276 CHAPTER 10 CHANNEL CON CEPTS:DISTRIBUTINGTHEPRODUCT
Summary
Thecomplexmechanismofconnectingtheproducerwiththeconsumeris referredtoasthechannelof
distribution.Thischapterhaslookedat theevolutionofthechannel,as wellastheoreticalexplanations
forthediolributionchannelphenomenon.Five"flows" aresuggestedthat reflectthetiesofchannel mem-
berswithotheragenciesinthedistributionofgoodsandservices.Achannelperformsthreeimportant
functions:(I)transactionalfunctions,(2)logisticalfunctions, and (3)facilitatingfunctions.Channelstrate-
giesareevidentforserviceproductsaswellasforphysical products. Optionsavailablefororganizing
thechannelstructureinclude:(1)conventionalchannels, (2)verticalmarketingsystems,(3)horizontal
channel systems,and(4)multiplechannelnetworks.Designingtheoptimaldistributionchanneldepends
ontheobjectivesofthefirmandthecharacteristicsofavailablechanneloptions.
Theprimarymembersofdistributionchannelsaremanufacturers,Wholesalers,andretailers,
Retailing is allactivitiesrequiredtomarketgoodsandservicestotheultimateconsumer. Thismakes
retailerswhoperformsuchac tivitiesanimportant linkinthechannelofdistributionformanycon-
sumerproducts.
Wholesalinginvolvesallactivitiesrequiredtomarket goods andservicestobusinesses,insti-
tutions,mindustrialuserswhoaremotivatedtobuyforresaleortoproduceandmarketotherprod-
ucts andservices.Wholesalersprovidea linkagebetweenproducersandretailersorinduotrialusers.
Physicaldistributionmanagementinvolvesthemovementandstorageofmaterials,parts, and
finishedinventoryfromsuppliers, betweenmiddlemen, andtocustomers.PhysicaldistribuLionactiv-
itiesareundertakentofacilitateexchangebetweenmarketersandcuslomers,Theba:;icobjectiveof
physicaldi stributionis toprovideanacceptablelevelofcustomerserviceatthelowestpossiblecost.
Thisisdone usingthetotal costconcept,whichrequiresthatallthecostsofeachalternativedistri-
butionsystembeconsideredwhena firmisattemptingtoprovidealevel()fcustomerselvice.
Channelsexhibitbehavior,aspeopledo,andthisbehaviorneedstobecoordinatedandman-
agedinordertoreachdesired objectives.Thefourdimensionsofbehaviorexaminedare role,com-
munication,conflict, andpower.Strategiesforeffectivechannelmanagementinclude:(I)analyze
theconsumer,(2)establishchannelobjectives , (3)specify thechannel tasks,(4)selecttheappropri-
atechannelfromavailablealternative s. and(5) evaluatetheresults.Thechapterconcludeswitha dis-
cussionofthelegalfactol':;impactonchannt:ls.
Marketer'sVocabulary
Exchange function Salesofthe producttothevariousmembersofthechannelofdistribution.
Physicaldistributionfunction Moves theproductthroughthe'Oxchangechannel,alongwith
titleandownership.
Marketingchannel Setsofindependentorganizationsinvolvedintheprocessofmaking aprod-
uctorserviceavailableforus e orconsumptionaswellasprovidinga paymentmechanismforthe
provider.
Routinization Therightproductsaremostalwaysfoundinplaceswheretheconsumerexpects
tofindthem,comparisonsarepossible,pricesaremarked,andmethodsofpaymentareavailable.
Retailing Involvesallactivitiesrequiredtomarketconsumergoods8ndservicestoultimate:
consumers.
Nonstore re tailing Sales madetoultimate consumers outsidea traditionalretailstoreselting.
Wholesaling Includesallactivitiesrequiredtomarketgoodsandservicestobusinesses,insti,u-
tions,orindustrialusers.
Conventionalchannel Agroupofindependentbusinesses,eachmotivatedbyprofit,andhaving
littleconcernaboutanyothermemberofthedistl'ibuti.onsequence.
