex Watches

1) Arm's-length Relationships 2) Integrated Relationships 3) Cooperative Relationships

-a relationship between companies that is loose, characterized by low relational investment and trust, and usually taking the form of a series of discrete transactions with no/low expectation of future interaction of service -used when company has sudden and/or unique need for a product or service and does not anticipate this need will arise again in the near future (ex: if Chevy's tire supplier was not able to ship out the tires, a solution might be to engage in a temporary, arm's-length relationship with an alternate provider) -downside because they can charge more ect.

-a relationship between companies that is tightly connected, with linked processes across and between firm boundaries, and high levels of trust and interfirm commitment (ex: vertical integration, all of the related channel members are collectively owned by a single legal entity which may be one of the channel members or may be a third party, (ex: mcdonalds... subsidiary companies have owned dairy and potato farms and processing plants that grow and process the components of the products served by them) *companies look for a happy medium between arm's-length and integrated relationships that enables them to maximize the advantages of both relationship types while limiting their potential risks

-a relationship between companies that takes the form of informal partnership with moderate levels of trust and information sharing as needed to further each company's goals -administrating some sort of formal contract -more flexible than integrated relationships, but structured with greater detail and depth than arm's-length

-power, control, leadership, conflict, partnering

the capacity of a particular marketing channel member to control or influence the behavior or other channel members

a situation that occurs when one marketing channel member intentionally affects another member's behavior

a member of a marketing channel that exercises authority and power over the activities of other channel members

a clash of goals and methods between distribution channel members -arise because staid, traditional channel members refuse to keep pace with the times -conflicting goals -channel members fail to fulfill expectations

a channel conflict that occurs among channel members on the same level -found most often when manufacturers practice dual or multiple distributions strategies (ex: apple changed its distribution strategy and began opening its own stores, it angered apple's traditional retail partners)

a channel conflict that occurs between different levels in a marketing channel, most typically between the manufacture and wholesaler or between the manufacture and retailer (ex: high-end fashion designers traditionally sold their products through luxury retailers such as Neiman Marcus and Saks Fifth Avenue.. interested in increasing sales and gaining additional control over presentation, many designers such as Giorgio Armani, Donna Karan, and Louis Vuitton opened their own boutiques in the same shopping centers anchored by the luxury retailers)

the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage

Transaction-Based Firms: -relationships between manufacturer and supplier: short-term, adversarial, independent, price more important -number of suppliers: many -level of information sharing: minimal -investment required: minimal Partnership-Based Firms: -relationships between manufacturer and supplier: long-term, cooperative, dependent, value-added services more important -number of suppliers: few -level of information sharing: high -investment required: high

-distribute directly or through foreign partners -different channel structures than in domestic markets -illegitimate "gray" marketing channels (getting rid of counterfeit products) -legal and infrastructure differences

1) minimizing wait times is a key factor in maintaining service quality 2) managing service capability is critical to successful service distribution 3) improving service delivery makes it easier and more convenient for consumers to use the service