Announcements

1
Announcements

• Exam 2 will be handed back at the end of class
• Research experiments
• Experiment 3 will be offered on Thursday and one
  final experiment (4) will be offered in a couple
  of weeks.
• Alternative written assignment details available
  under the Help Me (FAQ) section of the research
  website.

2
Managing Channels

• 04/06/09

3
Distribution channel (Place)

• Individuals and firms involved in the process of
  making a product or service available for use or
  consumption by consumers

4
Importance of distribution

• Can be a major source of competitive advantage
• Example Dell computers
• Usually requires long term commitments and is
  difficult to change immediately

5
Distribution channel

• Distribution is usually outsourced to channel
  members
• Availability of resources A company may not have
  the required resources to perform distribution
• Core competency A company may not possess the
  required skills for efficient distribution
• Efficiency It may be more efficient to outsource
  distribution from the customers viewpoint

6
Value creation
7
Consumer benefits

• Form utility
• Making the product available in the form that
  consumers want (e.g. small pack sizes)
• Place utility
• Making the product available at the place which
  is convenient to consumers (e.g. local grocery
  store)
• Time utility
• Making the product available when consumers want
  (e.g. immediate purchase and consumption)
• Possession utility
• Help take possession of the product or service
  (e.g. retailers accepting credit card
  transactions)

8
Marketing channels

• Direct vs. indirect channels

9
Common marketing channels
Producer of consumer products and services
Agent
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Ultimate consumers
Insurance
Cars
Salt, cereal
Specialty jewelry
10
Marketing channels

• Direct vs. indirect channels
• Electronic systems

11
Electronic channels

Amazon.com Autobytel.com Travelocity.com Dell.com
Book Publisher
Auto manufacturer
Commercial airline
Dell computer
Book wholesaler
Auto dealer
Travelocity virtual retailer
Auto-by-Tel virtual broker
Amazon.com virtual retailer
consumer
consumer
consumer
consumer
12
Marketing channels

• Direct vs. indirect channels
• Electronic systems
• Direct Marketing channels (No face-face
  interaction. E.g. catalogs, HSN etc)

13
Marketing systems

• Dual distribution (PG, Hallmark)
• Strategic channel alliances (Kraft and Starbucks
  Gateway and Office Max)
• Vertical integration
• Forward integration (Sherwin Williams,
  Disney-ABC, American Apparel)
• Backward integration (Kroger, Sears)
• Franchising (Cars, soft drinks, food)
• Relatively greater control with less cost

14
Distribution channel choice
Environmental factors
Consumer factors
Product factors
Company factors
Channel choice considerations 1. Target market
coverage 2. Buyer requirements 3.
Profitability a. Intensive distribution
a. Information b. Selective
distribution b. Convenience c.
Exclusive distribution c. Variety d.
Attendant services
15
Distribution Coverage

• Intensive Distribution
• Wide coverage with many customers and many
  intermediaries. Usually used for convenience
  products (milk)
• Maximum brand exposure and consumer convenience
  least control
• Selective Distribution
• Moderate coverage with good distributor image and
  moderate number of customers. Used for shopping
  items (cars)
• Adequate market coverage with more control and
  less cost than intensive distribution
• Exclusive distribution
• Limited coverage with few intermediaries and
  superior service. Used for high priced/high
  profit, prestigious/specialty items with few
  customers. (high fashion, art)
• Maximum control and least cost

16
Exam 2

• Mean score 84.7
• One question granted to entire class
• At which stage of the PLC do profits peak?
• Correct answer growth stage
• Most frequently selected answer maturity stage
• Exam office hours
• Today 2 3 pm
• Tomorrow (Tuesday) 10 am 1230 pm
• Wednesday 930 1045 am 2 330 pm