BUS 343 Chapter Notes - Chapter 11: Holt Renfrew, J.Crew, Electronic Data Interchange

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Published on 28 Dec 2016
School
Simon Fraser University
Department
Business Administration
Course
BUS 343
Professor
BUS 343 - Chapter 11 Notes: Marketing Channels
MARKETING AND DISTRIBUTION CHANNELS
- Upstream - from a company is the supply chain - raw materials, components, parts,
information, finances, expertise needed to create a product/service
- Downstream - marketing channels/distribution channels that look toward the customer
Value Delivery Network - the network made up of the company, suppliers, distributors, and
ultimately customers who “partner” with each other to improve the performance of the entire
system in delivering customer value
What is a Channel?
- Few producers sell their goods directly to the final users of their products
- Marketing Channel (distribution channel) - a set of interdependent organizations that
help make a product or service available for use or consumption by the consumer or
business customer
- A company’s channel decisions directly affect every other marketing decision
- Pricing depends on whether or not working with national discount chains
- Sales force and communications decisions depend on how much training channel
partners need
- Developing or acquiring products depends on how well they fit capabilities of
channel partners
How Channel Partners Add Value
- Channel partners reduce the amount of work that must be done to reach customers
- Marketing channel members buy large quantities from many producers and break them
down into the smaller quantities and broader assortments wanted by consumers
- Channel members add value by bridging major time, place, and possession gaps
- ^ independent dealer
Channel Functions
- Information gathering and distribution - collect info about consumers to help
manufacturers
- Promotion at point of purchase - for locally advertised sales
- Contact - sales agents can find new customers
- Matching and arranging - adapt/customize product to meet consumer needs
- Negotiation - brokers and agents negotiate price and terms of delivery
- Physical distribution - trucking and transportation
- Financing - store credit cards; companies that sell large products like cars might
have financing organizations as channel partners
- Risk taking - channel partners may assume risk of handling, transport, storage
- After-sales support - some things (electronics, automobiles) require after purchase
support and servicing - by channel partners
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Types of Channel Partners
- Channel partners are businesses that are owned and operated independently from the
manufacturer and who are contracted by the manufacturer to perform a specific function
Major types:
1. Retailers
2. Wholesalers
3. Drop shippers
4. Rack jobbers
5. Brokers
6. Agents
1. Retailers
- Retailing - the business of selling goods or services to consumers for their
personal use; operating and managing bricks-and-mortar location and/or website
- Retailer - a business that primarily sells products and services to consumers
- One of the most important and visible marketing channels
2. Wholesalers
- Wholesaling - all activities involved in selling goods and services to those buying
for resale or business use
- Also referred to as “merchant wholesalers” and “distributors”
- A wholesaler who takes possession of inventory also assumes the risk that does
with it
3 & 4. Drop Shippers and Rack Jobbers
- Drop Shipper - an intermediary who takes orders and payment from the customer
then arranges to have the merchandise shipped to the customer directly from the
supplier
- Companies that sell customized clothing, small items
- Do not manufacture the goods they sell; have network of suppliers
- Take payment from customers (sell) and later pay the supplier (buy); are
considered to be wholesalers
- Ex. Amazon.com
- Rack Jobber - a wholesaler who buys merchandise and re-sells it on “racks”
inside a retail store, in partnership with the retailer
- Serve grocery stores and drug retailers in non-food items
5. Brokers
Broker - a wholesaler who does not take title to goods and whose function is to bring
buyers and sellers together and assist in negotiation
- Does not carry inventory, or get involved in financing or assume risk
- Ex. a stock broker (buys stocks on behalf of client and earns commission)
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6. Agents
Agent - a representative, either a buyer or a seller who performs only a few functions and
does not take title to goods
- While a broker makes deals with different buyers and sellers, and agent has a
more permanent relationship with them
- Manufacturer’s agent - contracted by smaller manufacturing companies without
sales staff
- Advertising agencies - provide marketing communications services like designing
and making advertisements, buying the media to run them
- Call upstream channel partners “partners” instead of “clients” - easier to
empathize
Organization and Management of Channels
Direct and Indirect Channel
- The number of levels of the channel, or number of channel members who function as
intermediaries between the producer and the consumer constitutes the length of the
channel
- Direct marketing channel - no intermediaries; producer sells to final
customer
- Indirect marketing channel - one or more intermediaries
- Very few companies sell directly to end customer
Channel Conflict
- Channel Conflict - disagreement among marketing channel members over goals, roles,
and rewards
- Companies that market and sell their products through bricks-and-mortar and online
channels are especially susceptible to channel conflict
- Can try to avoid channel conflict with retailers by not competing online on price
Disintermediation
- Disintermediation - the cutting out of marketing channel intermediaries by product or
service producers, or the displacement of traditional resellers by radical new types of
intermediaries (they become unnecessary)
- Ex. travelocity - replaced travel agents; Netflix displaced physical video rental
stores
Vertical Marketing Systems
- Vertical Marketing Systems (VMS) - a distribution channel structure in which
producers, wholesalers, and retailers act as a unified system. One channel member owns
the others, has contracts with them, or has so much power that they all co-operate
- Can be dominated by producer, wholesaler, or retailer
- 3 types: corporate, administered, contractual
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Document Summary

Bus 343 - chapter 11 notes: marketing channels. Upstream - from a company is the supply chain - raw materials, components, parts, information, finances, expertise needed to create a product/service. Downstream - marketing channels/distribution channels that look toward the customer. Value delivery network - the network made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system in delivering customer value. Few producers sell their goods directly to the final users of their products. Marketing channel (distribution channel) - a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business customer. A company"s channel decisions directly affect every other marketing decision. Pricing depends on whether or not working with national discount chains. Sales force and communications decisions depend on how much training channel partners need.

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