Slide 1Chapter Twelve
Marketing Channels
What is a Distribution Channel?
A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.
Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.
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Why Use Marketing Intermediaries?
Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales
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Distribution Channel Functions
Marketing Channels
Conventional vs. Vertical Marketing Channels
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Vertical Marketing Systems
A vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system
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Vertical Marketing Systems
Corporate VMS combines successive stages of production and distribution under single ownership
Administered VMS coordinates successive stages of production and distribution through the size and power of the parties
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Horizontal Marketing Systems
(HMS)
Horizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone.
e.g.
Channel Behavior and Organization
Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones
Changing Channel Organization
Channel Design Decisions
Identifying Major Alternatives