Marketing ChannelsModule 1: Where Mission Meets Market

Preparation for the Marketing Channels exam at Edinburgh Business SchoolContent extracted from the text book by Lou E. Pelton, Dr. David Strutton, and Dr. James R. Lumpkin

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1.1 The Elements of Successful Marketing Channels

To achieve success in a c o m p e t i t i v e a r e n a , members of relay teams must pool individual resources to achieve collective goals through a connected system. In addition, this connected system must be flexible enough to accommodate c h a n g e s i n t h e environment.

1.1 The Elements of Successful Marketing Channels

Pooled ResourcesDistributors acting as field operatives, talking with customers, straightening up cases on retail floors.

1.1 The Elements of Successful Marketing Channels

Collective GoalsA mission statement is an organization’s strategic charter

– a public declaration of why it exists.

1.1 The Elements of Successful Marketing Channels

Connected SystemOrganizations cannot exist without markets. All business

competition emerges within marketing channels.

1.1 The Elements of Successful Marketing Channels

Flexibility As Alderson put it, the organizations and persons involved in channel flows mus t be ‘ su ffi c i en t l y connected to permit the system to operate as a whole, but the bond they share must be loose enough t o a l l ow fo r components to be replaced or added.’

1.2

What is a Marketing Channel?

A marketing channel can be defined as an array of exchange relationships that create customer value in the acquisition, consumption,

and disposition of products and services. This definition implies that exchange relationships emerge from market needs as a way of serving

market needs.

1.3 Evolution of Marketing Channels

Marketing channels always emerge out of a demand that marketplace needs be better served.

Production Era &

Distributive Practices

Institutional Period & Selling

Orientation

The MarketingConcept

Relationship Marketing

Era

1.4 Channel Intermediaries: The Customer Value Mediators

Channel intermediaries are individuals or organizations who mediate exchange

utility in relationships involving two or

more partners.

Contactual Efficiency

Routinization

SortingMinimizingUncertainty

1.4 Channel Intermediaries: The Customer Value Mediators

Contactual Efficiency

1.4 Channel Intermediaries: The Customer Value Mediators

Contactual efficiency describes this movement toward a point of equilibrium between the quantity and quality of exchange relationships between channel members. When only two parties are involved in an exchange, the relationship is said to be a dyadic relationship.

1.4 Channel Intermediaries: The Customer Value Mediators

The Economost system represents the state of the art in routinization. Routinization refers to the means by which transaction processes are standardized to improve the flow of goods and services through marketing channels. Routinization itself delivers several advantages to all channel participants.

Routinization

1.4 Channel Intermediaries: The Customer Value Mediators

In a channels context, sorting is often described as a smoothing function. Two principal tasks are associated with the sorting function. They are: a) Categorizing b) Breaking Bulk

Sorting

1.4 Channel Intermediaries: The Customer Value Mediators

The role that intermediaries play in reducing uncertainty is perhaps their most overlooked function. Types of uncertainty are:Need Uncertainty: what is available vs what is neededMarket Uncertainty: # of sources available for a product or serviceTransaction Uncertainty: imperfect channel flows between buyers and sellers

MinimizingUncertainty

Facilitating Strategic Aims

1.4 Functions performed by Marketing Intermediaries

Fulfilling Interaction Requirements

1.4 Functions performed by Marketing Intermediaries

Satisfying Delivery and Handling Requirements

1.4 Functions performed by Marketing Intermediaries

Managing Inventory Requirements

1.4 Functions performed by Marketing Intermediaries

1.4 Channels Relationship Model (CRM)

The CRM provides a structure for

examining how an array of exchange relationships can create customer

value in the distribution of products and

services.

1.4 Channels Relationship Model (CRM)

Array of Exchange Relationships

1st interaction: within the marketing organization (intraorganizational)

2nd interaction: between marketing organizations (interorganizational)

3rd interaction: between marketing organizations and their environments

1.4 Channels Relationship Model (CRM)

Creating Customer ValueFor customers, marketing channels create

form,

possession, andplace,

time utilities.

1.4 Channels Relationship Model (CRM)

Products and Services FlowsAcquisitionConsumptionOutsourcingDisposition

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