Lecture Basic Marketing: A global-managerial approach: Chapter 11 - William D. Perreault, E. Jerome McCarthy

Chapter 11:
  

Place and
Development of
Channel Systems

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Chapter 11 Objectives
When you finish this chapter, you should
1.  Understand what product 
classes suggest about Place 
objectives.
2.  Understand why some firms 
use direct channel systems 
while others rely on 
intermediaries and indirect 
systems.
3.  Understand how and why 
marketing specialists develop 
to make channel systems 
more effective.
4.  Understand how to develop 
cooperative relationships— 
and avoid conflicts—in 
channel systems.
11­2

5.  Know how channel members 
in vertical marketing systems 
shift and share functions—to 
meet customer needs.
6.  Understand the differences 
between intensive, selective, 
and exclusive distribution.
7. Understand the important new 
terms.

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Strategy Decision Areas in Place
Place objectives
Customer
service
level desired

Type of
channel

Direct

Degree of market
exposure desired

Indirect

Type of
physical distribution
facilities needed

Middlemen/
facilitators needed

How to manage
channels

Exhibit 11­1
11­3

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Why a Firm May Want to Use Direct Channels
Greater
GreaterControl
Control
Lower
LowerCost
Cost
Value
Valueadded
addedsubsequent

subsequentto
to
production
process
production process
Direct
Directcontact
contactwith
with
Customer
CustomerNeeds
Needs

Some
Some
Reasons
Reasons
for
for Choosing
Choosing
Direct
Direct Channels
Channels

11­4

Quicker
QuickerResponse
Responseor
or

Change
Changein
inMarketing
MarketingMix
Mix
Suitable
SuitableMiddlemen
MiddlemenNot
Not
Available
Available

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Regrouping Activities

Accumulating
Accumulating

Sorting
Sorting

11­5

BulkBulkBreaking
Breaking

Assorting
Assorting

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Managing Channel Relationships
Choosing the Type of
Relationship
Whole-Channel ProductMarket Commitment
Key
Issues in
Channel
Management

Conflict Handling
Common Objectives
Role of Channel Captain

11­6

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Vertical Marketing Systems
Type of channel

Characteristics

Vertical marketing systems
Traditional
Administered

Contractual

Corporate

Little or
none

Some to
good

Fairly good
to good

Complete

Control maintained
by

None

Economic
power and
leadership

Contracts

One
company
ownership

Examples

Typical
“independents”

General
Electric

McDonald’s

Florsheim

Amount of
cooperation

Exhibit 11­3
11­7

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Market Exposure

Intensive

What Market
Exposure
Fits the
Marketing
Objectives

Exclusive
11­8

Selective

= number of
outlets
For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill


Key Terms
Place
Channel of Distribution
Direct Marketing
Discrepancy of Quantity
Discrepancy of Assortment
Regrouping Activities
Accumulating
Bulk­Breaking

Sorting
Assorting
Traditional Channel Systems
Channel Captain

Vertical Marketing Systems
Corporate Systems
Vertical Integration
Administered Systems
Contractual Systems
Ideal Market Exposure
Intensive Distribution
Selective Distribution
Exclusive Distribution
Dual Distribution
Reverse Channels

For use only with Perreault and McCarthy texts.
© The McGraw-Hill Companies, Inc., 1999
Irwin/McGraw-Hill