Introduction to Marketing: Chapter 12

Set of interdependent organizations involve in the process of making a product or service available for use or consumption by the consumer or business user.

- Channel choices affect other decisions in the marketing mix - A strong distribution system can be a competitive advantage - Channel decisions involve long-term commitments to other firms
--> Depending where you sell, your price will vary--> When you are making a decision about a channel, you are making a long term commitment

If you do not have a distributor, a channel, you have to directly sell to customers. Each company would have to contact different groups of clients themselves, however, when there is a channel in the middle, all they have to deal with is selling their products to the distributor and the channel can organize/manage everything (they have contact and records regarding their customers and the product)

Channel 1: Single channel, two members are involved, there is a producer that directly sells to the consumer (example: online shopping) -> there are no intermediaries here
Channel 2: There is one element in the middle, a retailer. Here the producer doesn't sell directly to the consumer, they sell to the retailer and the retailer takes care of selling to the consumer. (This is good for companies who have numerous customers)
Channel 3: In additional to the retailer, you may the wholesaler. There may be numerous retailers. So producers sell to wholesalers and retailers buy products from wholesalers.

Advantage: you do not have to deal with each individual customer
Disadvantage: you loose control and there will be complexity

Channel 1: full controlChannel 2&3: no control(example: you sell your tickets to a travel agency, they promote other tickets)

Producer-->Wholesaler-->Retailer-->Consumer
-Each channel is seeking to maximize its own profit and often results in poor performance because price is valued higher than it should be and customers are not happy (and decide to go buy products from competitors instead)

Producer+wholesaler+retailer --> consumer-- all three get together, as a unified system, and discuss a reasonable profit that suites each and everyone of them --> try to come with a price that they all will benefit from as well as their customers

The producer could reach the consumers in two different methods: 1) Single Channel Method- the producer uses only one way to reach the consumers: sell directly --> Internet, telephone, cataloguese.g. selling tickets only through one website - you have full control / understand what your customers want2) Multi-Channel Method - the producer uses several ways to reach out to their consumers, they use multiple methods to sell to the consumer- if you sell through different ways, you will get different groups of consumers - the more flexibility you have, the more variations you will get

You are selling your tickets through travel agencies, suddenly you decide to sell tickets on the Internet as well. Travel agencies are not happy with this and tell your company that if they choose to do this, then they could sell their tickets online however, they would want nothing to do with them if this is done.

Step 1: Analyzing Consumer NeedsStep 2: Setting Channel ObjectivesStep 3: Identifying Major AlternativesStep 4: Evaluating Major Alternatives

- Cost and feasibility of meeting needs must be considered - You must analyze your consumer needs --> depending on where people buy, they might have different needs (e.g. people who go online to do their banking online want to save time. However, people who go to bank branches, go there to get personalize services, feel safer etc.)

- Set channel objectives in terms of targeted level of customer service- Objectives must be set after choosing your channel (e.g. if you are a bank, and one of your branches are your distributive channel, you must set objectives for them. à working hours)

Intensive distribution : when you try to sell in any possible place, as many places as possible, every corner people can find your product (sell to every grocery store, depanneur etc.)…everybody can buy your product. Selective: sometimes companies sell only in a few places. Exclusive: in one or two places Many companies remain selective because of brand personality --> if you sell intensively, your brand personality will be in danger. The personality of the brand, image of the brand, will become ordinary, normal etc.

- Economic Criteria- Control Issues - Adaptive Criteria e.g. manufacturer of food --> you want to evaluate major alternatives (which one is easier to control etc.)