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Marketing
Channels
and
Retailing
Chapter 14
Lamb, Hair, McDaniel
2013-2014
© 2013 by Cengage Learning Inc. All
rights reserved
Explain what marketing channels and channel
1 intermediaries are describe their functions and
activities
2 Describe common channel and strategies, and the
factors that influence their choice
3
Describe channel relationship types and roles, and
their unique benefits and drawbacks
4
Explain the importance of the retailer within in the
channel and within the national economy
2
© 2013 by Cengage Learning Inc. All
rights reserved
List and understand the different classifications and
5 types of retailers, as well as their different
operational models
6 Explain the major tasks involved in developing a
retail marketing strategy
7 Discuss the roles of CRM and customer data in
retailer decision making
8 Describe trends in retail and channel management
3
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rights reserved
Marketing Channels
Explain what marketing
channels and channel
intermediaries are, and
describe their functions
and activities
1
4
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All rights reserved
MARKETING CHANNEL
a set of interdependent organizations that
eases the transfer of ownership as
products move from producer to business
user or consumer.
Channel Members
negotiate with one another, buy and sell
products, and facilitate the change of ownership
between buyer and seller in the course of
moving the product from the manufacturer into
the hands of the final consumer
1
5
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MARKETING CHANNEL FUNCTIONS
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
1
6
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SPECIALIZATION AND
DIVISION OF LABOR
◆ Creates greater efficiency
◆ Provides lower production
costs
◆ Create time, place, form, and
exchange utility
1
7
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CONTACT EFFICIENCY
Retailer
Firms in the channel that sell directly to
customers
Retailers simplify distribution by cutting the
number of transactions required by consumers,
making an assortment of goods available in one
location
1
8
EXHIBIT 14.1
HOW MARKETING CHANNELS REDUCE THE NUMBER OF REQUIRED
TRANSACTIONS
9
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CHANNEL INTERMEDIARIES
Merchant
Wholesaler
An institution that buys goods
from manufacturers, takes
title to goods, stores them,
and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries
who facilitate the sale of a
product by representing
channel members.
1
10
CHANNEL INTERMEDIARIES
Agents
and
Brokers
Take Title to Goods
Do NOT Take Title to Goods
1
Merchant
Wholesalers
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Learning Inc. All rights
11
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rights reserved
FACTORS SUGGESTING TYPE OF
WHOLESALING INTERMEDIARY TO
USE
Product characteristics
Buyer considerations
Market characteristics
1
12
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CHANNEL FUNCTIONS
PERFORMED BY INTERMEDIARIES
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Functions
Researching
Financing
1
13
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Channel Structures
Describe common
channel and strategies,
and the factors that
influence their choice
2
14
Exhibit 14.2
Marketing Channels for Consumer Products
15
Exhibit 14.3
Channels for Business and Industrial Products
16
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rights reserved
ALTERNATIVE CHANNEL
ARRANGEMENTS
Multiple or dual distribution
Nontraditional channels
Strategic channel alliances
2
17
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FACTORS AFFECTING CHANNEL
CHOICE
Market Factors
Product Factors
Producer Factors
2
18
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MARKET FACTORS
Customer profiles
Consumer or Industrial
Customer
Market
Factors
That Affect
Channel
Choices
Size of market
Geographic location
2
19
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PRODUCT FACTORS
Product Complexity
Product Price
Product Standardization
Product
Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
2
20
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PRODUCER FACTORS
Producer Resources
Number of Product Lines
Producer
Factors
That Affect
Channel
Choices
Desire for Channel
Control
2
21
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LEVELS OF DISTRIBUTION
INTENSITY
Intensive
A form of distribution aimed at
having a product available in
every outlet
Selective
A form of distribution achieved
by screening dealers to eliminate
all but a few in any single area
Exclusive
A form of distribution that
established one or a few
dealers within a given area
2
22
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LEVELS OF DISTRIBUTION INTENSITY
Intensity
Level
Objective
Number of
Intermediaries
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
One
23
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Types of Channel Relationships
Describe channel
relationship types and
roles, and their unique
benefits and
drawbacks
3
24
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rights reserved
TYPES OF CHANNEL RELATIONSHIPS
Benefits
Hazards
Arm’s Length
Relationship
Fulfills a one time or
unique need; low
involvement/risk
Parties unable to
develop relationship;
low trust level
Cooperative
Relationship
Formal contract
without capital
investment/long-term
commitment; “happy
medium”
Some parties may
need more relationship
definition
Integrated
Relationship
Closely bonded
relationship; explicitly
defined relationships
High capital
investment; any failure
could affect every
channel member
25
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GLOBAL CHANNEL RELATIONSHIPS
Global Channel
Development
Channel
policies differ
3
Gray marketing
channels
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SOCIAL INFLUENCES IN CHANNELS
Power
Control
Leadership
Conflict
Partnering
3
27
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CHANNEL POWER, CONTROL,
AND LEADERSHIP
Channel
Power
A channel member’s capacity to control
or influence the behavior of other channel
members
Channel
Control
A situation that occurs when one marketing
channel member intentionally affects another
member’s behavior
Channel
Leader
A member of a marketing channel that
exercises authority/power over the activities
of other members
3
28
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CHANNEL CONFLICT
Conflicts may occur if channel
members:
◆
Have conflicting goals
◆
Fail to fulfill expectations of other
channel members
◆
Have ideological differences
◆
Have different perceptions of reality
3
29
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CHANNEL PARTNERING
the joint effort of all channel members
to create a channel that serves
customers and creates a competitive
advantage.
By COOPERATING, channel members can
speed up inventory replenishment, improve
customer service, and reduce the total
costs of the marketing channel.
3
30
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The Role of Retailing
Explain the importance of the
retailer within in the channel
and within the national
economy
4
31
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rights reserved
RETAILING
All the activities directly
related to the sale of goods
and services to the ultimate
consumer for personal, nonbusiness use.
4
32
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rights reserved
THE ROLE OF RETAILING
◆ U.S. retailers employ nearly 15 million
people
◆ Retailers account for 10.8 percent of U.S.
employment
◆ Retailing accounts for 10 percent of U.S.
businesses
◆ Retailers account for two-thirds of the
U.S. GDP
4
◆ Industry is dominated by a few giant
organizations, such as Walmart
33
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rights reserved
Classification of Retail Operations
List and understand the
different classifications
and types of retailers, as
well as their different
operational models
5
34
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rights reserved
CLASSIFICATION
OF RETAIL OPERATIONS
Ownership
Level of Service
Product Assortment
Price
5
35
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rights reserved
Exhibit 14.4
Types of Stores and Their Characteristics
Service
Level
Type of Retailer
Assortment
Price
Gross
Margin
Department Store
Mod Hi-High
Broad
Mod-High
Mod High
Specialty Store
High
Narrow
Mod-High
High
Supermarket
Low
Broad
Moderate
Low
Convenience Store
Low
Med-Narrow
Mod High
Mod High
Drugstore
Low-Mod
Medium
Moderate
Low
Full-line Discounter
Mod-Low
Med-Broad
Mod Low
Mod Low
Specialty Discounter
Mod-Low
Med-Broad
Mod Lo-low
Mod Low
Warehouse Clubs
Low
Broad
Low-very low
Low
Off-price Retailer
Low
Med-Narrow
Low
Low
Restaurant
Low-High
Narrow
Low-High
Low-High
CLASSIFICATION
OF OWNERSHIP
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Independent
Retailers
Owned by a single person or
partnership and not part of a
larger retail institution
Chain Stores
Owned and operated as a
group by a single organization
Franchises
The right to operate a
business
or to sell a product
5
37
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LEVEL OF SERVICE
Full
Service
Self
Service
5
38
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PRODUCT ASSORTMENT
Classification based on BREADTH
and DEPTH of product lines.
5
39
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PRICE
Gross Margin
The amount of money the retailer makes as
a percentage of sales after the cost of goods
sold is subtracted.
5
40
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rights reserved
MAJOR TYPES OF RETAIL
OPERATIONS
Department Stores
Specialty Stores
Supermarkets
Drugstores
Convenience Stores
Discount Stores
Restaurants
5
41
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rights reserved
TYPES OF RETAIL OPERATIONS
A store housing several
departments under one roof.
Department
Each department is headed by a
Store
buyer, or department head who
selects merchandise.
Specialty
Store
A retail store specializing in a
given type of merchandise.
5
42
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rights reserved
TYPES OF RETAIL OPERATIONS
Supermarket
Large, departmentalized, selfservice retailer. Specializes in
food. Some use scrambled
merchandising.
Drugstore
A retail store that stocks
pharmacy-related products
and services as its main draw.
Convenience
Store
A miniature supermarket,
carrying only a limited line of
high-turnover convenience
goods.
5
43
CATEGORIES OF
DISCOUNT STORES
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Full-Line
Discounters
Specialty Discount
Stores
Warehouse
Clubs
Off-Price
Retailers
5
44
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RESTAURANTS
Straddle the line between retail
and service establishments
Sell tangible products (food,
drink) but also services (food
prep, food service)
Many could be considered
specialty retailers
5
45
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NONSTORE RETAILING
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
5
46
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All rights reserved
AUTOMATIC VENDING
Is the use of machines to offer goods for sale.
Vending is the most pervasive retail business in the
United States, with 11.5 MILLION vending machines
selling billions or dollars worth of goods annually.
5
47
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DIRECT RETAILING
Door-to-Door
Office-to-Office
Home Sales Parties
5
48
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TYPES OF DIRECT MARKETING
Telemarketing
Direct Mail
Catalogs and Mail Order
Electronic Retailing
Shop-at-Home Networks
5
49
Top E-Tailers by Sales Volume
America’s Top Ten Retail Businesses
Rank
Company
Web Sales
Volume
(in billions)
1
Amazon.com Inc.
$48.08
2
Staples Inc.
$10.6
3
Apple Inc.
$6.66
4
Walmart.com
$4.9
5
Dell Inc.
$4.6
6
Office Depot Inc.
$4.1
7
Liberty Media (owns QVC)
$3.76
8
Sears
$3.6
9
Netflix Inc.
$3.2
10
CDW
$3.0
50
Beyond the Book
© 2013 by Cengage Learning Inc. All
rights reserved
THE BASIC FORMS OF FRANCHISING
Product and
Trade Name
Franchising
Business
Format
Franchising
Dealer agrees to sell in
products provided by a
manufacturer or
wholesaler.
An ongoing business
relationship between a
franchiser and a franchisee.
5
51
TOP 10 FRANCHISORS
1. Hampton Hotels
2. Subway
3. 7-Eleven
4. ServPro
5. Days Inn
6. McDonald’s
7. Denny’s
8. H&R Block
9. Pizza Hut
10. Dunkin Donuts
5
52
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Retail Marketing Strategy
List the major tasks
involved in developing
a retail marketing
strategy
6
53
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rights reserved
RETAIL MARKETING STRATEGY
Define & Select
a Target Market
Develop a Retailing
Mix
6
54
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DEFINING A TARGET MARKET
Demographics
STEP 1:
Segment the Market
Geographics
Psychographics
6
55
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CHOOSING THE RETAILING MIX
STEP 2:
Choose the
Retailing Mix
Product
Place
Promotion
Price
Personnel
Presentation
6
56
© 2013 by Cengage Learning Inc. All
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Exhibit 14.6
The Retailing Mix
57
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CHOOSING THE RETAILING MIX
Product Offering
The mix of products offered to the
consumer by the retailer; also
called the product assortment or
merchandise mix.
6
58
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RETAIL PROMOTION STRATEGY
Advertising
Public Relations
Publicity
Sales Promotion
6
59
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THE PROPER LOCATION
Choosing a Community
Economic growth
potential
Competition
Geography
6
60
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