Brief Contents
Preface
XIX
PART 1:
INTRODUCTION
1
Chapter 1 Marketing Channels: Structure and Functions
PART11:
1
CHANNEL DESIGN: DEMAND, SUPPLY,
AND CHANNEL EFFICIENCY
40
Chapter 2 Segmentation for Marketing Channel Design:
Service üutputs
40
Chapter 3 Supply Side Channel Analysis: Channel Flows
and Efficiency Analysis
72
Chapter 4 Supply-Side Channel Analysis: Channel Structure
and Intensity
112
Chapter 5
PART 111:
Gap Analysis
154
CHANNEL IMPLEMENTATION
Chapter 6
196
Channel Power: Getting It, Using It, Keeping It
196
Chapter 7
Managing Conflict to Increase
Channel Coordination
243
Chapter 8
Strategic Alliances in Distribution
Chapter 9
Vertical Integration in Distribution
Chapter 10
Legal Constraints on Marketing Channel Policies
PARTIV:
289
330
377
CHANNEL INSTITUTIONS
Chapter 11 Retailing
425
Chapter 12 Wholesaling
484
Chapter 13
Franchising
518
Chapter 14
Logistics and Supply Chain Management
560
Company Index
577
Name Index
583
Subject Index
589
vii
Contents
PREFACE
PART1:
xix
INTRODUCTION
CHAPTER
1
1
Marketing
ChanneIs:
What Is a Marketing
Channel?
Why Do Marketing Channels
Demand-SideFactars
6
Supply-Side
Factars
7
Structure
and Functions
1
2
Exist and Change?
What Is the Work of the Marketing
Channel?
5
10
Who Belongs to a Marketing Channel?
14
Manufacturers
14
lntermediams
15
End-Users
16
Channel Formatsas Combinationsof Channel Members
16
A Framework for Channel Analysis
17
Channel Design:Segmentation
17
Channel Design: Channel StructureDecisions
19
Channel Design:Splitting the WarkÚJad 21
Channel Design:Degreeof Commitment
22
Channel Design: GapAnalysis
22
Channellmplementation: ldentifying PowerSources
24
Channellmplementation: ldentifying Channel Conflicts
24
Channellmplementation: The Goalof Channel Coardination
25
Channel Design and lmplementation:lnsights far SPecificChannellnstitutions
Organization
PART11:
of the Text
Summary
27
Discussion
Endnotes
Questions
30
Appendix
lA: Alternate
25
27
29
Channel
Formats
33
CHANNEL DESIGN: DEMAND, SUPPLY,
AND CHANNEL EFFICIENCY
40
CHAPTER 2 Segmentation for Marketing Channel Design:
Service Outputs
40
End-User Channel Preferences
41
Service Outputs
43
ix
X
Contents
Segrnenting the Market by Service Output Demands
55
Meeting Service Output Demands
59
The Role of Service Output Demand Analysis in
Marketing Channel Design
61
Discussion Questions
64
Endnotes
65
Appendix 2A: The Service Output Demands Template
68
CHAPTER 3 Supply Side Channel Analysis: Channel Flows
and Efficiency Analysis
72
Channel Flows Defined
73
EightGenericChannelFlows 73
CustomizingtheListofFlowsfor a ParticularChannel 91
WhoDoesWhichChannelFlows" 92
Describing the Current Channel with the Efficiency Template
92
Using Channel Flow Concepts to Design a Zero-Based Channel
Matching Normative and Actual Profit Shares:
The Equity Principie
100
Summary: Channel Flow Analysis as Part of the
Overall Channel Audit Process
101
Discussion Questions
Endnotes
104
98
103
Appendix 3A: The Efficiency Template
106
CHAPTER 4
Supply-Side Channel Analysis: Channel Structure
and Intensity
112
Introduction
113
Coverage versus Assortment: Framing the Decisions of Upstream and
Downstream Channel Members
114
WhyMoreCoverage
Is Betterfor ManufacturersofConvenience
Goods 114
WhyDownstreamChannelMembersDislikeIntensiveDistribution 115
CantheManufacturerSustainIntensiveDistribution? 119
Degreeof Category
Exclusivity:TheDownstreamChannelMember'sDecision 120
Striking a Deal: How Much Selectivity to Trade Away
122
TheThreatof Complacency 122
TheNatureoftheProductCategory 122
BrandStrategy:QualityPositioningandPremiumPricing 124
BrandStrategy:TargetMarket
127
Bargaining for Influence over Channel Members
127
DesiredCoordination 128
Manufacturer-SPecific
InvestmentsbyDownstreamChannelMembers
DependenceBalancing: Trading TerritoryExclusivity
for Category
Exclusivity 131
Reassurance:UsingSelectivitytoStabilizeFragileRelationships 134
ThePriceof theConcession:
Factoringin DpportunityCost 135
129
Contents
Back to the Basics: Cutting Costs and Raising Sales
137
SavingMoneybyLimitingtheNumberof TradingPartners 137
DoMoreTradingPartnersReallyMeanMoreRevenue? 138
A Cautionon thelssueofLimitingtheNumberof TradingPartners
139
Simulating the Benefits of Selectivity While Maintaining
Intensive Coverage
140
Going to Market via Multiple Types ofChannels
141
Dual Distribution: Going to Market via
Independent Channels and Self-Owned Channels
lnherentRivalry
144
TheDemonstration
Argument 144
Carrier-Rider Relationships
Summary
145
146
Discussion Questions
Endnotes
150
CHAPTER 5
144
149
Gap Analysis
154
Sources and Types of Channel Gaps
155
SourcesofGaps
155
Typesof Gaps:Demand-SideGaps
168
Typesof Gaps:Supply-SideGaps
174
CombinedChannelGaps
176
Closing Channel Gaps
180
ClosingDemand-SideGaps
180
ClosingSupply-SideGaps
183
ChallengingGapsProducedbyEnvironmentalorManagerialBounds
Pulling It Together: The Gap Analysis Template
185
Discussion Questions
192
Endnotes
192
PARTIII:
CHANNEL IMPLEMENTATION
196
CHAPTER 6 Channel Power: Getting It, Using It, Keeping It
The Nature of Power
196
PowerDejined
197
ls PowerGoodor Bad?
198
'WhyMarketing Channels RequirePower
199
Power as the Mirror Image of Dependence
200
SpecifyingDependence
200
Measuring DependenceDirectly
201
Measuring Dependencevia Proxylndicators
203
The Greatest Source: Reward Power
204
Four More Sources ofPower
CoercivePower
209
Expert Power
210
209
184
196
xi
xii
Contents
LegitimatePower
214
ReferentPower
216
Separating theFivePowerSources
216
Putting lt Together:What ls Powerand How Do Youlndex lt?
The Balance ofPower
219
Net Dependence
219
1mbalancedDependence:ls Exploitation Inevitable?
220
1mbalancedDependence:Countermeasuresfor the WeakerParty
Tolerating1mbalancedDependence:The Most CommonSeenario
Exercising Power: Influence Strategies
Six lnfluence Strategies
227
228
The ConsequencesofEach Strategy
229
How to Framean lnfluence Attempt
Summary
230
Discussion Questions
Endnotes
238
CHAPTER
7
218
222
224
226
238
Managing Conflict to Increase
Channel Coordination
243
Assessing the Degree and Nature of Channel
What ls Channel Conflicl?
244
Measuring Conflict
246
Conflict
244
The Consequences
ofConflict
247
When Conflictls Desirable
247
How lntense ConflictDamages Channel Performance
and Coordination
249
Major Sources of Conflict in Marketing Channels
CompetingGoals
251
Differing Perceptionsof Reality
252
Clash of Market Domains
256
lntrachannel Competition
256
Multiple Channels:No Longer Unusual
257
ls lt Really a Problem?
259
What Suppliers Can Do
262
Unwanted Channels: GrayMarkets
263
Fueling Conflict
266
ConflictBegetsMore Conflict
Threats
266
251
266
Conflict Resolution Strategies: How They Drive Conflict and Shape
Channel Performance
271
Resolving Conflict:lnstitutionalized MechanismsDesigned
to Contain ConflictEarly
271
Stylesof ConflictResolution:How Channel MembersHandle Disputes
and NegotiatetoAchieve Their Goals
275
Resolving Conflictand Achieving Coordinationvia lncentives
277
Summary
Discussion
Endnotes
281
Questions
285
284
Contents
CHAPTER
8
Strategic Alliances in Distribution
289
Strategic Alliances: Their Nature and the Motives
for Creating Them
290
What ls a StrategicDistribution Alliance?
290
292
WhyForgea StrategicDistribution Alliance? UpstreamMotives
295
WhyForcea StrategicDistribution Alliance?DownstreamMotives
Do Alliances OutperformOrdinary Channels?
297
299
Building Commitment
by Creating Mutual Vulnerability
The Minimum &quirement: Expectationsof Continuity
299
Why Commitmentls Ni! Unlesslt ls Mutual
300
How the OtherSide Gauges YourCommitment
302
Actions That Bind Distributorsto Suppliers
305
Actions That Bind Suppliersto Distributors
306
CreatingAlliances via Ties That Bind
306
Building Commitment by the Management
of Daily Interactions
308
311
How Can Channel MembersManufacture Trust?
311
TheFundamental Role of EconomicSatisfaction
NoneconomicSatisfactionAlso Matters
312
Picking the Partner and the Setting
314
Decision Structures That Enhance Trust
316
How Do YouManufacture Trust in a Channel?
317
Moving a Transaction Through Stages of Development
to Reach Alliance Status
317
From Cradleto Grave: The Life of a Marketing Channel PartnershiP
Managing the Stages
320
Managing Troubled&lationshiPs
321
The Virtuesof a Porifolioof &lationshiPs
321
317
Putting It AlI Together: What Does lt Take and When Does
It Pay to Create a Marketing Channel Alliance?
323
Discussion
Endnotes
Questions
327
326
CHAPTER 9 Vertical Integration
Introduction
330
FivePuzzles
331
in Distribution
330
Make or Buy: A CriticalDeterminant of Company Competencies
ChapterOrganization
332
The Costs and Benefits ofVertical Integration
in Marketing Channels
333
DegreesofVertical lntegration
333
Costsand Benefitsofthe Choiceto Make
335
The Choiceto Buy Distribution: Termsof Payment to Third Parties
Deciding When to Vertically Integrate Forward:
An Economic Framework
339
&turn on lnvestment: The Usual Criterion
339
Outsourcing as the Starting Point
340
Six &asons to OutsourceDistribution
341
332
337
xiü
xiv
Contents
346
Vertical Integration Forward When Competiúon
Is Low
Company-SPecijicCapabilities
346
Six Typesof Company-SpecijicCapabilitiesin Distribution
350
Rnrity versus Specijicity:The Effectsof Thin Markets
358
Turning the Lens Around: Should the Channel MemberIntegrateBackward?
Verúcal Integration
to Cope with Environmental
Uncertainty
358
360
Vertical Integration to Reduce Performance
Ambiguity
363
The BaselineProblem
363
364
Results Indicators That Are Inaccurate, Late, or Nonexistent
Summary of the Decision Framework
365
Vertical Integraúon as an Observatory on the Market or as an Opúon:
Economic Rationality or Rationalization?
367
Summary
370
Discussion Quesúons
Endnotes
374
373
CHAPTER lO Legal Constraints on Marketing Channel Policies
Market Coverage Policies
378
Customer Coverage Policies
383
Pricing Policies
384
PriceMaintenance 385
PriceDiscrimination 388
Product Line Policies
399
ExclusiveDealing 399
Tying
403
Full-LineForcing 405
DesignatedProductPolicies 407
Selecúon and Termination Policies
Ownership Policies
411
VerticalIntegrationbyMerger 412
VerticalIntegrationbyInternalExpansion
DualDistribution 413
408
413
Summary and Conclusions
414
Discussion Quesúons
418
Endnotes
418
PART IV:
CHANNEL INSTITUTIONS
CHAPTER 11 Retailing
Retailing Defined
425
425
Choosing a Retail Positioning Strategy
426
Financial and Cost-SidePositioning:Margin and
Inventory Turnover Goals
435
Demand-SidePositioning
442
Implicationsfor a Taxonomyof Retail Types
449
377
Contents
Strategic Issues in Retailing
451
ManagingtheMultichannelShoppingExperience
451
Recognizingand Responding to the Continued Strong PowerPosition
ofMajorRetailers 463
TheContinuedGlobalization
ofRetailing
Summary and Conclusions
472
Discussion Questions
474
Endnotes
475
470
Appendix 11A: A Glossary of Pricing and
479
Buying Terms Commonly Used by Retailers
481
Appendix 11B: Merchandise Planning and Control
CHAPTER 12 Wholesaling
Introduction
484
484
An Overview of the Wholesaling
Wholesaler-Distributors 485
Sector
485
TheWholesaler-Distributor's
Rolein theSupplyChain
The ImportanceofWholesaler-Distributors
486
487
What the Independent
Wholesale Sector Offers:
The Essential Tasks
488
ThreeCreat ChallengesofWholesaling: 200 YearsofPharmaceuticals
Wholesalingin an EmergingEconomy
490
Surprising Waysfor WholesalerstoAdd Value
492
Master Distributors
493
Federations ofWholesalers
495
Wholesaler-LedInitiatives
496
IntegratedSupply
496
Manufacturer-LedInitiatives
496
The Requirementsfor Innovative WholesaleService
489
497
Voluntary and Cooperative Groups
498
WholesalerVoluntary Groups
498
Alternative FederationsofDownstream Channel Members
Consolidation
502
ConsolidationPressuresin Wholesaling
502
The Manufacturer's Responseto WholesaleConsolidation
499
504
Export Distribution Channels
505
The Future ofWholesaler-Distributors
506
International Expansion
506
ElectronicCommerce 507
B2B E-Online Exchanges
508
Online ReverseAuctions
509
Capturing ValueAfter Creating Value:WholesalerProfitability
509
A Sketch ofVertical Integration and of Agents in Wholesaling
VerticalIntegrationForwardinto WholesalingbyManufacturers
510
Set thePriceand Seethe Buyer:Agents, Brokers,and CommissionAgents
510
511
xv
xvi
Contents
Summary
513
Discussion Questions
Endnotes
515
CHAPTER
13
Franchising
What Is Franchising?
515
518
518
Why Become a Franchisee?
520
The Start-UpPackage
523
Ongoing Benefits
523
Why Ask a FranchisartoProvide TheseServices?
524
Why Become a Franchisor?
525
Rnising Financial and Managerial CaPitalto GrowFast
Hamessing the EntrepreneurialSpirit
527
When Is FranchisingInappropriate?
530
525
The HistoricaI Roots of Franchising
531
The A uthorizedFranchiseSystem:Moving theProduct
531
The Dividing Line: When DoesFranchising Stop?
535
The Franchise Contract
536
Giving and Taking Hostages, Or Why YouShouldn't Leave It to Lawyers
The Payment System
537
Who WiUBe the Landlard?
539
Termination
539
Why ContractsDo Not Varywithin a System
540
SafeguardsOutside the Contract
540
When Do FranchisarsEnfarceTheir Contracts?
541
Why Franchise Systems Include Company Outlets
543
Variation in Situatí~s
543
TempararyFranchisesand TempararyCompanyStares
544
The Plural Farm:Exploiting the Synergyof Having Both Company
and FranchiseeOutlets
544
Exploiting Franchisees:&direction of OwnershiP
546
Ongoing Challenges Facing the Franchisor
Survival
547
Gaining and Keeping a CooperativeAtmosphere
Inherent Goal Conflict
549
Multiunit Franchising:Handicap arAdvantage?
Other Waysto Cain Cooperation
552
Summary
14
548
550
552
Discussion Questions
Endnotes
556
CHAPTER
547
555
Logistics and SuppIy Chain Management
The Impact of Logistics and SuppIy Chain Management
Responding Efficiently
561
Efficient Consumer&sponse
563
Obstaclesto Efficient Consumer&sponse
564
560
560
536
Contents
Responding Rapidly
565
Putting It AlI Together: What Is the Right Supply Chain?
PhysicalEfficiencyversusMarket Responsiveness
566
Supply Chain Management: Why Only Now?
571
Surnrnary
572
Discussion Questions
Endnotes
574
COMPANY INDEX
NAME INDEX
SUBJECT INDEX
577
583
589
573
566
xvii