Chapter 11:
Place and
Development of
Channel Systems
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Exchange and Marketing
Pots
Hats
Hoes
Baskets
In very basic economic
systems, each seller
must meet directly with
each buyer in order to
exchange something of
value. As needs
increase, the number of
exchanges can soon
become unmanageable
for one person.
Knives
Ten exchanges are required
when a central market is not used
Exhibit 11-2 (A)
11-2
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Marketing Facilitates Production
and Consumption
Production Sector
Specialization and division of labour = heterogeneous supply capabilities
Spatial Separation
Discrepancies of Quantity
Marketing
needed
to overcome
discrepancies
and
separations
Separation in Time
Separation of Information
Separation in Values
Discrepancies of Assortment
Separation of Ownership
Consumption Sector
Heterogeneous demand for form, task, time, place, and possession utility
Exhibit 11-3
11-3
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Model of Market-Directed
Macro-Marketing System
Many Individual Producers
intermediaries
Facilitators
Perform universal marketing functions
Monitoring by government(s)
and public interest groups
To overcome discrepancies and
separations
To create utility and direct flow of
need-satisfying goods and services
Many Individual Consumers
Exhibit 11-4
11-4
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Regrouping Activities
Accumulating
Sorting
11-5
BulkBreaking
Assorting
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Strategic Decision Areas in Place
Place objectives
Customer
service
level desired
Type of
channel
Direct
Degree of market
exposure desired
11-6
Indirect
Type of
physical distribution
facilities needed
Intermediaries/
facilitators needed
How to manage
channels
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Why a Firm May Want to Use Direct Channels
Greater Control
Lower Cost
Value Added Subsequent to
Production Process
Direct Contact with
Customer Needs
Some
Reasons
for Choosing
Direct Channels
11-7
Quicker Response or
Change in Marketing Mix
Suitable Intermediaries
Not Available
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Managing Channel Relationships
Choosing the Type of
Relationship
Whole-Channel ProductMarket Commitment
Key
Issues in
Channel
Management
Conflict Handling
Common Objectives
Role of Channel Captain
11-8
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Vertical Marketing Systems
Type of channel
Characteristics
Vertical marketing systems
Traditional
Administered
Contractual
Corporate
Little or
none
Some to
good
Fairly good
to good
Complete
Control maintained
by
None
Economic
power and
leadership
Contracts
One
company
ownership
Examples
Typical
channel of
“independents”
General
Electric
McDonald’s
Florsheim
Amount of
cooperation
Exhibit 11-5
11-9
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.
Market Exposure
Intensive
Selective
What Market
Exposure
Fits the
Marketing
Objectives
Exclusive
11-10
For use only with Shapiro, Wong, Perreault, and McCarthy texts.
Copyright © 2002 McGraw-Hill Ryerson Limited.