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Kotler Summary - Chapter 18: Selecting & Managing Marketing Channels
Description: Chapter notes for the famous marketing textbook by Kotler
What are marketing channels?
Sets of interdependent organizations involved in the process of making a product or service available for use or
consumption.
Channel Levels
Each intermediary that performs work in bringing the product & its title closer is a channel level.
Zero-channel level (direct-marketing channel) consists of a manufacturer selling directly to the final customer (i.e. door-
to-door sales, mail order. Telemarketing, TV selling)
One level channel contains one selling intermediary (i.e. retailer)
Two level...(wholesalers, retailers)
Three level...(wholesalers, jobbers, retailers)
Channel-Design Decisions
Designing a channel system calls for analyzing customer needs, establishing channel objectives, & identifying & evaluating
the major channel alternatives.
1. Lot size: # of units that the marketing channel permits a typical customer to purchase on a purchase occasion
2. Waiting time: Average time that customers of that channel wait for receipt of the goods.
3. Spatial convenience: Degree to which the marketing channel makes it easy for customers to purchase the product.
4. Product variety: assortment breadth.
5. Service backup: add-on services provided by the channel (installation, repairs, credit).
1. Types of intermediaries.
Depends on the service outputs desired by the target mkt & the channel's transactions costs. The company must
search for the channel alternative that promises the most long-run profitability.
2. Number of intermediaries.
Exclusive distribution
Selective "
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Intensive "
3. Terms & responsibilities of channel members
The producer must determine the rights & responsibilities of the participating channel members, making sure that
each channel member is treated respectfully & given the opportunity to be profitable.
1. Economic Criteria
The first step is to determine whether a company sales force or a sales agency will produce more sales.
The next step is to estimate the costs of selling different volumes through each channel.
The final step is comparing sales & costs.
Each channel will produce a different level of sales & costs.
2. Control Criteria
The agents may concentrate on other customers' products or they may lack the skills to handle our products.
3. Adaptive Criteria
The channel members must make some degree of commitment to each other for a specified period of time.
Channel-management decisions
After a company has chosen a channel alternative, individual intermediaries must be selected, motivated & evaluated.
Channel Dynamics
Conventional marketing channel
Comprises an independent producer, wholesaler(s) & retailer(s).
Each is a separate entity.
No channel member has complete or substantial control over the other members.
3 types of VMS:
1. Corporate VMS
Combines successive stages of production & distribution under single ownership. (Sears).
2. Administered VMS
Coordinates successive stages of production & distribution through the size & power of one of members (Kodak,
Gillete, P&G)
3. Contractual VMS
Wholesaler-sponsored voluntary chains
Retailer cooperatives
Franchise organizations
Independent firms at different levels of production & distribution integrating their programs on a contractual basis to
obtain more economies &/or sales impact than they could achieve alone. 3 types:
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Remind me later
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