1. CHAPTER ELEVEN
Place and
Development of
Channel Systems
For use only with
Perreault and McCarthy
texts.
© 2005 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin
www.mhhe.com/fourps

2. Exhibit 11-1
Place Decisions Are an Important Part of Marketing Strategy
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

3. Place Decisions Are Guided by “Ideal” Place Objectives
Product
Classes
Suggest
Objectives
Key
Issues
Decisions
Have
Long-run Effects
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Place
System
Is Not
Automatic

4. Channel System May Be Direct or Indirect
Greater Control
Lower Cost
Internet Makes Direct
Distribution Easier
Some
Reasons
For Choosing
Direct Channels
Direct Contact with
Customer Needs
Quicker Response or
Change in Marketing Mix
Suitable Middlemen
Not Available
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

5. Channel Specialists Adjust Discrepancies
with Regrouping Activities
Accumulating
Bulk-Breaking
Assorting
Sorting
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

6. Channel Relationship Must Be Managed
Choosing the Type of
Relationship
Key
Issues In
Channel
Management
Whole-Channel ProductMarket Commitment
Conflict Handling
Common Objectives
Role of Channel Captain
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

7. Exhibit 11-2
Producers or Middlemen May Be Channel Captains
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

8. The Best Channel System Should Achieve
Ideal Market Exposure
Intensive
Market
Exposure
Strategies
Selective
Exclusive
= number of
outlets
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

9. The Best Channel System Should Achieve Ideal
Market Exposure
»Intensive distribution means “sell it where they buy it.”
»Selective distribution means “sell it where it sells best.”
»Selective distribution can reduce costs and get better partners.
»Selective distribution often moves to intensive as the market grows.
•Exclusive distribution means selling through only one middleman in a
particular geographic area.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

10. Limiting Market Exposure
Producer
Vertical
Arrangements
May Be Legal
Wholesaler
Retailer
Retailer
Horizontal Arrangements
Are Illegal
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Retailer

11. Limiting Market Exposure
•Horizontal arrangements among competitors are illegal.
»These arrangements exist among the firms at one level of the channel.
»
»They are considered to be collusion that reduces competition and harms
customers.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

12. Vertical Marketing Systems Focus
on Final Customers
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
“independents”
General
Electric
McDonald’s
Florsheim
Amount of
cooperation
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

13. Exhibit 11-4
Channel Systems Can Be Complex
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin