Marketing

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Marketing Channel

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(AKA distribution channel, channel of distribution) the network of organizations that creates time, place, and possession utilities for consumers and business users

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Time, place, possession utilities

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conditions that enable consumers and business users to have products available for use when and where they want them and to actually take possession of them

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Sales Channel

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that part of the channel involved in buying, selling, or transferring title

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Facilitating Channel

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the transportation firms, which do not buy, sell, or transfer titles

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Channel Structure

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the form or shape that a marketing channel takes to perform the tasks necessary to make products available to consumers (facilitating agencies not considered part of channel structure)

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Channel Length

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the number of levels in a marketing channel (ranges from 2 to 10, commonly 2 to 5)

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Channel Intensity

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refers to the number of intermediaries at each level of the marketing channel

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Intensive Distribution

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occurs when all possible intermediaries at a particular level of the channel are used

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Selective Distribution

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a carefully chosen group of intermediaries is used at a particular level in the marketing channel

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Exclusive Distribution

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occurs when only one intermediary is used at a particular level in the marketing channel

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Scrambled merchandising

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where all kinds of products are sold in stores not traditionally associated with those products

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Concentration

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bringing products together from many manufacturers

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Equalization

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adjusting the quantities of products to balance supply and demand

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Dispersion

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delivering products to final customers

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Distribution Tasks

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(AKA marketing functions, channel functions) often described by functions such as buying, selling, risk taking, transportation, storage, order processing, and financing.

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Discrepancies between production and consumption

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differences in quantity, assortment, time, and place that must be overcome to make goods available to final customers

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Specialization or division of labor

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each worker in a factory focuses on performing particular manufacturing tasks and thereby develops specialized expertise and skills in performing those tasks, resulting in greater efficiency and higher output

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Economies of scale and economies of scope

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obtained by spreading the costs of distribution over a large quantity of products (scale) or over a wide variety of products (scope)

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Transaction efficiency

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refers to designing marketing channels to minimize the number of contacts between producers and consumers (lengthening transaction structure creates fewer transactions)

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Product flow

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the actual physical movement of the product from the manufacturer through all of the parties who take physical possession of the product, from its point of production to consumers

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Negotiation flow

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the interplay of the buying and selling tasks associated with the transfer of title to the products

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Ownership flow

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the movement of the title to the product as it is passed along from the manufacturer to final consumers

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Information flow

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the exchange of information

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Promotion flow

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the flow of persuasive communication in the form of advertising, personal selling, sales promotions, and public relations

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Flows in marketing channels

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the movement of products, negotiation, ownership, information, and promotion through each participant in the marketing channel.

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Marketing channel power

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the capacity of one channel member to influence the behavior of another channel member

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Conflict in marketing channels

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occurs when one channel member believes that another channel member is impeding the attainment of its goals

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Tying arrangements

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when a producer attempts to force channel members to buy a particular product as a condition for access to another product

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Exclusive dealing

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a manufacturer requires channel members to carry only its brand

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Price discrimination

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a producer or manufacturer charges different prices to the same class of channel member for the same products

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Territorial restrictions

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a producer or manufacturer dictates where a channel member such as a wholesaler can sell its products

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Full-line forcing

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a manufacturer requires a channel member such as a retail to buy undesirable products from the manufacturer in order to obtain the manufacturers’ most desirable products

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Marketing channel management

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(AKA channel management) refers to the analysis, planning, organization, and control of a firm’s marketing channels

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Interorganizational context

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refers to the channel management that extends beyond a firm’s own organization into independent businesses

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Channel strategy

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the broad set of principles by which a firm seeks to achieve its distribution objectives to satisfy its customers

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Sustainable competitive advantage

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a competitive edge that cannot be easily or quickly copied by competitors in the short run

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Channel design

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the process of developing new channels where none existed before, or making significant modifications to existing channels

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Distribution objectives

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refer to what the firm would like its channel strategy to accomplish in terms of meeting the needs of its customers

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Bottom-up or backward approach

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refers to the need to state distribution objectives from the point of view of the customer

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Selection criteria

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the factors that a firm uses to choose which intermediaries will become members of its marketing channel

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Motivating channel members

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refers to the actions taken by manufacturers (or franchisers) to get channel members to implement their channel strategy

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Information support approaches

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“throwing money at a particular need or problem without thinking too deeply about it.” (Advertising dollars, promotional support, incentives, etc.)

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Strategic alliances or channel partnerships

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support provided by the manufacturer is based on extensive knowledge of the needs and problems of the channel members and is carried out on a long-term basis

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Vertical marketing systems (VMS)

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professionally managed or centrally programmed networks, pre-engineered to achieve operating economies and maximum impact

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Administered VMS

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characterized by a careful and comprehensive program developed by one of the channel members to support the efforts of other channel members

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Contractual VMS

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consists mainly of retail cooperatives, wholesaler-sponsored voluntary chains, and franchise systems

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Retail cooperatives

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created when a group of retailers unites and agrees to pool its buying power and contribute to the operation of the cooperative by collectively supporting its own major management tasks

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Wholesaler-sponsored voluntary chains

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similar to retail cooperatives, except that a wholesaler gets large numbers of retailers to work together

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Franchising

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characterized by a close business relationship between franchiser and franchisee that includes not only the product, service, and trademark but also the entire business format itself

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Corporate VMS

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exists when a firm owns and operates the organizations at other levels in the marketing channel

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Product positioning strategy

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seeks to present products to customers in a way that gives the products a certain image compared to competitive products

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Logistics

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(AKA physical distribution) planning, implementing, and controlling the physical flows of materials and final products from points of origin to points of use to meet customers’ needs at a profit

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Supply-chain management

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managing logistical systems to achieve close cooperation and comprehensive interorganizational management, so as to integrate the logistical operations of different firms in the marketing channel

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Systems concept of logistics

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entails viewing all components of a logistical system together and understanding the relationships among them

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Total-cost approach

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calculating the cost of a logistical system by addressing all of the costs of logistics together rather than individual costs taken separately, so as to minimize the total cost of logistics

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Cross-docking

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(AKA flow-through distribution) products from an arriving truck are not stored in a warehouse and then resorted later to fill orders. Rather, the merchandise is simply moved across the receiving dock to other trucks for immediate delivery to stores

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Order-cycle time

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the time between when an order is placed and when it is received by the customer

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Economic order quantity (EOQ)

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occurs at the point at which total costs (inventory carrying cost plus ordering costs) are lowest.

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Logistical service standards

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the kinds of quantifiable distribution services performed by a logistical system to meet customer needs