Marketing Notes 1/22/11 2:14 PM
Green marketing – marketing efforts to produce, promote, and reclaim
environmentally sensitive products.
The American Marketing Association, is the professional body
representing marketers in Canada, The United States, and other countries
around the world.
Marketing – an organizational function and a set of processes for
creating, communicating, and delivering value to customers and for
managing customer relationships in ways that benefit the organization
and its stakeholders.
In order to create Value Marketing seeks:
• To discover the needs and wants of prospective customers
• To satisfy them
Four requirements for Marketing to Occur
• Two or more parties with unsatisfied needs
• A desire and ability on their part to be satisfied
• A way for the parties to communicate
• Something to exchange
Market – people with the desire and ability to buy a specific product
Social marketing – marketing designed to influence the behavior of
individuals in which the benefits of the behavior accrue to those
individuals or to the society in general and no to the market.
Ultimate consumers – people who use the gods and services purchased
for a household.
Organizational buyers – those manufacturers, wholesalers, retailers, and
government agencies that buy goods and services for their own use or for
resale. Those who benefit are:
• Consumers who buy
• Organizations that sell
• Society as a whole
Environmental Forces which affect Marketing:
Need – occurs when a person feel physiological deprived of basic
necessities, such as food, clothing, and shelter.
Want – a felt need that is shaped by a person’s knowledge, culture, and
Target Market – one or more specific groups of potential customers
toward which an organization directs its marketing program.
The Four Ps:
• Price – what is exchanged for the product.
• Product – a good, service, or idea to satisfy the consumer’s needs.
• Promotion – a means of communication between the seller and
• Place – a means of getting the product into the consumer’s hand.
Marketing Mix – the marketing manager’s controllable factors; the
marketing actions of product, price, promotion and place that he or she
can take to create, communicate, and deliver value.
Environmental Forces – the uncontrollable factors involving social,
economic, technological, competitive, and regulatory forces. Marketing program – a plan that integrates the marketing mix to provide
a good, service, or idea to prospective buyers.
Evolution of Marketing:
Production era – goods were good so there was no standard for goods.
Products sold themselves. Early on until the 1920s.
Sales era – competition grew. 1920s – 1960s.
Marketing concept era – marketing became motivating force among
firms. 1960s – 1990s.
Marketing orientation era – focus on marketing needs and wants,
customer value, and customer satisfaction. 1990s – 2020s.
Customer experience management era – the customer is the focus and
interaction between consumer and organization has grown. 2000s –
Marketing concept – the idea that an organization should strive to satisfy
the needs of consumer, while also trying to achieve the organization’s
Marketing orientation – focusing efforts on continuously collecting
information about customers’ needs and competitors’ capabilities. Sharing
this information throughout the organization, and using the information to
create value, ensure customer satisfaction, and develop customer
Customer value – the unique combination of benefits received by the
customer that include quality, price, convenience, on-time delivery, and
both before-sale and after-sale service.
Customer satisfaction – the match between customer expectations of the
product and the product’s actual performance. Customer relationship management (CRM) – the process of building and
developing long-term relationship with customers by delivering customer
value and satisfaction.
Customer lifetime value (CLV) – the profit generated by the customer’s
purchase of an organization’s product or service over the customer’s
eCRM – a Web-Centric, personalized approach to managing long-term
customer relationships electronically.
Interactive marketing – involves two-way buyer-seller electronic
communication in which the buyer can control the kind and amount of
information received from the seller.
Customer experience management (CEM) – managing the customers’
interactions with the organization at all levels and at all touch points so
that the customer has a positive impression of the organization, is
satisfied with the experience, and will remain loyal to the organization.
Ethics – the moral principles and values that govern the actions and
decisions of an individual.
Social responsibility – individuals and organizations are part of a larger
society and are accountable to that society for their actions.
Societal marketing concept – the view that an organizations should
discover and satisfy the needs of its consumers in a way that also
provides for society’s well being.
Macro-marketing – the aggregate flow of a nation’s goods and service to
Micro-marketing – how an individual organization directs its marketing
activities and allocates its resources to benefit its customers. Chapter Two:
Profit – the reward to a business firm for the risk it undertakes in offering
a product for sale; the money left over after a firm’s total expenses are
subtracted from its total revenue.
Kinds of Organization
• Business firms
• Nonprofit organizations
Business firm – a privately owned organization that serves its customer in
order to earn a profit.
Nonprofit Organization – a nongovernmental organization that serves its
customers but does not have profit as an organization goal.
Levels in Organization
• Corporate level
• Business unit level
• Functional level
Corporate level – level at which top management directs overall strategy
for the entire organization.
Business unit – an organization that markets a set of related products to
a clearly defined group of customers.
Business unit level – level at which business unit managers set the
direction for their product and markets.
Functional level – level at which groups of specialists actually create value
for the organization.
• Information system • Finance
• Research and development
• Human resources
Cross-functional teams – a small number of people form different
departments in an organization who are mutually accountable to a
common set of performance goals.
Mission – a statement of the organization’s scope that often identifies its
customers, markets, products, technology, and values.
Stakeholders – individuals or groups, either within or outside an
organization, that relate to it in what it does and how well it performs.
Organizational culture – a set of values, ideas, and attitudes that is
learned and shared among the members of an organization.
Goals or Objectives – convert the mission into targeted levels of
performance to be achieved.
Market share – the ratio of sales revenue of the firm to the total sales
revenue of all firms in the industry, including the firm itself.
• Profit – maximize long-run profit
• Sales revenue – increase sale levels
• Market share – increase its market share, even if it costs some
• Unit sales – increase number of units it sells
• Quality – target high quality or service in its industry
• Customer satisfaction – vital to survival or organization
• Employee welfare – provide good employment opportunities and
working conditions. • Social responsibility – balance conflicting goals of consumers,
employees, and shareholders to promote the overall welfare of all
these groups, even at the expense of profits.
Customers – strategic direction is set by knowing in complete detail who
an organization’s customers and prospective customers are and the type
of products and services (value) they are seeking.
Competencies – an organization’s special capabilities, including skills,
technologies, and resources, that distinguish it from other organizations.
Competitive advantages – a unique strength relative to competitors, often
based on quality, time, cost, innovation, customer intimacy, or customer
Quality – those features and characteristics of a product that influences
its ability to satisfy customer needs.
Benchmarking – discovering how others do something better than your
own firm so that you can imitate or leapfrog competition.
Competitors – fierce competitive and globalized economy.
Business portfolio analysis – uses quantified performance measures and
growth targets to analyze a firm’s business units as though they were a
collection of separate investments.
Growth-share matrix reveals four types of Strategic Business Units (SBU)
• Cash cows
• Question marks
Cash cows – low-growth, high share businesses that require less
investment to maintain market share. Stars – high-growth, high-share businesses that require heavy
investment to finance their rapid growth. When their growth slows they
are likely to become cash cows.
Question Marks – low-share businesses in high-growth markets that
require major investment to hold shares, and even more investments to
Dogs – low-growth, low-share businesses. They may generate enough
cash to maintain themselves but do not hold promise to become real
winners for the organization.
Market penetration – a marketing strategy of increasing sales of present
product in existing markets.
Market development – a marketing strategy of selling existing products to
Product development – a marketing strategy of selling new products to
Diversification – a marketing strategy of developing new products and
selling them in new markets.
Related diversification – occurs when new products and new markets
have something in common with the firm’s existing operations.
Unrelated diversification – the new products and new markets have
nothing in common with existing operations.
Strategic marketing process – process whereby an organization allocates
it s marketing mix resources to reach its target market.
Marketing plan – a road map for the marketing activities of an
organization for a specified future period of time, such as one year or five
years. The Planning Phase
• Situation analysis (SWOT)
• Market-product focus and goal setting
• Marketing Program
Situational analysis – taking stock of where the firm or product have been
recently, where it is now, and where it is headed in terms of the
organization’s plans and the external factors and trends affecting it.
SWOT analysis – an acronym describing an organization’s appraisal of its
internal strengths and weakness and its external opportunities and
Situational Analysis (SWOT)
• Identify industry trends
• Analyze competitors
• Assess own company
• Research customers
Market-product focus and goal setting
• Set market and product goals
• Select target markets
• Find points of difference
• Position the product
• Develop the program’s marketing mix
• Develop the budget, by estimating revenues expenses, and profits.
Market segmentation – aggregating prospective buyers into groups, or
segments, that have common needs, and will respond similarly to a
Points of difference – characteristics of a product that make it superior to
competitive substitutes. The Implementation Phase
• Obtaining resources
• Designing the marketing organization
• Developing schedules
• Actually executing the marketing program designed
Marketing strategy – the means by which a marketing goal is to be
achieved, usually characterized by a specified target market and a
marketing program to reach it.
Marketing tactics – detailed day-to-day operational decisions essential to
the overall success of marketing strategies.
The Control Phase
• To compare the results of the marketing program with the goals in
the written plans to identify deviations
• To act on these deviations, correct or exploit them.
Marketing map – a road map for the marketing activities of an
organization for a specified future period of time.
Target audience and purpose
• Who the audience is
• What its purpose is
Business map – a road map for the entire organization for a specified
future period of time, such as one year or five years.
Interpreting the Marketing Plan
• Substantive notes are shaded blue and elaborate on the significance
of an element in the marketing plan and are keyed to chapter
references in the text. • Writing, style, forma, and layout notes are shaded in yellow and
explaining the editorial or visual rationale for the element.
Environmental scanning – the process of continually acquiring information
on events occurring outside the organization to identify and interpret
Social forces – forces of the environment that include the demographic
characteristics of the population and its values.
Demographics – the study of the characteristics of a human population.
These characteristics include population size, growth rate, gender, martial
status, ethnicity, income, and so forth.
Baby boomers – the generation of those born between 1946 and 1964.
Generation X – the population of these born between 1965 and 1976.
Generation Y – those born between 1977 and 1994.
Blended family – family formed by the merging into a single family of two
previously separated units.
Census Metropolitan Areas (CMAs) – geographic labour markets having a
population of 100,000 persons or more.
Ethnic marketing – combinations of the marketing mix that reflect the
unique attitudes, race or ancestry, communication preferences, and
lifestyles of ethnic Canadians. Culture – the set of values, ideas, and attitudes that are learned and
shared among the members of a group.
Value consciousness – the concern for obtaining the best quality,
features, and performance of a product or service for a given price.
• Macroeconomic Conditions
• Consumer Income
Economy – pertains to the income, expenditures, and resources that
affect the cost of running a business and household.
Gross income – the total amount of money made in one year by a person,
household, or family unit.
Disposable income – the money a consumer has left after paying taxes to
use for such necessities as food, shelter, clothing, and transportation.
Discretionary income – the money that remains after paying for taxes and
necessities. Used for luxury items.
• Technology’s Impact on Marketers
• Technology’s Impact on Customers
Technology – invitations or innovations from applied science or
Intranet – an internet/web-based network used within the boundaries of
Extranet – an internet-based technology that permits communication
between a company and its suppliers, distributors, and other partners. Marketspace – an information and communication-based electronic
E-Business – all electronic-based company activities, both within and
outside the company.
E-commerce – specific buying and selling processes on the internet.
E-marketing – also called online marketing, the marketing component of
• B2B – Business-to-business marketing
• B2C – business to consumer
Blog – a personal web site or web page that contains the online personal
journal of an individual.
CGC – Consumer generated content, also called user-created media
C2C – Consumer to consumer marketing, allowing consumers to buy and
sell products and service among themselves.
C2B – Customer to business marketing, where proactive customers
initiate communication and interact with companies online, providing
suggestions on feedback on their experience.
• Alternative forms of competition
• Components of competition
• Small business as competition
• Pure-play online competitors.
Competition – alternative firms that could provide a product to satisfy a
specific market’s needs. Pure competition – every company has similar products.
Monopolistic competition – the many sellers compete with their products
on a substitutable basis.
Oligopoly – a common industry structure, occurs when a few companies
control the majority of industry sales.
Monopoly – occurs when the one firm sells the product or service.
Components of Competition
• Power of buyers and suppliers
• Existing competitors and substitutes
Barriers to entry – business practices or conditions that make it difficult
for new firms to enter a market.
• Protecting competition and consumers
Regulation – restrictions that provincial and federal laws place on
businesses with regard to the conduct of its activities.
Competition act – the key legislation designed to protect competition and
consumers in Canada.
Self-regulation – an alternative to government control where an industry
attempts to police itself.
Consumerism – a grassroots movement started in the 1960s to increase
the influence, power, and rights of consumers in dealing with institutions.
Acts to protect privacy • The privacy Act (PA)
• Personal information protection and electronic documents act
Segment buyers into groups that:
• Have common needs
• Will respond similarly to a marketing action
Marketing segments – the relatively homogenous groups of prospective
buyers that result from the market segmentation process.
Product differentiation – strategy that involves a firm using different
marketing mix activities, such as product features and advertising, to
help consumers perceive the product as being different from and better
than competing production.
Market-product grid – a framework to relate the market segments of
potential buyers to products offered or potential marketing actions by the
Use of Market Segmentation
• One product and multiple market segments
• Multiple products and multiple market segments
• “Segments of one” or mass customization
Segmenting its markets when it expects that it will increase its sales,
profit, and return on investment.
BTO – Build to order, manufacturing a product only when there is an
order from a customer.
Ultra-Customization – allows you to hand-pick your entertainment
packages, personalize your next action, design your own clothes etc. Steps in Segmenting
• Group potential buyers into segments
• Group products to be sold into categories
• Develop a market-product grid and estimate size of markets
• Select target markets
• The marketing actions to reach target markets
Forming the segments
• Potential for increased profit
• Similarity of needs of potential buyers within a segment
• Differences of needs of buyers among segments
• Potential of a marketing action to reach a segment
• Simplicity and cost of assigning potential buyers to segments
Ways to segment consumer markets
• Geographic segmentation
• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation
Usage rate – quantity consumed or patronage, store visits, during a
specific period; varies significantly among different consumer groups.
80/20 rule – a concept that suggests 80 percent of a firm’s sales are
obtained from 20 percent of its customers.
Way to segment organizational markets
• geographic segmentation
• demographic segmentation
• behavioral segmentation
Criteria to choosing the target segments
• market size
• expected growth
• competitive position
• cost of reaching the segment • compatibility with the organization’s objective and resources
Product positioning – the place an offering occupies in consumers mind on
important attributes relative to competitive products.
Product repositioning – changing the place an offering occupies in a
consumer’s mind relative to competitive products.
Two approaches to product positioning
• Head-to-head positioning – competing directly with competitors on
similar product attributes in the same target market.
• Differentiation positioning – seeking a less competitive, smaller
market niche in which to locate a brand, usually stressing the
unique aspects of the product.
Perceptual map – a means of displaying or graphing in two dimensions
the location of products or brands in the minds of consumers to enable a
manager to see how consumers perceive competing products or brands
relative to its own and then take marketing actions.
Market potential – the maximum total sales of a product by all firms to a
segment during a specified time period under specified environmental
conditions and marketing efforts of the firm.
Sales forecast – the total sales of a product that a firm expects to sell
during a specified time period under specified environmental conditions
and its own marketing efforts.
Direct forecast – estimating the value to be forecast without any
Lost-horse forecast – making a forecast using the last known value and
modifying it according to positive or negative factors expected in the
future. Survey of buyers intentions forecast – asking prospective customers if the
yare likely to buy the product during some future time period.
Salesforce survey forecast – asking the firm’s salespeople to estimate
sales during a coming period.
Trend extrapolation – extending a pattern observed in past data into the
Linear trend extrapolation – the pattern is described with a straight line.
Product life cycle – the stages of a new product goes through in the
marketplace: introduction, growth, maturity, and decline.
Selective demand – demand for a specific brand.
Trial – the initial purchase of a product by a consumer
Growth stage – characterized by rapid increases in sales
Maturity stage – characterized by a slowing of total industry sales or
product class revenue.
Decline stage – occurs when sales and profits begins to drop.
Deletion – dropping a product from a company’s product line.
Harvesting – occurs when a company retains the product but reduces
marketing support costs.
Aspects of Product Life Cycle
• Their length
• The shape of their curve
• How they vary with different levels of the product • The rate at which consumers adopt products
Product class – the entire product category or industry
Product form – variations of a product within the product class
Product manager – manages the marketing efforts for a close-knit family
of products or brands.
Product modification – altering a product’s characteristics, such as its
quality, performance, appearance, features, or packages to try to
increase and extend the product’s sales.
Market modification – strategy in which a company tries to find new
customers, increase product’s use among existing customers, or create
Product repositioning – changing the place a product occupies in a
consumer’s mind relative to competing products.
Trading up – adding value to a product through additional features or
higher quality materials.
Trading down – reducing the number of features, quality or price.
Downsizing – reducing the content of packages without changing package
size and marinating or increase the package price.
Branding – activity in which an organization uses a name, phrase, design,
or symbols, or combination of these to identify its products and
distinguish them from those of competitors.
Brand name – any word, device, or combination of these used to
distinguish a seller’s goods or services. Trade name – a commercial, legal name under which a company does
Trademark – identifies that a firm has legally registered its brand name or
trade name so that the firm has its exclusive use.
Product counterfeiting – involves low-cost copies of popular brands not
manufactured by the original producer has been a growing problem.
Brand personality – a set of human characteristics associated with a
Brand equity – the added value that a given brand name gives to a
product beyond the functional benefits provided.
Creating brand equity
• Develop positive brand awareness
• Establish a brand’s meaning
• Elicit the proper consumer responses
• Create consumer brand resonance evident in an intense, active
loyalty relationship between consumer and the brand.
Brand licensing – a contractual agreement whereby a company allows
another firm to use its brand name, patent, trade secret, or other
property for a royalty or free.
Multi-product branding – use by a company of one name for all its
products in a product class. Also known as family branding or corporate
• Multi-product branding strategy
• Multi-branding strategy
• Private branding strategy
• Mixed branding strategy Co-branding – the pairing of two or more recognized brands on a single
product or service.
Multi-branding – a manufacturer’s branding strategy giving each product
a distinct name.
Private branding – when a company manufactures products but sells
them under the brand name of a wholesaler or retailer. Also called private
labeling or reseller branding)
Cohort brand management – the bundling of one company’s multiple
brands into a single marketing effort aimed at a common consumer
Mixed Branding – a firm markets products under its own name and that
of a reseller because the segment attracted by the reseller is different
from its own market.
Packaging – any container in which a product is offered for sale and on
which label information is communicated.
Label – an integral part of the package that typically identifies the product
or brand, who made it, where and when it was made, how it is to be
used, and package contents and ingredients.
Warranty – a statement indicating the liability of the manufacturer for
Consumer behavior – the actions that a person takes in purchasing and
using products and services, including the mental and social processes
that precede and follow these actions.
Purchase decision process – the stages a buyer passes through in making
choices about which products and services to buy. Purchase Decision Process
• Problem recognition – perceiving a difference between a person’s
ideal and actual situation that is big enough to trigger a decision.
• Information Search – begin to search for information
• Alternative evaluation – clarifies the problem for the consumer
• Purchase decision
• Post purchase behavior
• Personal sources
• Public sources
• Marketed dominated sources
• Yielding brand names
• Suggesting criteria to use to judge the various brands
• Developing consumer value perception
Evaluative criteria – factors that represent both the objective attributes of
a brand, you use to compare different products and brands.
Consideration set – the group of brands that a consumer would consider
acceptable from among all the brands of which he or she is aware.
Cognitive dissonance – feeling of post purchase psychological tension or
Involvement – the personal, social, and economic significance of the
purchase to the consumer.
• Item is expensive
• Can have serious personal consequences
• Could reflect on one’s social image. Situational influences – have an impact on your purchase decision
process, the purchase task, social surroundings, physical surroundings,
temporal effects, and antecedent states.
Motivation – the energizing force that causes behavior that satisfies a
Physiological needs – basic to survival and must be satisfied first.
Safety needs – self-preservation and physical well being.
Social needs – concerned with love and friendship.
Personal needs – represented by the need for achievement, status,
prestige, and self-respect.
Self-actualization – involve personal fulfillment, such as completing your
Personality – a person’s consistent behaviors or responses to recurring
National character – a distinct set of personality characteristics common
among people of a country or society.
Self-concept – the way people see themselves and the way they believe
others see them.
Actual self – refers to how people actually see themselves.
Ideal self – describes how people would like to see themselves.
Perception – the process by which an individual selects, organizes, and
interprets information to create a meaningful picture of the world. Selective perception – the brain organizes and interpret information
through a filtering process.
Four States of Perception:
• Selective exposure
• Selective attention
• Selective comprehension
• Selective retention
Selective attention – consumer will pay attention only to messages that
are consistent with their attitudes and beliefs and will ignore those that
Selective comprehension – involve interpreting information so that it is
consistent with one’s attitude and beliefs.
Selective retention – consumers don’t remember all they see.
Subliminal perception – means that you see or hear messages without
being aware of them.
Perceived risk – the anxiety felt because the consumer cannot anticipate
the outcomes of a purchase but believes that there are may be negative
Learning – those behaviors that result from repeated experience, and
Behavioral learning – the process of developing automatic responses to a
situation built up through repeated exposure to it.
Four Behavioral Variables:
• Drive – need that moves an individual to action
• Cue – a stimulus or symbol perceived by consumers
• Response – the action taken by a consumer to satisfy the drive
• Reinforcement – the reward Stimulus generalization – occurs when a response elicited by one stimulus
is generalized to another stimulus.
Stimulus discrimination – refers to a person’s ability to perceive
differences in stimuli.
Cognitive learning – making connection between two or more ideas, or
simply observing the outcomes of other’s behaviors and adjusting your
Brand loyalty – a favorable attitude toward and consistent purchase of a
single brand over time.
Values – personally or socially preferable modes of conduct or states of
existence that are enduring.
Beliefs – a consumer’s subjective perception of how well a product or
brand performs on different attributes.
Attitude – a learned predisposition to respond to an object or class of
objects in a consistently favorable or unfavorable way.
• Changing beliefs about the extent to which a brand has certain
• Changing the perceived importance of attributes
• Adding new attributes to the product
Lifestyle – a mode of living that is identified of how people spend their
time and resources, what they consider important in their environment,
and what they think of themselves and the world around them.
Psychographics – analysis of consumer lifestyles. Opinion leaders – those knowledgeable about users of particular products
and services, and so their opinions influence other’s choice.
Word of mouth – the influencing of people during conversations.
Buzz marketing – popularity created by consumer word of mouth.
Viral marketing – the online version of word of mouth, involving the use
of messages “infectious” enough that consumers wish to pass them along
to others through online communication.
Reference groups – people to whom an individual looks as basis for self-
appraisal or as a source of personal standards.
Membership group – one to which a person actually belongs, including
fraternity, sororities, social clubs, and family.
Aspiration group – one that a person wishes to be a member of or wishes
to be identified with, such as a professional society.
Dissociative group – one that a person wishes to maintain a distance from
because of differences in values of behaviors.
Family influences on consumer behavior:
• Consumer socialization
• Family life cycle
• Family decision making
Consumer socialization – the process by which people acquire the skills,
knowledge, and attitudes necessary to function as consumers.
Family life cycle – the distinct phase that a family progresses through
from formation to retirement, each phase bringing with it identifiable
Family-Decision making styles • Spouse-dominant
o One makes the decisions.
• Joint decision making
o Made by both husband and wife
Roles of individual family members
• Information gatherer
• Decision maker
Social class – the relatively permanent, homogenous division in a society
into which people sharing similar values, lifestyles, interests, and
behavior can be grouped.
Subcultures – subgroups within the larger, or national, culture with
unique values, ideas, and attitudes.
Services – intangible activities, benefits, or satisfactions that an
organization provides to consumers in exchange for money or something
else of value.
Four Is of services – four unique elements to services: intangibility,
inconsistency, inseparability, and inventory.
Idle product capacity – when the service provider is available but there is
Service continuum – a range from the tangible to the intangible or goods-
dominant to service-dominant offerings available in the marketplace.
Customer contact audit – a flowchart of the points of interaction between
consumer and service provider. Gap analysis – an evaluation tool that compares expectations about a
service offering to the actual experience a consumer has with the service.
Dimensions of service quality
• Tangibles – appearances of physical facilities
• Reliability – ability to perform the promised service
• Responsiveness – willingness to help customers
• Assurance – personnel who listen to customers and answer
• Empathy – knowing the customer and understanding their needs
Eight Ps of service marketing – product, price, place, and promotion, as
well as people, physical evidence, process, and productivity that
constitute the services marketing mix.
Internal marketing – the notion that in order for a service organization to
serve its customers well, it must care for and treat its employees like
Capacity management – making service capacity as productive as
possible without compromising service quality.
Off-peaking pricing – charging different prices during different times of
the days or days of the week to reflect variations in demand for the
Marketing Channel – individuals and firms involved in the process of
making a product or service available for use or consumption by
consumers or industrial users.
Producers recognize that intermediaries make selling goods and services
more efficient because they minimize the number of sales contacts
necessary to reach a target market. Intermediary – any intermediary between manufacturer and end-user
Agent or Broker – any intermediary with legal authority to act on behalf
of the manufacturer.
Wholesaler – an intermediary who sells to other intermediaries, usually to
retailers; usually applies to consumer markets.
Retailer – an intermediary who sells to consumers.
Distributor – an imprecise term, usually used to describe intermediaries
who perform a variety of distribution functions, including selling,
maintaining inventories, extending credit, and so on; a more common
term in business markets but may also be used to refer to wholesalers.
Dealer – an even more imprecise term that can mean the same as
distributor, retailer, wholesaler, and so forth.
Types of Function:
• Transactional function
• Logistical function
• Facilitating function
All three groups of functions must be performed in a marketing channel.
Direct channel – a marketing channel where a producer and ultimate
consumer deal directly with each other.
Indirect channel – a marketing channel where intermediaries are inserted
between the producer and consumers and perform numerous channel
functions. Business distributor – performs a variety of marketing channel functions,
including selling, stocking, delivering a full product assortment, and
financing for business goods and services.
Electronic marketing channels – employ the internet to make a goods and
services available for consumption or used by consumers or business
Direct marketing channels – allow consumers to buy products by
interacting with various advertising media without a face-to-face meeting
with a salesperson.
Multi-channel distribution – an arrangement whereby a firm reaches
buyers by employing two or more different types of marketing channels.
Strategic channel alliances – a practice whereby one firm’s marketing
channel is used to sell another firm’s products.
Merchant wholesalers – independently owned firms that take title to the
merchandise they handle.
• General merchandise
• Specialty merchandise
General merchandise (full-line service) – carry a broad assortment of
merchandise and perform all channel functions.
Specialty merchandise (limited-line service) – offer a relatively narrow
range of products but have an extensive assortment within the product
Four Major types of specialty merchandise (limited service):
• Rack jobbers
• Cash-and-carry wholesalers
• Drop shippers
• Truck jobbers Manufacturer’s agents – work for several producers and carry
noncompetitive, complementary merchandise in an exclusive territory;
also called manufacturer’s representatives.
Selling agents – represent a single producer and are responsible for the
entire marketing function of that producer.
Brokers – independent firms or individuals whose principal function is to
bring buyers and sellers together to make sales.
Food brokers differ from conventional brokers because they act on behalf
of producers on a permanent basis and receive a commission for their
Manufacturer’s branch office – carries a producers inventory and performs
the functions of a full-service wholesaler.
Manufacturer’s sales office – does not carry inventory, typically performs
only a sales function, and serves as an alternative to agents and brokers.
Vertical marketing system (VMS) – professionally managed and centrally
coordinated marketing channels designed to achieve channel economies
and maximum marketing impact.
Corporate vertical marketing system – the combination of successive
stages of production and distribution under a single ownership.
Forward integration – when a producer owns the intermediary at the next
level down in the channel, an example is oil companies which own gas
Backward integration – when a retailer might own a manufacturing
operation, an example is Tim Hortons which operates its own roasting
facilities. Contractual vertical marketing system – independent production and
distribution firms integrate their efforts on a contractual basis to obtain
greater and functional economies and marketing impact than they coul
• Wholesaler-sponsored voluntary chains – a wholesaler develops a
contractual relationship with small, independent retailers to
standardize and coordinate buying practices, merchandising
programs, and inventory management efforts.
• Retailer-sponsored cooperatives – small, independent retailers for
man organization that operates a wholesale facility cooperatively.
• Franchising – contractual arrangement between a parent company
and an individual or firm that allows the franchise to operate a
certain type of business under an established name and according
to specific rules.
Four types of Franchise arrangements
• Manufacturer sponsored retail franchise system (Auto Industry)
• Manufacturer sponsored wholesale systems (Soft-drink companies)
• Service-sponsored retail franchise system (Mcdonalds)
• Service sponsored franchise system (Tax services)
Administered vertical marketing system – achieve coordination at
successive stages of production and distribution by the size and influence
of one channel member rather than through ownership.
Factors affecting channel choice and management
• Environment factors
• Consumer factors
• Product factors
• Company factors
A firm’s financial, human, or technological capabilities affect channel
choice. Channel Design Consideration
• Target market coverage
• Satisfying buyer requirements