Marketing Channels Designs & Dynamics
Work Performed by Marketing Channels Channel-Design Decisions Channel-Management Decisions Channel Dynamics
How a Distributor Reduces theNumber of Channel Transactions
= Customer= Customer= Manufacturer= Manufacturer
A. Number of contacts A. Number of contacts without a distributorwithout a distributor
M x C = 3 X 3 = 9M x C = 3 X 3 = 9
11
3322
445566
778899
How a Distributor Reduces theHow a Distributor Reduces theNumber of Channel TransactionsNumber of Channel Transactions
= Distributor= Distributor= Customer= Customer= Manufacturer= Manufacturer
B. Number of contacts B. Number of contacts with a distributorwith a distributorM x C = 3 + 3 = 6M x C = 3 + 3 = 6
Store
11
22
33
44
55
66
OrderingOrdering
PaymentsPayments
CommunicationCommunicationTransferTransfer
NegotiationNegotiation
FinancingFinancingRisk TakingRisk Taking
PhysicalDistribution
PhysicalDistribution
InformationInformation
Distribution Channel Functions
WholesalerWholesaler JobberJobber RetailerRetailer ConsumerConsumer
ConsumerConsumer
RetailerRetailer ConsumerConsumer
ManufacturerManufacturer
0-level channel
WholesalerWholesaler RetailerRetailer ConsumerConsumer MfgMfg
2-level channel
MfgMfg
3-level channel
1-level channel
ManufacturerManufacturer
Consumer Marketing Channels
Industrialdistributors
Man
ufa
ctu
rer
Co
nsu
mer
Manufacturer’srepresentative
Manufacturer’ssales branch
Lot size Waiting time Spatial convenience Product variety Service backup
SellingSellingcostscosts
(dollars)(dollars)
Level of sales (dollars)Level of sales (dollars)
Break-Even Cost ChartBreak-Even Cost Chart
CompanyCompanysales forcesales force
Manufacturer’s Manufacturer’s sales agencysales agency
SSBB
SelectingSelecting
MotivatingMotivating
TrainingTraining
EvaluatingEvaluating
Channel Management Decisions
CorporateCommon Ownership at Different
Levels of the Channel
CorporateCommon Ownership at Different
Levels of the Channel
ContractualContractual Agreement Among
Channel Members
ContractualContractual Agreement Among
Channel Members
AdministeredLeadership is Assumed by One or
a Few Dominant Members
AdministeredLeadership is Assumed by One or
a Few Dominant Members
Type of Vertical Marketing System
Conventional Distribution Channel vs. Conventional Distribution Channel vs. Vertical Marketing SystemsVertical Marketing Systems
VerticalVerticalmarketingmarketingchannelchannel
Manufacturer
Retailer
ConventionalConventionalmarketingmarketingchannelchannel
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
Wh
ole
sale
r
Incompatibility Difference in Perception Dependence
Exclusive Dealing Exclusive Territories Tying Agreements Dealers’ Rights
Work Performed by Marketing Channels Channel-Design Decisions Channel-Management Decisions Channel Dynamics