Chapter 6: Designing Marketing Channels Flashcards
Refers to decisions associated with developing new marketing channels where none had existed before, or to modifying existing channels?
- Channel design
The channel design decision can be broken down into seven phases or steps?
1) Recognizing the need for a channel design decision
2) Setting and coordinating distribution objectives
3) Specifying distribution tasks
4) Developing possible alternative channel structures
5) Evaluating the variables affecting channel structure
6) Choosing the “best” channel structure
7) Selecting the channel members
INTENSITY AT THE VARIOUS LEVELS?
- Intensive (sometimes termed saturation) means that as many outlets as possible are used at each level of the channel.
- Selective, as the name suggests, means that not all possible intermediaries at a
particular level are used, but rather that those included in the channel are carefully
chosen. - Exclusive is actually a way of referring to a very highly selective pattern of distribution.
Four basic subcategories of market variables are particularly important in influencing channel structure?
- Market geography refers to the geographical size of markets and their physical location and distance from the producer or manufacturer.
- Market Size -The number of customers making up a market (consumer or industrial) determines the market size.
- Market Density -The number of buying units (consumers or industrial firms) per unit
of land area determines the density of the market. - Market behavior refers to the following four types of buying behaviors: (1) how customers buy, (2) when customers buy, (3) where customers buy, and (4) who does the buying.
What are the 6 variables affecting channel structure?
- Market variables
- Product variables
- Company variables
- Intermediary variables
- Environmental variables
- Behavioral variables
Some of the most important product variables are?
- Bulk and Weight - Heavy and bulky products have very high handling and shipping
costs relative to their value. - Perishability - Products subject to rapid physical deterioration (such as fresh foods) and those that experience rapid fashion obsolescence are considered to be highly perishable.
- Unit Value - in general, the lower the unit value of a product, the longer the channels should be.
- Degree of Standardization - Degree of standardization is shown on the horizontal axis as a continuum ranging from custom-made products to those that are identical.
- Technical versus Nontechnical - In the industrial market, a highly technical product will generally be distributed through a direct channel.
- Newness - Many new products in both consumer and industrial markets require
extensive and aggressive promotion in the introductory stage to build demand. - Product Prestige - Prestigious products are often associated with famous luxury
brands such as Gucci, Rolex, Louis Vuitton, Mercedes-Benz, and many others need
to maintain an aura of exclusivity and rareness that would be incompatible with mass
market distribution channels.
Company Variables?
- Size - In general, the range of options for different channel structures is a positive function of a firm’s size. The power bases available to large firms particularly those of reward, coercion, and expertise enable them to exercise a substantial amount of power in the channel.
- Financial Capacity - Generally, the greater the capital available to a company, the lower is its dependence of intermediaries.
- Managerial Expertise - Some firms lack the managerial skills necessary to perform
distribution tasks. When this is the case, channel design must of necessity include the services of intermediaries, which may include wholesalers, manufacturers’ representatives, selling agents, brokers, or others. - Objectives and Strategies - Marketing and general objectives and strategies (such as a desire to exercise a high degree of control over the product and its service) may limit the use of intermediaries.
Intermediary Variables?
- Availability -In a number of cases, the availability of adequate intermediaries will influence channel structure.
- Cost -The cost of using intermediaries is always a consideration in choosing a channel structure.
- Services - Essentially this involves evaluating the services offered by particular intermediaries to see which ones can perform them most effectively at the lowest cost.
The channel manager should choose an optimal channel structure that would offer the desired level of effectiveness in performing the distribution tasks at the lowest possible cost?
- True
5 characteristics that describe a product?
- Replacement rate- the rate at which a good is
purchased and consumed by users in order to
provide the satisfaction a consumer expects from
the product. - Gross margin- the difference between the laid-in
cost and the final realized sales price. (This includes
the sum of all gross margins as products move
through the channel.) - Adjustment- services applied to goods in order to
meet the exact needs of the consumer. - Time of consumption- the measured time of
consumption during which the product gives up the
utility desired. - Searching time- a measure of average time and
distance from the retail store.
The importance of Aspinwall’s Approach?
- The chief value of Aspinwall’s approach for the channel manager is that it provides a neat way of describing and relating a number of heuristics about how product characteristics might affect channel structure.
Lambert offers another approach developed in the 1960s, by arguing that the most important variables for choosing channel structure are?
Serves as a useful reminder of the importance of financial variables in choosing a channel structure?
- Financial Approach
Addresses the choice of marketing channel structure only in the most general case situation of choosing between the manufacturer performing
all of the distribution tasks itself through vertical integration versus using independent intermediaries to perform some or most of the distribution tasks?
- Transaction Cost Analysis approach
Such as operations research, simulation, and decision theory, in an effort to design optimal marketing channels?
- Management Science Approaches
The qualitative approach is the crudest but, in practice, the most commonly used approach for choosing channel structures. Under this approach, the various alternative channel structures that have been generated are evaluated by management in terms of decision factors that are thought to be important?
- Straight Qualitative Judgment Approach
