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Essentials of Marketing 7th Edition

Essentials of Marketing (7th Edition)

Book Edition7th Edition
Author(s)Hair, Lamb
ISBN9780538478342
PublisherCengage Learning
SubjectBusiness
Chapter 12, End Of Chapter, REVIEW AND APPLICATIONS, Exercise 1.1
Page 424

Explain what a marketing channel is and why intermediaries are needed.

 

A marketing channel is a business structure of interdependent organizations that reach from the point of product origin to the consumer with the purpose of physically moving products to their final consumption destination, representing "place" or "distribution" in the marketing mix, and encompassing the processes involved in getting the right product to the right place at the right time. Members of a marketing channel create a continuous and seamless system that performs or supports the marketing channel functions. Channel members provide economies to the distribution process in the form of specialization and division of labor; overcoming discrepancies in quantity, assortment, time, and space; and providing contact efficiency.

 

Your family runs a specialty ice cream parlor called Scoops. It manufactures its own ice cream in small batches and sells it only in pint-sized containers. After someone not affiliated with the company sent six pints of its ice cream to a popular talk-show host, she proclaimed on her national TV show that it was the best ice cream she had ever eaten. Immediately after the broadcast, orders came flooding in, overwhelming your small-batch production schedule and your limited distribution system. The company's shipping manager thinks she can handle it, but you disagree. List the reasons why you need to restructure your channel of distribution.

Explanation

The company is run by a family and is very small in size. Earlier it used to manufacture and sell small batches of ice cream, now it is getting heavy orders immediately after the mention of its product  show. The company is not able to complete these orders on time and hence, it needs to restructure. The reasons for restructuring channels of distribution include:

  • Lack of space: As the company does not have facilities for more production and storage, it therefore needs to restructure its distribution channels. The company may involve wholesalers, retailers or other middlemen in the distribution channels so that it may not need much space for stock.
  • Providing more accessibility: Effective distribution channels add to customer's value by making the product accessible. Including intermediaries in distribution of goods enhances accessibility of goods by covering every corner of the target market.
  • Gaining more market share: By managing effective distribution, the company can increase its share of the market. If the ice creams of the company are available to consumers, they are more likely to buy it. It can help in capturing market share.

Verified Answer

The reasons for restructuring channels of distribution include:

  • Lack of space
  • Providing more accessibility
  • Gaining more market share
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