What Type Of Stores Rely On Their Large Size And Very Deep Selection To Try To Dominate The Market?

8.1 Marketing Channels and Channel Partners

Learning Objectives

Explain why marketing aqueduct decisions can result in the success or failure of products.
Understand how supply chains differ from marketing channels.
Draw the different types of organizations that work together as channel partners and what each does.

Today, marketing channel decisions are as important every bit the decisions companies brand well-nigh the features and prices of products (Littleson, 2007). Consumers have become more demanding. They are used to getting what they want. If you can't get your product to them when, where, and how they desire it, they will simply buy a competing production. In other words, how companies sell has go every bit important every bit what they sell^one.

The firms a company partners with to actively promote and sell a product equally it travels through its marketing channel to users are referred to by the firm as its aqueduct members (or partners). Companies strive to choose non only the best marketing channels only also the best channel partners. A stiff channel partner like Walmart can promote and sell the heck out of a production that might not otherwise plough a turn a profit for its producer. In plough, Walmart wants to piece of work with strong channel partners information technology can depend on to continuously provide it with corking products that wing off the shelves. By dissimilarity, a weak aqueduct partner can be a liability.

The simplest marketing channel consists of just two parties—a producer and a consumer. Your haircut is a good example. When yous go a haircut, it travels straight from your hairdresser to yous. No one else owns, handles, or remarkets the haircut to you before you go it. However, many other products and services laissez passer through multiple organizations earlier they get to yous. These organizations are called intermediaries (or middlemen or resellers).

Companies partner with intermediaries not because they necessarily want to (ideally they could sell their products directly to users) but considering the intermediaries can help them sell the products better than they could working solitary. In other words, they accept some sort of capabilities the producer needs: contact with many customers or the correct customers, marketing expertise, shipping and handling capabilities, and the ability to lend the producer credit are amid the types of help a firm can become by utilizing a channel partner. There are iv forms of utility, or value, that channels offering. These are time, form, place, and ownership.

Intermediaries besides create efficiencies by streamlining the number of transactions an organization must brand, each of which takes time and costs money to comport. As Figure viii.1 "Using Intermediaries to Streamline the Number of Transactions" shows, by selling the tractors it makes through local subcontract machinery dealers, the subcontract mechanism manufacturer John Deere can streamline the number of transactions information technology makes from eight to just 2.

Figure viii.1 Using Intermediaries to Streamline the Number of Transactions

Using Intermediaries to Streamline the Number of Transactions. John Deere can sell to many different farmers, or John Deere can sell to many dealers, who in turn sell to many farmers

The marketing environment is always changing, so what was a great channel or channel partner yesterday might not be a dandy channel partner today. Changes in technology, production techniques, and your customer's needs mean you take to continually reevaluate your marketing channels and the aqueduct partners you ally yourself with. Moreover, when you create a new product, you can't assume the channels that were used in the past are the all-time ones (Lancaster & Withey, 2007). A different aqueduct or channel partner might be better.

Consider Microsoft'south digital encyclopedia, Encarta, which was offset sold on CD and via online subscription in the early 1990s. Encarta nearly destroyed Encyclopedia Britannica, a firm that had dominated the print encyclopedia business for literally centuries. Ironically, Microsoft had actually tried to partner with Encyclopedia Britannica to employ its encyclopedia information to make Encarta only was turned downwardly.

Figure 8.2

World Book Encyclopedias

Neither Encyclopedia Britannica nor Microsoft saw Wikipedia on the horizon.

Simply today, Encarta no longer exists. It's been put out of business concern by the costless online encyclopedia Wikipedia. The bespeak is that products and their marketing channels are constantly evolving. Consequently, you and your company have to exist gear up to evolve, too.

Marketing Channels versus Supply Chains

In the past few decades, organizations accept begun taking a more holistic wait at their marketing channels. Instead of looking at only the firms that sell and promote their products, they have begun looking at all the organizations that figure into any office of the procedure of producing, promoting, and delivering an offering to its user. All these organizations are considered role of the offering's supply chain.

For instance, the supply chain includes producers of the raw materials that go into a product. If it'southward a food production, the supply chain extends back through the distributors all the fashion to the farmers who grew the ingredients and the companies from which the farmers purchased the seeds, fertilizer, or animals. A product's supply chain also includes transportation companies such equally railroads that assistance physically motion the product and companies that build Spider web sites for other companies. If a software maker hires a company in Republic of india to help information technology write a computer program, the Indian company is role of the partner'due south supply chain. These types of firms aren't considered channel partners considering it's not their job to actively sell the products being produced. Nonetheless, they all contribute to a product's success or failure.

Firms are constantly monitoring their supply bondage and tinkering with them so they're as efficient as possible. This procedure is called supply chain management. Supply chain direction is challenging. If done well, information technology's practically an fine art.

Types of Aqueduct Partners

Let's now expect at the basic types of aqueduct partners. To assist you understand the diverse types of channel partners, we will go over the most common types of intermediaries. The 2 types you lot hear about most oftentimes are wholesalers and retailers. Keep in mind, nevertheless, that the categories we discuss in this section are only that—categories. In recent years, the lines betwixt wholesalers, retailers, and producers have begun to mistiness considerably. Microsoft is a producer of goods, merely recently it began opening up its ain retail stores to sell products to consumers, much equally Apple has done (Lyons, 2009). Every bit you volition learn later in the chapter, Walmart and other big retailers now produce their own shop brands and sell them to other retailers. Similarly, many producers have outsourced their manufacturing, and although they still telephone call themselves manufacturers, they deed more than like wholesalers. Wherever organizations see an opportunity, they are first to take it, regardless of their positions in marketing channels.

Wholesalers

Wholesalers obtain large quantities of products from producers, store them, and break them down into cases and other smaller units more convenient for retailers to buy, a process called "breaking majority." Wholesalers get their name from the fact that they resell goods "whole" to other companies without transforming the appurtenances. If you lot are trying to stock a modest electronics shop, y'all probably don't want to purchase a truckload of iPods. Instead, you probably want to buy a smaller assortment of iPods as well as other merchandise. Via wholesalers, y'all tin can get the assortment of products yous want in the quantities you want. Some wholesalers conduct a wide range of different products. Other bear narrow ranges of products.

Near wholesalers "take title" to goods—or own them until purchased past other sellers. Wholesalers such as these assume a dandy deal of gamble on the part of companies further downward the marketing channel as a result. For example, if the iPods you lot plan to buy are stolen during shipment, damaged, or get outdated considering a new model has been released, the wholesaler suffers the loss—not you. Electronic products, in particular, go obsolete very quickly. Recollect almost the cell phone you owned simply a couple of years ago. Would you want to have to utilize it today?

Video Prune

Marketing Channels and Products That Become Obsolete

(click to meet video)

Skillful matter yous don't have to employ the jail cell phone shown in this YouTube video. You lot could forget nigh putting it in your purse or pocket. Merely in 1973, the phone was the latest and greatest of gadgets. Martin Cooper, who championed the development of the device, was a pb engineer at Motorola. To whom practise you lot call up Cooper made his first telephone call on the device? To his rivals at AT&T, which at the time manufactured only "landline" phones. He wanted to let them know he and Motorola had inverse the phone game.

There are many types of wholesalers. The three basic types of wholesalers are merchant wholesalers, brokers, and manufacturers' agents, each of which we hash out next.

Merchant Wholesalers

Merchant wholesalers are wholesalers that accept title to the appurtenances. They are as well sometimes referred to as distributors, dealers, and jobbers. The category includes both total-service wholesalers and limited-service wholesalers. Full-service wholesalers perform a broad range of services for their customers, such as stocking inventories, operating warehouses, supplying credit to buyers, employing salespeople to help customers, and delivering goods to customers. Maurice Sporting Goods is a large N American full-service wholesaler of hunting and fishing equipment. The firm's services include helping customers effigy out which products to stock, how to price them, and how to brandish them¹.

Express-service wholesalers offer fewer services to their customers but lower prices. They might not offer commitment services, extend their customers' credit, or have sales forces that actively call sellers. Cash-and-carry wholesalers are an case. Small retailers frequently buy from greenbacks-and-carry wholesalers to keep their prices every bit low as big retailers that get large discounts because of the huge volumes of goods they buy.

Driblet shippers are another type of limited-service wholesaler. Although drop shippers take title to the goods, they don't actually take possession of them or handle them, oftentimes because they deal with goods that are large or bulky. Instead, they earn a commission past finding sellers and passing their orders along to producers, who then transport them directly to the sellers. Post-gild wholesalers sell their products using catalogs instead of sales forces and then transport the products to buyers. Truck jobbers (or truck wholesalers) actually store products, which are often highly perishable (e.g., fresh fish), on their trucks. The trucks make the rounds to customers, who inspect and select the products they want directly off the trucks.

Rack jobbers sell specialty products, such as books, hosiery, and magazines that they brandish on their ain racks in stores. Rack jobbers retain the title to the goods while the trade is in the stores for sale. Periodically, they accept count of what'due south been sold off their racks and and so bill the stores for those items.

Brokers

Effigy 8.3

A broker smiling, standing next to a lake

Good brokers with excellent contacts are able to quickly friction match up buyers and sellers.

DanEvans – Pixabay – CC0 public domain.

Brokers, or agents, don't purchase or take championship to the products they sell. Their role is limited to negotiating sales contracts for producers. Clothing, piece of furniture, food, and bolt such as lumber and steel are often sold by brokers. They are mostly paid a commission for what they sell and are assigned to unlike geographical territories past the producers with whom they piece of work. Because they take excellent industry contacts, brokers and agents are "go-to" resource for both consumers and companies trying to buy and sell products.

The virtually common form of agent and broker consumers run across are in real manor. A existent manor agent represents, or acts for, either the buyer or the seller. The listing agent is contacted by the homeowner who wants to sell, and puts the firm on the market. The buyer also contacts an agent who shows the buyer a number of houses. If at that place is a business firm that the buyer wants to purchase, the agent calls the list amanuensis and the price is negotiated. In some states, the buyer's agent is a legal representative of the seller, unless a buyer'south agent understanding is signed, which is something to keep in mind when you are the buyer. Agents work for brokers, who act as sort of a head amanuensis and market the company'south services while making sure that all of the legal requirements are met.

Manufacturers' Sales Offices or Branches

Manufacturers' sales offices or branches are selling units that work directly for manufacturers. These are found in business-to-business settings. For case, Konica-Minolta Business concern Systems (KMBS) has a organisation of sales branches that sell KMBS printers and copiers directly to companies that need them. Every bit a consumer, it would be rare for you to interact direct with a manufacturer through a sales office considering in those instances, such as with Apple tree stores and Nike stores, these are considered retail outlets.

Retailers

Retailers buy products from wholesalers, agents, or distributors so sell them to consumers. Retailers vary by the types of products they sell, their sizes, the prices they charge, the level of service they provide consumers, and the convenience or speed they offer. You are familiar with many of these types of retailers because you lot have purchased products from them. We mentioned Nike and Apple as examples of companies that make and sell products directly to consumers, just in reality, Nike and Apple contract manufacturing to other companies. They may design the products, but they actually purchase the finished goods from others.

Supermarkets, or grocery stores, are self-service retailers that provide a total range of food products to consumers, as well every bit some household products. Supermarkets can be high, medium, or depression range in terms of the prices they charge and the service and variety of products they offer. Whole Foods and Central Market place are grocers that offering a broad diverseness of products, more often than not at higher prices. Midrange supermarkets include stores similar Albertsons and Kroger. Aldi and Sack 'north Salvage are examples of supermarkets with a limited selection of products and service but low prices. Drugstores specialize in selling over-the-counter medications, prescriptions, and health and beauty products and offer services such equally photo developing.

Convenience stores are miniature supermarkets. Many of them sell gasoline and are open twenty-four hours a day. Frequently they are located on corners, making it easy and fast for consumers to go in and out. Some of these stores contain fast-food franchises like Church's Chicken and Jack in the Box. Consumers pay for the convenience in the form of higher markups on products. In Europe, as well as in rural parts of the U.s., you'll find convenience stores that offer fresh meat and produce.

Specialty stores sell a certain type of product, but they usually comport a deep line of it. Zales, which sells jewelry, and Williams-Sonoma, which sells an array of kitchen and cooking-related products, are examples of specialty stores. The personnel who work in specialty stores are usually knowledgeable and often provide customers with a high level of service. Specialty stores vary by size. Many are small. Still, in contempo years, behemothic specialty stores called category killers take emerged. A category killer sells a high volume of a particular blazon of production and, in doing so, dominates the competition, or "category." PETCO and PetSmart are category killers in the retail pet-products market place. Best Buy is a category killer in the electronics-product market. Many category killers are, themselves, struggling, as shoppers for their products are moving to the Web or to disbelieve department stores.

Section stores, past contrast, comport a broad variety of household and personal types of trade such as clothing and jewelry. Many are chain stores. The prices section stores charge range widely, as does the level of service shoppers receive. Neiman Marcus, Saks Fifth Artery, and Nordstrom sell expensive products and offering extensive personal service to customers. The prices department stores such as JCPenney, Sears, and Macy's charge are midrange, as is the level of service shoppers receive. Walmart, Kmart, and Target are discount department stores with cheaper goods and a limited amount of service. As mentioned earlier, these disbelieve department stores are a real threat to category killers, peculiarly in the class of a superstore.

Superstores are oversized department stores that deport a broad assortment of general merchandise also as groceries. Banks, hair and nail salons, and restaurants such as Starbucks are often located within these stores for the convenience of shoppers. You have probably shopped at a SuperTarget or a huge Walmart with offerings such as these. Superstores are too referred to equally hypermarkets and supercenters.

Warehouse clubs are supercenters that sell products at a discount. They crave people who shop with them to become members by paying an almanac fee. Costco and Sam's Club are examples. Off-toll retailers are stores that sell a variety of discount trade that consists of seconds, overruns, and the previous flavour'south stock other stores have liquidated. Big Lots, Ross Dress for Less, and dollar stores are off-price retailers.

Outlet stores were a new phenomenon at the end of the last century. These were discount retailers that operated nether the brand proper name of a single manufacturer, selling products that couldn't be sold through normal retail channels due to mistakes made in manufacturing. Oftentimes located in rural areas but along interstate highways, these stores had lower overhead than like stores in big cities due to lower hire and lower employee salaries. But due to the high popularity of the stores, demand far outstripped the supply of mistakes. Most outlet malls are at present selling first-quality products just, perhaps at a discount.

Online retailers can fit into whatever of the previous categories; indeed, most traditional stores also have an online version. You tin buy from JCPenney.com, Walmart.com, BigLots.com, and so forth. At that place are besides stores, like O.co (formerly called Overstock.com) that operate simply on the Web.

Used retailers are retailers that sell used products. Online versions, similar eBay and Craigslist, sell everything from used airplanes to clothing. Traditional stores with a physical presence that sell used products include One-half-Priced Books and wearable consignment or furniture stores like Amelia'south Attic. Notation that in assignment stores, the stores practise not accept title to the products but only retail them for the seller.

A new blazon of retail store that turned up in the last few years is the pop-upwardly store. Pop-up stores are small temporary stores. They can be kiosks or temporarily occupy unused retail space. The goal is to create excitement and "buzz" for a retailer that then drives customers to their regular stores. In 2006, JCPenney created a pop-up store in Times Square for a calendar month. Kate Coultas, a spokesperson for JCPenney, said the shop got the attention of Manhattan's residents. Many hadn't been to a JCPenney store in a long fourth dimension. "It was a existent dramatic argument," Coultas says. "It kind of had a halo effect" on the visitor's stores in the surrounding boroughs of New York City (Austin, 2009). Most commonly, though, popular-up stores are used for seasonal sales, such as a costume store before Halloween or the Hillshire Farms sausage and cheese shops you meet at the mall just before Christmas.

Not all retailing goes on in stores, however. Nonstore retailing—retailing not conducted in stores—is a growing trend. Online retailing; party selling; selling to consumers via tv, catalogs, and vending machines; and telemarketing are examples of nonstore retailing. These are forms of straight marketing. Companies that appoint in straight marketing communicate with consumers urging them to contact their firms directly to purchase products.

Key Takeaway

How a product moves from raw textile to finished good to the consumer is a marketing channel, also chosen a supply chain. Marketing channel decisions are as important as the decisions companies make about the features and prices of products. Channel partners are firms that actively promote and sell a product as it travels through its aqueduct to its user. Companies try to cull the all-time channels and aqueduct partners to help them sell products because doing and then can requite them a competitive advantage.

Review Questions

Why are marketing channel decisions every bit of import equally pricing and production feature decisions?
What are the benefits of looking at all of the organizations that contribute to the production of a product versus but the organizations that sell them?
Why do channel partners rely on each other to sell their products and services?
How do companies add value to products via their marketing channels?

¹"Developing a Channel Strategy," CBSNews.com, http://world wide web.cbsnews.com/8301-505125_162-51168339/developing-a-channel-strategy/?tag=mncol;lst;1 (accessed April 13, 2012).

References

Austin, J., "Pop-Up Stores Offer Long-Term Strategy," Fort Worth Star-Telegram, Nov 27, 2009, 1C–2C.

Lancaster Thousand. and Frank Withey, Marketing Fundamentals (Burlington, MA: Butterworth-Heinemann, 2007), 173.

Littleson, R., "Supply Chain Trends: What's In, What's Out," Manufacturing.internet, February half-dozen, 2007, http://www.manufacturing.cyberspace/articles/2007/02/supply-concatenation-trends-whats-in-whats-out (accessed April xiii, 2012).

Lyons, D., "The Lost Decade," Newsweek, Nov 9, 2009, 27.