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ObjectivesObjectivesObjectivesObjectives

Work Performed by Marketing ChannelsWork Performed by Marketing Channels Channel-Design DecisionsChannel-Design Decisions Channel-Management DecisionsChannel-Management Decisions Channel DynamicsChannel Dynamics

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How a Distributor Reduces theNumber of Channel Transactions

= = CustomerCustomer= = ManufacturerManufacturer

A. Number of contacts A. Number of contacts without a distributorwithout a distributor

M x C = 3 X 3 = 9M x C = 3 X 3 = 9

11

3322

445566

778899

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How a Distributor Reduces theHow a Distributor Reduces theNumber of Channel TransactionsNumber of Channel Transactions

= = DistributorDistributor= = CustomerCustomer= = ManufacturerManufacturer

B. Number of contacts B. Number of contacts with a distributorwith a distributorM x C = 3 + 3 = 6M x C = 3 + 3 = 6

Store

11

22

33

44

55

66

©2000 Prentice Hall

Distribution Channel FunctionsDistribution Channel Functions

OrderingOrdering

PaymentsPayments

CommunicationCommunicationTransferTransfer

NegotiationNegotiation

FinancingFinancingRisk TakingRisk Taking

PhysicalDistribution

PhysicalDistribution

InformationInformation

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Customers’ Desired Service LevelsCustomers’ Desired Service LevelsCustomers’ Desired Service LevelsCustomers’ Desired Service Levels

Lot sizeLot size Waiting timeWaiting time Spatial convenienceSpatial convenience Product varietyProduct variety Service backupService backup

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Channel Management DecisionsChannel Management Decisions

SelectingSelecting

FE

ED

BA

CK

MotivatingMotivating

TrainingTraining

EvaluatingEvaluating

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Types of Vertical Marketing SystemsTypes of Vertical Marketing Systems

CorporateCommon Ownership at Different

Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

©2000 Prentice Hall

Conventional Distribution Channel vs. Conventional Distribution Channel vs. Vertical Marketing SystemsVertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

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Causes of Channel Causes of Channel ConflictConflictCauses of Channel Causes of Channel ConflictConflict

IncompatibilityIncompatibility Difference in PerceptionDifference in Perception DependenceDependence

Legal & Ethical Issues in Legal & Ethical Issues in Channel RelationsChannel Relations

Legal & Ethical Issues in Legal & Ethical Issues in Channel RelationsChannel Relations

Exclusive DealingExclusive Dealing Exclusive TerritoriesExclusive Territories Tying AgreementsTying Agreements Dealers’ RightsDealers’ Rights