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get sets of interdependent organizations participating in the process providing a payment mechanism for a provider while making a service or product accessible and available for use or consumption is the definition of ________. from EN Bilgi.
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52cards Vin T. Marketing
Marketing Principles & Concepts
channel of distribution
also called a marketing channel, as sets of interdependent organizations involved in the process of making a product or service available for use or consumption, as well as providing a payment mechanism for the provider.
First, the channel consists of organizations,
Second, the channel management process is continuous and requires continuous monitoring and reappraisal
Finally, channels should have certain distribution objectives guiding their activities
Product flow: the movement of the physical product from the manufacturer through all the parties who take physical possession of the product until it reaches the ultimate consumer
Negotiation flow: the institutions that are associated with the actual exchange processes
Ownership flow: the movement of title through the channel
Information flow: the individuals who participate in the flow of information either up or down the channel
Promotion flow: the flow of persuasive communication in the form of advertising, personal selling, sales promotion, and public relations
Monster Channel Flow
Product flow: the bottlers receive and process the bases and syrups
Negotiation flow: the bottlers buy concentrate, sell product and collect revenue from customers
Ownership flow: distributors acquire the title of the syrups and own the product until it’s sold to supermarkets
Information flow: bottlers communicate product options to customers and communicate demand and needs to Coca-Cola
Promotion flow: bottlers communicate benefits and provide promotional materials to customers
the buyer is able to make contact with many different product types in a more efficient way from a single store (market or grocery store)
The producer of the product: a craftsman, manufacturer, farmer, or other producer
The user of the product: an individual, household, business buyer, institution, or government
Middlemen at the wholesale and/or retail level
functions of channel partner
Transactional functions: buying, selling, and risk assumption
Logistical functions: assembly, storage, sorting, and transportation
Facilitating functions: post-purchase service and maintenance, financing, information dissemination, and channel coordination or leadership
First, although you can eliminate or substitute channel institutions, the functions performed by these institutions cannot be eliminated
Second, all channel institution members are part of many channel transactions at any given point
Third, the fact that you are able to complete all these transactions to your satisfaction, as well as to the satisfaction of the other channel members, is due to the routinization benefits provided through the channel
The direct channel
is the simplest channel. In this case, the producer sells directly to the consumer Exp:
Etsy.com online marketplace
Oracle’s personal sales team that sells software systems to businesses
A bake sale retail channel
is the way a retailer sells and delivers merchandise and services to customers. (most common is a store) Exp:
Walmart discount stores
Amazon online store
Nordstrom department store
Dairy Queen restaurant
looks very similar to the retail channel, but it also involves a wholesaler. A wholesaler is primarily engaged in buying and usually storing and physically handling goods in large quantities, which are then resold (usually in smaller quantities) to retailers or to industrial or business users Exp:
Christmas-tree wholesalers who buy from growers and sell to retail outlets
Restaurant food suppliers
Clothing wholesalers who sell to retailers
Agents and brokers are different from wholesalers in that they do not take title to the merchandise. In other words, they do not own the merchandise because they neither buy nor sell. Instead, brokers bring buyers and sellers together and negotiate the terms of the transaction Exp:
An insurance broker, who sells insurance products from many companies to businesses and individuals
A literary agent, who represents writers and their written works to publishers, theatrical producers, and film producers
An export broker, who negotiates and manages transportation requirements, shipping, and customs clearance on behalf of a purchaser or producer
The Role of Intermediaries
Purchasing: By purchasing large quantities or volumes, wholesalers are able to secure significantly lower prices
Warehousing and Transportation: Once the wholesaler has purchased a mass quantity of goods, it needs to get them to a place where they can be purchased by consumers
Grading and Packaging : this includes physically sorting, grading, and assembling the goods
First, it means that the wholesaler finances the purchase of the goods and carries the cost of the goods in inventory until they are sold
Second, wholesalers also bear the risk for the products until they are delivered
Marketing: Supply Chain
a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer
Place: Distribution Channels
Place: Distribution Channels
List the characteristics and flows of a distribution channel
Describe the channel partners that support distribution channels
Explain the role of wholesale intermediaries
Describe the different types of retailers businesses use to distribute products
Differentiate between supply chains and distribution channels
Evolution of Distribution Channels
As consumers, we take for granted that when we go to a supermarket the shelves will be filled with the products we want; when we are thirsty there will be a Coke machine or bar around the corner, and we count on being able to get online and find any product available for purchase and quick delivery. Of course, if we give it some thought, we realize that this magic is not a given and that hundreds of thousands of people plan, organize, and labor long hours to make this convenience available. It has not always been this way, and it is still not this way in many other parts of the world.
Looking back over time, the channel structure in primitive culture was virtually nonexistent. The family or tribal group was almost entirely self-sufficient. The group was composed of individuals who were both communal producers and consumers of whatever goods and services could be made available. As economies evolved, people began to specialize in some aspect of economic activity. They engaged in farming, hunting, or fishing, or some other basic craft. Eventually this specialized skill produced excess products, which they exchanged or traded for needed goods that had been produced by others. This exchange process or barter marked the beginning of formal channels of distribution. These early channels involved a series of exchanges between two parties who were producers of one product and consumers of the other.
With the growth of specialization, particularly industrial specialization, and with improvements in methods of transportation and communication, channels of distribution have become longer and more complex. Thus, corn grown in Illinois may be processed into corn chips in West Texas, which are then distributed throughout the United States. Or, turkeys raised in Virginia are sent to New York so that they can be shipped to supermarkets in Virginia. Channels do not always make sense.
The channel mechanism also operates for service products. In the case of medical care, the channel mechanism may consist of a local physician, specialists, hospitals, ambulances, laboratories, insurance companies, physical therapists, home care professionals, and so on. All of these individuals are interdependent and could not operate successfully without the cooperation and capabilities of all the others.
Based on this relationship, we define a channel of distribution, also called a marketing channel, as sets of interdependent organizations involved in the process of making a product or service available for use or consumption, as well as providing a payment mechanism for the provider.
This definition implies several important characteristics of the channel.
First, the channel consists of organizations, some under the control of the producer and some outside the producer’s control. Yet all must be recognized, selected, and integrated into an efficient channel arrangement.
Second, the channel management process is continuous and requires continuous monitoring and reappraisal. The channel operates twenty-four hours a day and exists in an environment where change is the norm.
Finally, channels should have certain distribution objectives guiding their activities. The structure and management of the marketing channel is thus, in part, a function of a firm’s distribution objective. It’s also a part of the marketing objectives, especially the need to make an acceptable profit. Channels usually represent the largest costs in marketing a product.
One traditional framework that has been used to express the channel mechanism is the concept of flow. These flows reflect the many linkages that tie channel members and other agencies together in the distribution of goods and services. From the perspective of the channel manager, there are five important flows.Product flow: the movement of the physical product from the manufacturer through all the parties who take physical possession of the product until it reaches the ultimate consumerNegotiation flow: the institutions that are associated with the actual exchange processesOwnership flow: the movement of title through the channelInformation flow: the individuals who participate in the flow of information either up or down the channelPromotion flow: the flow of persuasive communication in the form of advertising, personal selling, sales promotion, and public relations
Monster Channel Flow
The figure below maps the channel flows for the Monster Energy drink (and many other energy drink brands). Why is Monster’s relationship with Coca-Cola so valuable? Every single flow passes through bottlers and distributors in order to arrive in supermarkets where the product will be available to consumers.
10.1 Role of Distribution Channels – Core Principles of Marketing
10.1 ROLE OF DISTRIBUTION CHANNELS
The objectives of this section is to help students …
Understand the role of distribution channels
Understand the flows in channels
Sam sightings are everywhere
The spirit of Sam Walton permeates virtually every corner of America. This small-town retailer has produced a legacy of US sales of USD 118 billion, or 7 per cent of all retail sales. In the US, Wal-Mart has 1,921 discount stores, 512 super centers, and 446 Sam’s Clubs. Wal-Mart recently challenged local supermarkets by opening their new format: Neighborhood Markets. Overall, they have more than 800,000 people working in more than 3,500 stores on four continents.
Today, Wal-Mart is the largest seller of underwear, soap, toothpaste, children’s clothes, books, videos, and compact discs. How can you challenge their Internet offerings that now number more than 500,000, with planned expansion of more than 3,000,000? Or the fact that Ol’ Roy (named after Sam’s Irish setter) is now the best-selling dog food brand in America? Besides Ol’ Roy, Wal-Mart’s garden fertilizer has also become the best-selling brand in the US in its category, as has its Spring Valley line of vitamins
So how do you beat a behemoth like Wal-Mart? One retail expert tackled this question in his autobiography. He suggests 10 ways to accomplish this goal: (a) have a strong commitment to your business; (b) involve your staff in decision making; (c) listen to your staff and your customers; (d) learn how to communicate; (e) appreciate a good job; (f) have fun; (g) set high goals for staff; (h) promise a lot, but deliver more; (i) watch your expenses; and (j) find out what the competition is doing and do something different. The author of this autobiography: Made in AmericaSam Walton. (36)
This scenario highlights the importance of identifying the most efficient and effective manner in which to place a product into the hands of the customer. This mechanism of connecting the producer with the customer is referred to as the channel of distribution. Earlier we referred to the creation of time and place utility. This is the primary purpose of the channel. It is an extremely complex process, and in the case of many companies, it is the only element of marketing where cost savings are still possible
In this chapter, we will look at the evolution of the channel of distribution. We shall see that several basic functions have emerged that are typically the responsibility of a channel member. Also, it will become clear that channel selection is not a static, once-and-for-all choice, but that it is a dynamic part of marketing planning. As was true for the product, the channel must be managed in order to work. Unlike the product, the channel is composed of individuals and groups that exhibit unique traits that might be in conflict, and that have a constant need to be motivated. These issues will also be addressed. Finally, the institutions or members of the channel will be introduced and discussed.
The dual functions of channels
Just as with the other elements of the firm’s marketing program, distribution activities are undertaken to facilitate the exchange between marketers and consumers. There are two basic functions performed between the manufacturer and the ultimate consumer.1 (See Exhibit 31.) The first called the exchange function, involves sales of the product to the various members of the channel of distribution. The second, the physical distribution function, moves products through the exchange channel, simultaneously with title and ownership. Decisions concerning both of these sets of activities are made in conjunction with the firm’s overall marketing plan and are designed so that the firm can best serve its customers in the market place. In actuality, without a channel of distribution the exchange process would be far more difficult and ineffective.
The key role that distribution plays is satisfying a firm’s customer and achieving a profit for the firm. From a distribution perspective, customer satisfaction involves maximizing time and place utility to: the organization’s suppliers, intermediate customers, and final customers. In short, organizations attempt to get their products to their customers in the most effective ways. Further, as households find their needs satisfied by an increased quantity and variety of goods, the mechanism of exchange—i.e. the channel—increases in importance.
Figure 10.1: Dual-flow system in marketing channels.
The evolution of the marketing channel
As consumers, we have clearly taken for granted that when we go to a supermarket the shelves will be filled with products we want; when we are thirsty there will be a Coke machine 0r bar around the corner; and, when we do not have time to shop, we can pick-up the telephone and order from the J.C. Penney catalog or through the Internet. Of course, if we give it some thought, we realize that this magic is not a given, and that hundreds of thousands of people plan, organize, and labor long hours so that this modern convenience is available to you, the consumer. It has not always been this way, and it is still not this way in many other countries. Perhaps a little anthropological discussion will help our understanding.