1. Managing The Marketing Mix
Lecture 3:
Place and Channels to Market
Dr. Martin J. Liu
Lecturer in Marketing

2. Learning
Outcomes Important Announcement
Define the 1. Seminar presentation group allocations will be available on
Place the U drive on 9/3/10 before 5PM. Please contact your group
members and make necessary preparations.
Types of 2. Q and A
Channels
Advantage
Target Scope
Low Cost Product Uniqueness
The IDR Broad
Cycle (Industry Wide)
Cost Leadership Differentiation
Strategy Strategy
Narrow
Marketing (Market Segment) Focus Focus
Strategy Strategy
Channel (low cost) (differentiation)
Functions
Channel
Strategy

3. Learning
Outcomes Learning Outcomes
Define the • Understand the importance & nature of marketing channels and
Place intermediaries to marketers
• Explore channel strategies their selection and management
Types of
Channels
• Understand factors influencing channel strategies
The IDR • Explore the effect of technology on traditional notion of place in
Cycle marketing
• Understand the potential for co-operation & conflict within
Marketing channels, and the effects of both positive and negative uses of
Channel power
Functions
Channel
Strategy

4. Learning
Outcomes The Definition of Place
Define the
• The place element of the marketing mix involves
Place
decisions about the location in which goods &
services can be purchased
Types of
Channels • The distribution channels through which they pass
from producer to final user, and the physical
distribution methods used
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy

5. Learning
Outcomes
Product Characteristics Influence
Channel Strategy
Define the • High value or technically complex products tend to be distributed
Place directly through a short channel (e.g. computers, cars, designer
jewellery)
Types of
Channels
• Perishable products need short, fast specialised distribution (e.g.
dairy products, fresh fruits, meat products, daily newspapers)
The IDR
Cycle
Marketing
• Well packaged, routinely purchased long shelf-life products tend
Channel to be intensively distributed through a variety of channels
Functions
Channel
Strategy

6. Learning
Outcomes
Channels for Consumer Products
Define the Direct Retailer Wholesaler Agent/Broker
Place Channel Channel Channel Channel
Producer Producer Producer Producer
Types of
Channels
Agents or
Brokers
The IDR
Cycle Wholesalers Wholesalers
Marketing Retailers Retailers Retailers
Channel
Functions
Consumers Consumers Consumers Consumers
Channel
Strategy

7. Learning
Outcomes Channels for Business-to-
Business Products
Define the
Direct Industrial Agent/Broker Agent Industrial Direct
Place
Channel Distributor Channel Channel Channel
Types of Producer Producer Producer Producer Producer
Channels
The IDR Agents or Agents or
Cycle Brokers Brokers
Industrial Industrial
Marketing Distributor Distributor
Channel
Functions Industrial Industrial Industrial Industrial Government
User User User User Buyer
Channel
Strategy

8. Learning
Outcomes
Distribution of Services
Define the
Place • Intangibility of services makes their distribution different from
the distribution of products
Types of • Intangibility also means that there are no titles or rights to
Channels services & inventory cannot exist
• Therefore, some of the primary functions of distributors
The IDR Inventorying, Securing & Taking title of goods - do not exist in
Cycle services
• Distribution that are appropriate for services
Marketing – Franchises
Channel – Agents
Functions – Brokers
– Electronic channels
Channel
Strategy

9. Learning
Outcomes
Marketing Channel Functions
Define the
Place
Specialization and
Division of Labor
Types of
Channels
Channels
The IDR Fulfill
Cycle Three Overcoming
Important Discrepancies
Functions
Marketing
Channel
Functions
Providing Contact
Efficiency
Channel
Strategy

10. Learning
Outcomes Specialization and
Division of Labor
Define the
Place • Provides economies of scale
• Aids producers who lack resources to market directly
Types of
Channels • Builds good relationships with customers
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy

11. Learning
Outcomes
Overcoming Discrepancies
Define the
Place
Temporal A situation that occurs when a product is
Discrepancy produced but a
customer is not ready to buy it.
Types of
Channels
Spatial The difference between the
Discrepancy location of a producer and the location of
The IDR widely scattered markets.
Cycle
Discrepancy The difference between the amount of
of product produced and the
Marketing Quantity amount an end user wants to buy.
Channel
Functions Discrepancy The lack of all the items a
of customer needs to receive full satisfaction
Assortment from a product or products.
Channel
Strategy

12. Learning
Outcomes
Contact Efficiency
Define the
Place Philips Sony Samsung Toshiba
Types of
Channels
The IDR
Cycle
Philips Sony Samsung Toshiba
Marketing
Channel
Functions
PC World
Channel
Strategy

13. Learning
Outcomes Value Added Services
Provided by Intermediaries
Define the
Place • Facilitating value - financing, training, information & after
sales
Types of • Logistic value - assortment, storage, sorting, bulk breaking,
Channels transportation
The IDR • Transactional value - risk, marketing, administration
Cycle
Marketing
Channel
Functions
Channel
Strategy

14. Learning
Outcomes
Discussion
Define the
Place What should we do about the
middlemen (intermediaries)? Are they
Types of the necessary evil?
Channels
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy

15. Learning
Outcomes
The IDR Cycle
Define the
Place Intermediation - Disintermediation – Reintermediation
(IDR) Cycle
Types of • (i) Pure-players enter the market with new offering
Channels
• (ii) They grab market share and push out traditional firms
The IDR • (iii) Traditional intermediaries fight back by making themselves
digital-capable
Cycle
Marketing
Channel
Functions
Channel
Strategy

16. Learning
Outcomes
The IDR Cycle
Define the
Place Customer Traditional Intermediary Supplier
Intermediation
Types of Customer Intermediary Supplier
Channels
EC-only Intermediary
Disintermediation
The IDR Customer Intermediary Supplier
Cycle
EC-only Intermediary
Reintermediation
Marketing
Channel Customer EC-able Intermediary Supplier
Functions EC-only Intermediary
Channel Weak Link Strong Link
Strategy
Source: Chircu and Kauffman (1999)

17. Learning
Outcomes
Channel Strategies
Define the
Place
Channel strategies cover the selection & management of
distribution systems.
Types of
Channels • Selection involves decision on the direction and intensity of
distribution
The IDR • Channel management decisions attempt to overcome conflict
Cycle and create efficiencies through:
– Vertical channel integration: the combination of two or more
Marketing stages in the channel under one management
Channel (e.g. supermarkets who own food processing plants)
Functions
– Horizontal channel integration: the combination of institutions at
the same level of operation under one management
Channel (e.g. DSG International, Owner of Dixons, Currys, PC World )
Strategy

18. Learning
Outcomes
Developing A Channel Strategy
Define the
Place
Types of
Channels
The IDR
Cycle
Marketing
Channel
Functions
“Channel strategy decisions involve the selection of the most effective distribution
Channel channel, the most appropriate level of distribution intensity and the degree of channel
integration”
Strategy (Jobber 2004: 641)

19. Learning
Outcomes Developing A Channel Strategy:
Channel Selection
Define the
Place
Market factors Product factors
- Buyer behaviour/expectations - Large/complex products: direct
- Geographical concentration & to consumers
Types of location of customers - Perishable products: short
Channels channels
Producer factors - Bulky/difficult products: direct
- Resources available distribution
The IDR - Desired degree of control - Digitized products: direct
Cycle - Decide on either push their distribution
product through the channel or
market to the end consumer Competitive factors
- Follow or differentiate from
Marketing what competitors are doing
Channel
Functions
Channel
Strategy

20. Learning
Outcomes
Push vs. Pull Strategy
Define the
Place
Types of
Channels
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy

21. Learning
Outcomes
Push vs. Pull Strategy
Define the
Place
Push Strategy Pull Strategy
• Personal selling rather than • Mass media advertising to
mass media advertising – communicate the marketing
Types of relatively costly message to a large segment
Channels
• Product type = industrial • Product type = consumer
product or complex new goods
The IDR products – educate the
Cycle customer about features • Channel length = long, more
intermediaries need
• Channel length = short consumer to pull product
through channel
Marketing
Channel • Media =few print or
electronic media available • Sufficient print & electronic
Functions (or limited by law) media to carry the
marketing message
Channel
Strategy

22. Learning
Outcomes Developing A Channel Strategy:
Channel Intensity
Define the
Intensive
Place - aims to provide saturation coverage of the market
- mainly used for mass market products
- convenience aspect of purchase is of most importance
Types of Selective
Channels - enables market coverage
- the producer uses a limited number of outlets in a geographical area to sell
his/hers products
The IDR - main advantage to the producer:
Cycle opportunity to select only the best outlets & build close working relationships
- main disadvantage:
potential dissatisfaction of the distributor if refused the distribution rights of a
certain product
Marketing
Channel Exclusive
Functions - extreme form of selective distribution in which only one distributor is used in a
particular geographical area
- could restrict competition in a way that may be detrimental to consumer interests
Channel
Strategy

23. Learning
Outcomes Channel Integration:
Vertical Integration
Define the
Place Benefits
• A secure source of raw materials or distribution channels
Types of • Protection of and control over valuable assets
Channels • Access to new business opportunities
• Simplified procurement and administrative procedures
The IDR
Cycle Risks
• Costs and expenses associated with increased overhead and
capital expenditures
Marketing
Channel • Loss of flexibility resulting from large investments
Functions • Problems associated with unbalanced capacities along the value
chain
• Additional administrative costs associated with managing a more
Channel complex set of activities
Strategy

24. Learning
Outcomes Channel Integration:
Horizontal Integration
Define the
Place Benefits
• Economies of scale: achieved by selling more of the same product
Types of • Economies of scope: achieved by sharing common resource to
Channels different products
• Increase market power over suppliers and down stream channel
members
The IDR • Reduction in the cost of international trades by operating factories
Cycle in foreign markets
Marketing Risks
Channel
• Anti-trust issue may arise
Functions
• Whether the anticipated economic gains will materialized
• The synergies may not exist
Channel
Strategy

25. Learning
Outcomes
Channel Management
Define the
Place
Types of
Channels
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy

26. Learning
Outcomes
Key Retail Marketing Decisions
Define the  Retail positioning  Product assortment
Place  Involves the choice of target market  Retailers have to decide on the
& differential advantage breadth & depth of their product
 Innovation in retailing can come assortment
from novelty in the process offered  Decide on providing or not own-label
Types of to the shopper, or from novelty in brands
the product or product assortment
Channels offered  Price
 Some retailers use price as their
 Store location differential advantage, as price is a key
 Critical to the success of retailer factor in store choice for some market
The IDR  Retailers have to decide on regional segments
coverage, the towns & cities to
Cycle target within regions and the  Store atmosphere
precise location to select within a  Is created by a combination of the
given town or city design, colour and layout of a store
 Rise of experiential marketing makes
Marketing retailers to want to create a shopping
experience for consumers
Channel
Functions
Channel
Strategy

27. Learning
Outcomes
Define the
Place
Types of
Channels
Thank You!
The IDR
Cycle
Marketing
Channel
Functions
Channel
Strategy