Marketing Management, Millenium Edition - epiheirimatikotita.gr

Channel-Design Decisions 241Channel design must also take into account the limitations and constraints of workingwith different types of intermediaries. As one example, reps that carry more than onefirm’s product line can contact customers at a low cost per customer because the totalcost is shared by several clients, but the selling effort per customer will be less intense thanif each company’s reps did the selling. In addition, channel design can be constrained bysuch factors as competitors’ channels, the marketing environment, and country-bycountrylegal regulations and restrictions. U.S. law looks unfavorably upon channelarrangements that tend to substantially lessen competition or create a monopoly.Identifying Major Channel AlternativesAfter a firm has examined its customers’ desired service outputs and has set channelobjectives, the next step is to identify channel alternatives. These are described by(1) the types of available intermediaries, (2) the number of intermediaries needed,and (3) the terms and responsibilities of each channel member.Types of IntermediariesIntermediaries known as merchants—such as wholesalers and retailers—buy, take titleto, and resell the merchandise. Agents—brokers, manufacturers’ representatives andsales agents—search for customers and may negotiate on the producer’s behalf but donot take title to the goods. Facilitators—transportation companies, independent warehouses,banks, and advertising agencies—assist in the distribution process but neithertake title to goods nor negotiate purchases or sales. The most successful companiessearch for innovative marketing channels. The Conn Organ Company, for example,sells organs through merchants such as department and discount stores, drawingmore attention than it ever enjoyed in small music stores. Similarly, Ohio-basedProvident Bank reaches new mortgage customers by selling through the lendingtree.comWeb site, which acts as a facilitator.Number of IntermediariesIn deciding how many intermediaries to use, successful companies use one of threestrategies:➤➤➤Exclusive distribution means severely limiting the number of intermediaries. Firmssuch as automakers use this approach when they want to maintain control over theservice level and service outputs offered by the resellers. Often it involves exclusivedealing arrangements, in which the resellers agree not to carry competing brands.Selective distribution involves the use of more than a few but less than all of theintermediaries who are willing to carry a particular product. In this way, theproducer avoids dissipating its efforts over too many outlets, and it gains adequatemarket coverage with more control and less cost than intensive distribution. Nike,for example, sells its athletic shoes and apparel through seven types of outlets:(1) specialized sports stores, which carry a special line of athletic shoes; (2) generalsporting goods stores, which carry a broad range of styles; (3) department stores,which carry only the newest styles; (4) mass-merchandise stores, which focus ondiscounted styles; (5) Niketown stores, which feature the complete line; (6) factoryoutlet stores, which stock mostly seconds and closeouts, and (7) the popular FogdogSports site (www.fogdog.com), its exclusive Web retailer. 9Intensive distribution consists of the manufacturer placing the goods or services in asmany outlets as possible. This strategy is generally used for items such as tobaccoproducts, soap, snack foods, and gum, products for which the consumer requires agreat deal of location convenience.