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Marketing 333
Chapter 10
Place and Development
of Channel Systems
The Place Component of the
Marketing Mix:
• Channels of
Distribution
• Logistics
– Materials
Management
– Physical Distribution
Strategy Decision Areas in Place
Place objectives
Customer
service
level desired
Type of
channel
Direct
Degree of market
exposure desired
Exhibit 10-1
10-3
Indirect
Type of
physical distribution
facilities needed
Middlemen/
facilitators needed
How to manage
channels
The Channel of Distribution
• A channel of distribution consists of
producer, consumer and any
intermediary organizations that are
aligned to provide a means for passage
of title or possession of the product
from producer to consumer.
• The channel is a system of
interdependency that facilitates the
exchange process.
Distribution Channels: Direct
Producer
Producer
Example:
Holiday Inn
Consumer
Consumer
Why a Firm May Want to Use Direct Channels
Greater Control
Lower Cost
Value added subsequent to
production process
Direct contact with
Customer Needs
Some
Reasons
for Choosing
Direct Channels
10-4
Quicker Response or
Change in Marketing Mix
Suitable Middlemen Not
Available
Distribution Channels:
Producer-Retailer-Consumer
Example:
Producer
Producer
Retailer
Consumer
Michelin Tires
Sears
Consumer
Distribution Channels:
Producer-Agent-Consumer
Example:
Producer
Producer
Agent
American Airlines
International Tours
Travel Agency
Customers
Consumer
Distribution Channels: ProducerWholesaler-Retailer-Consumer
Producer
Producer
Producer
Producer
Wholesaler
Retailer
Consumers
Example:
Moosehead Brewery
All Brands Distributor
Zimmerman’s liquor store
Consumer
Distribution Channels: Producer-AgentWholesaler-Retailer-Consumer
Producer
Producer
Example:
Sports Illustrated Magazine
Agent
Hearst (Ntl. wholesaler)
Wholesaler
Retailers
Consumers
Local wholesaler
Student union bookstore
Consumers
Dual Distribution
• Using more than
one channel of
distribution to reach
the same or
different markets
Market Exposure
Intensive
What Market
Exposure
Fits the
Marketing
Objectives
Exclusive
10-9
Selective
= number of
outlets
Channel Members May Reduce
Discrepancies and Separations
• Discrepancy of quantity
• Discrepancy of assortment
• Regrouping activities
– accumulating
– Bulk-breaking
– Sorting
– Assorting
Accumulating Bulk
Producer
A
Producer
A
Producer
A
Intermediary
Buyer
Producer
A
Breaking Bulk
Producer
Intermediary
Buyer
A
Buyer
B
Buyer
C
Buyer
D
Creating Assortments
Intermediary
Buyer
Sends assortment
of produce in one
order to buyer
Managing Channel Relationships
Choosing the Type of
Relationship
Whole-Channel ProductMarket Commitment
Key
Issues in
Channel
Management
Conflict Handling
Common Objectives
Role of Channel Captain
10-7
Vertical Marketing Systems
Type of channel
Characteristics
Vertical marketing systems
Traditional
Administered
Contractual
Corporate
Little or
none
Some to
good
Fairly good
to good
Complete
Control maintained
by
None
Economic
power and
leadership
Contracts
One
company
ownership
Examples
Typical
“independents”
General
Electric
McDonald’s
Florsheim
Amount of
cooperation
Exhibit 10-3
10-8