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    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 ________.

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    Module 12 Flashcards

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    Module 12

    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

    Channel 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 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

    contact efficiency

    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)

    Channel Partners

    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

    Farmer’s markets

    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

    wholesale channel

    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

    broker channel

    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

    Risk Bearing:

    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

    Source : www.chegg.com

    Place: Distribution Channels

    Place: Distribution Channels

    LEARNING OUTCOMES

    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.

    Channel Flows

    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.

    Source : courses.lumenlearning.com

    10.1 Role of Distribution Channels – Core Principles of Marketing

    10.1 ROLE OF DISTRIBUTION CHANNELS

    Learning Objectives

    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)

    Introduction

    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.

    Source : opentext.wsu.edu

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