Marketing Channels

by Coughlan, Anne; Anderson, Erin; Stern, Louis W.; El-Ansary, Adel

• ISBN13: 9780131913462
• ISBN10: 0131913468
• Edition: 7th
• Format: Paperback
• Copyright: 2005-12-29
• Publisher: Prentice Hall

Summary

For advanced undergraduate and/or graduate-level courses in Distribution Channels, Marketing Channels or Marketing Systems.

 

Marketing Channels, Seventh Edition shows readers how to design, develop, maintain and manage effective relationships among worldwide marketing channels to achieve sustainable competitive advantage by using strategic and managerial frames of reference.

 

Author Biography

Anne T. Coughlan

Anne Coughlan received her bachelor’s degree in Economics (Phi Beta Kappa, with Honors and Distinction, 1977) and her Ph.D. in Economics (1982) both from Stanford University.  From 1981 to 1985 she taught at the Graduate School of Business of the University of Rochester as an assistant professor of Economics and Marketing.  Since 1985 she has been on the Marketing faculty at the Kellogg School of Management at Northwestern University, where she is currently a tenured Associate Professor of Marketing.  She was a visiting Professor of Marketing at INSEAD, in Fontainebleau, France, during the 1997-98 school year.

 

Professor Coughlan’s teaching, research, and consulting interests lie in the areas of distribution channel management and design, pricing, competitive strategy, and the international applications of these areas.  She teaches courses in distribution channel management and design to the Kellogg students in the regular MBA program, the Executive Masters’ Program, and the International Executive MBA program.  She won Teacher of the Year awards for the best elective course in the Executive Masters’ Program at Kellogg in 1996 and 2003, and the Sidney J. Levy Teaching Award in 2000-2001.  She is a frequent lecturer in executive programs on distribution and pricing, both at Kellogg and around the world.  She has consulted and done executive education for various companies including Monsanto, Motorola, AT&T, Square D, Bulkmatic, The Tribune Company, GlaxoSmithkline, Roche, DJ Ortho, and J.M. Huber Engineered Materials.

 

Professor Coughlan is the lead author (with co-authors Erin Anderson, Louis W. Stern, and Adel I. El-Ansary) of Marketing Channels, 7^th edition (Prentice-Hall, 2006), a leading textbook and reference work in the area of distribution channel design and management.  She has also written many scholarly research articles and her work has been published in journals such as Marketing Science, Management Science, International Journal of Research in Marketing, Journal of Business, and Journal of Marketing.

 

She has served as an Area Editor for Marketing Science and has served on the editorial boards of Journal of Marketing Research and Marketing Letters. She is currently an Associate Editor at Journal of Economics and Management Strategy and serves on the editorial board of Marketing Science.  She is a co-editor of the Quantitative Marketing Network of the Social Sciences Research Network.  Professor Coughlan was elected Secretary-Treasurer (1988-89) and President (1992-93) of the College on Marketing of The Institute for Management Sciences.

 

Professor Coughlan served on the Board of Trustees of The Kent Funds (a Michigan-based bank proprietary mutual fund family) from 1994-97 and has served since 1994 on the board of directors of The Care of Trees, a national tree care company in the United States.  She has been a member of the Advisory Board of Channel Velocity, a reverse logistics company, since September 2004.  She served on the Program Committee of the Japan-America Society of Chicago from 1992-1996.

 

Professor Coughlan is currently doing research on gray marketing, dual distribution in retailing, sales force compensation, direct selling organization management and compensation, brand equity investments in the grocery channel, and the optimal allocation of activities in multi-member distribution channels.

 

 

Erin Anderson

Erin Anderson is the John H. Loudon Chaired Professor of International Management and Professor of Marketing at INSEAD (The European Institute of Business Administration) in Fontainebleau, France, which she joined in 1994.

 

Her research focuses around the problems of motivating, structuring, and controlling sales forces and channels of distribution. She emphasizes issues related to vertical integration, including modes of foreign market entry. She takes a field-data approach to these issues, which she structures using a blend of institutional economics, macro-level organization theory, strategic management, and marketing directory.

 

Anderson has published articles, based primarily on original field research, in a number of journals, including the Journal of Marketing Research, Management Science, Marketing Science, Rand Journal of Economics, Journal of Economic Behavior and Organization, Journal of Law, Economics, and Organization, Organization Science, Journal of International Business, and the Sloan Management Review. In addition, she serves on the editorial boards of several journals, including Journal of Marketing, Journal of Marketing Research and International Journal of Research in Marketing. With Bob Trinkle, she has authored Outsourcing the Sales Function: The Real Cost of Field Sales, published by Thomson Texere Publishing.

 

Anderson has consulted or been involved in executive teaching for a range of industrial companies, including DuPont, Air Liquide, Lafarge, and Alcatel, as well as consumer goods companies such as Heuer Time and Electronics, Motorola Cellular Systems, and Phillips Lighting. She has lectured for executive audiences in England, France, Spain and Belgium as well as the United States and Canada.

 

Dr. Anderson received her PhD in Marketing in 1982 from the Anderson Graduate School of Management at the University of California, Los Angeles. Prior joining INSEAD, Anderson was Associate Professor of Marketing at the Wharton School of the University of Pennsylvania, where she had been a faculty member since 1981. Anderson has taught at the Catholic University of Mons, Belgium, and has been a visiting scholar at the European Institute for Advanced Studies in Management, Brussels.

 

 

Adel I. El-Ansary

Adel I. El-Ansary is the Donna L. Harper Professor of Marketing at the University of North Florida.  He is the recipient of the State of Florida University System Professional Excellence Award, 1999 and Prime Osborne III Distinguished Professor Award, 2000. Prior to joining the faculty at the University of North Florida as the First Holder of the Paper and Plastics Educational Research Foundation Eminent Scholar Chair in Wholesaling, he served as Professor and Chairman of Business Administration at the George Washington University, Washington, D.C.

 

El-Ansary is a Fulbright Scholar.  He is co-author of the leading text-reference books on E-Marketing, 3^rd, and 4^th edition, Prentice-Hall, 2003-206 and Marketing Channels, 1^st through 7^th edition, Prentice-Hall, 1977 - 2006.  He is also a contributor to the Encyclopedia of Marketing, Encyclopedia of Economics, American Marketing Association Marketing Encyclopedia, the Logistics Handbook, and over thirty-five books and conference proceedings.  El-Ansary’s research and writing contributed twenty key articles published in major journal including the Journal of Marketing, Journal of Marketing Research, Journal of Marketing Channels, Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Macro Marketing, Journal of Relationship Marketing, Journal of Personal Selling and Sales Management, and European Business Review, International Marketing Review.

 

El-Ansary was privileged to serve on the National Advisory Board of U.S. Small Business Administration under Presidents Nixon and Ford, the Board of Director of the International Consultants Foundation, the Global Council of the American Marketing Association, Founder of the Special Interest Group in Wholesale Distribution and Co-Chairman of the Relationship Marketing Interest Group of the Academic Council of the American Marketing Association, and Member of the Board of Governors of the Academy of Marketing Science.     

 

Table of Contents

Preface	xix
Part I: Introduction	1	(39)
Marketing Channels: Structure and Functions	1	(39)
What Is a Marketing Channel?	2	(3)
Why Do Marketing Channels Exist and Change?	5	(5)
Demand-Side Factors	6	(1)
Supply-Side Factors	7	(3)
What Is the Work of the Marketing Channel?	10	(4)
Who Belongs to a Marketing Channel?	14	(3)
Manufacturers	14	(1)
Intermediaries	15	(1)
End-Users	16	(1)
Channel Formats as Combinations of Channel Members	16	(1)
A Framework for Channel Analysis	17	(10)
Channel Design: Segmentation	17	(2)
Channel Design: Channel Structure Decisions	19	(2)
Channel Design: Splitting the Workload	21	(1)
Channel Design: Degree of Commitment	22	(1)
Channel Design: Gap Analysis	22	(2)
Channel Implementation: Identifying Power Sources	24	(1)
Channel Implementation: Identifying Channel Conflicts	24	(1)
Channel Implementation: The Goal of Channel Coordination	25	(1)
Channel Design and Implementation: Insights for Specific Channel Institutions	25	(2)
Organization of the Text	27	(1)
Summary	27	(2)
Discussion Questions	29	(1)
Endnotes	30	(3)
Appendix 1A: Alternate Channel Formats	33	(7)
Part II: Channel Design: Demand, Supply, and Channel Efficiency	40	(156)
Segmentation for Marketing Channel Design: Service Outputs	40	(32)
End-User Channel Preferences	41	(2)
Service Outputs	43	(12)
Segmenting the Market by Service Output Demands	55	(4)
Meeting Service Output Demands	59	(2)
The Role of Service Output Demand Analysis in Marketing Channel Design	61	(3)
Discussion Questions	64	(1)
Endnotes	65	(3)
Appendix 2A: The Service Output Demands Template	68	(4)
Supply Side Channel Analysis: Channel Flows and Efficiency Analysis	72	(40)
Channel Flows Defined	73	(19)
Eight Generic Channel Flows	73	(18)
Customizing the List of Flows for a Particular Channel	91	(1)
Who Does Which Channel Flows?	92	(1)
Describing the Current Channel with the Efficiency Template	92	(6)
Using Channel Flow Concepts to Design a Zero-Based Channel	98	(2)
Matching Normative and Actual Profit Shares: The Equity Principle	100	(1)
Summary: Channel Flow Analysis as Part of the Overall Channel Audit Process	101	(2)
Discussion Questions	103	(1)
Endnotes	104	(2)
Appendix 3A: The Efficiency Template	106	(6)
Supply-Side Channel Analysis: Channel Structure and Intensity	112	(42)
Introduction	113	(1)
Coverage versus Assortment: Framing the Decisions of Upstream and Downstream Channel Members	114	(8)
Why More Coverage Is Better for Manufacturers of Convenience Goods	114	(1)
Why Downstream Channel Members Dislike Intensive Distribution	115	(4)
Can the Manufacturer Sustain Intensive Distribution?	119	(1)
Degree of Category Exclusivity: The Downstream Channel Member's Decision	120	(2)
Striking a Deal: How Much Selectivity to Trade Away	122	(5)
The Threat of Complacency	122	(1)
The Nature of the Product Category	122	(2)
Brand Strategy: Quality Positioning and Premium Pricing	124	(3)
Brand Strategy: Target Market	127	(1)
Bargaining for Influence over Channel Members	127	(10)
Desired Coordination	128	(1)
Manufacturer-Specific Investments by Downstream Channel Members	129	(2)
Dependence Balancing: Trading Territory Exclusivity for Category Exclusivity	131	(3)
Reassurance: Using Selectivity to Stabilize Fragile Relationships	134	(1)
The Price of the Concession: Factoring in Opportunity Cost	135	(2)
Back to the Basics: Cutting Costs and Raising Sales	137	(3)
Saving Money by Limiting the Number of Trading Partners	137	(1)
Do More Trading Partners Really Mean More Revenue?	138	(1)
A Caution on the Issue of Limiting the Number of Trading Partners	139	(1)
Simulating the Benefits of Selectivity While Maintaining Intensive Coverage	140	(1)
Going to Market via Multiple Types of Channels	141	(3)
Dual Distribution: Going to Market via Independent Channels and Self-Owned Channels	144	(1)
Inherent Rivalry	144	(1)
The Demonstration Argument	144	(1)
Carrier-Rider Relationships	145	(1)
Summary	146	(3)
Discussion Questions	149	(1)
Endnotes	150	(4)
Gap Analysis	154	(42)
Sources and Types of Channel Gaps	155	(25)
Sources of Gaps	155	(13)
Types of Gaps: Demand-Side Gaps	168	(6)
Types of Gaps: Supply-Side Gaps	174	(2)
Combined Channel Gaps	176	(4)
Closing Channel Gaps	180	(5)
Closing Demand-Side Gaps	180	(3)
Closing Supply-Side Gaps	183	(1)
Challenging Gaps Produced by Environmental or Managerial Bounds	184	(1)
Pulling It Together: The Gap Analysis Template	185	(7)
Discussion Questions	192	(1)
Endnotes	192	(4)
Part III: Channel Implementation	196	(229)
Channel Power: Getting It, Using It, Keeping It	196	(47)
The Nature of Power	196	(4)
Power Defined	197	(1)
Is Power Good or Bad?	198	(1)
Why Marketing Channels Require Power	199	(1)
Power as the Mirror Image of Dependence	200	(4)
Specifying Dependence	200	(1)
Measuring Dependence Directly	201	(2)
Measuring Dependence via Proxy Indicators	203	(1)
The Greatest Source: Reward Power	204	(5)
Four More Sources of Power	209	(10)
Coercive Power	209	(1)
Expert Power	210	(4)
Legitimate Power	214	(2)
Referent Power	216	(1)
Separating the Five Power Sources	216	(2)
Putting It Together: What Is Power and How Do You Index It?	218	(1)
The Balance of Power	219	(7)
Net Dependence	219	(1)
Imbalanced Dependence: Is Exploitation Inevitable?	220	(2)
Imbalanced Dependence: Countermeasures for the Weaker Party	222	(2)
Tolerating Imbalanced Dependence: The Most Common Scenario	224	(2)
Exercising Power: Influence Strategies	226	(4)
Six Influence Strategies	227	(1)
The Consequences of Each Strategy	228	(1)
How to Frame an Influence Attempt	229	(1)
Summary	230	(8)
Discussion Questions	238	(1)
Endnotes	238	(5)
Managing Conflict to Increase Channel Coordination	243	(46)
Assessing the Degree and Nature of Channel Conflict	244	(3)
What Is Channel Conflict?	244	(2)
Measuring Conflict	246	(1)
The Consequences of Conflict	247	(4)
When Conflict Is Desirable	247	(2)
How Intense Conflict Damages Channel Performance and Coordination	249	(2)
Major Sources of Conflict in Marketing Channels	251	(5)
Competing Goals	251	(1)
Differing Perceptions of Reality	252	(4)
Clash of Market Domains	256	(10)
Intrachannel Competition	256	(1)
Multiple Channels: No Longer Unusual	257	(2)
Is It Really a Problem?	259	(3)
What Suppliers Can Do	262	(1)
Unwanted Channels: Gray Markets	263	(3)
Fueling Conflict	266	(5)
Conflict Begets More Conflict	266	(1)
Threats	266	(5)
Conflict Resolution Strategies: How They Drive Conflict and Shape Channel Performance	271	(10)
Resolving Conflict: Institutionalized Mechanisms Designed to Contain Conflict Early	271	(4)
Styles of Conflict Resolution: How Channel Members Handle Disputes and Negotiate to Achieve Their Goals	275	(2)
Resolving Conflict and Achieving Coordination via Incentives	277	(4)
Summary	281	(3)
Discussion Questions	284	(1)
Endnotes	285	(4)
Strategic Alliances in Distribution	289	(41)
Strategic Alliances: Their Nature and the Motives for Creating Them	290	(9)
What Is a Strategic Distribution Alliance?	290	(2)
Why Forge a Strategic Distribution Alliance? Upstream Motives	292	(3)
Why Force a Strategic Distribution Alliance? Downstream Motives	295	(2)
Do Alliances Outperform Ordinary Channels?	297	(2)
Building Commitment by Creating Mutual Vulnerability	299	(9)
The Minimum Requirement: Expectations of Continuity	299	(1)
Why Commitment Is Nil Unless It Is Mutual	300	(2)
How the Other Side Gauges Your Commitment	302	(3)
Actions That Bind Distributors to Suppliers	305	(1)
Actions That Bind Suppliers to Distributors	306	(1)
Creating Alliances via Ties That Bind	306	(2)
Building Commitment by the Management of Daily Interactions	308	(8)
How Can Channel Members Manufacture Trust?	311	(1)
The Fundamental Role of Economic Satisfaction	311	(1)
Noneconomic Satisfaction Also Matters	312	(2)
Picking the Partner and the Setting	314	(2)
Decision Structures That Enhance Trust	316	(1)
How Do You Manufacture Trust in a Channel?	317	(1)
Moving a Transaction Through Stages of Development to Reach Alliance Status	317	(6)
From Cradle to Grave: The Life of a Marketing Channel Partnership	317	(3)
Managing the Stages	320	(1)
Managing Troubled Relationships	321	(1)
The Virtues of a Portfolio of Relationships	321	(2)
Putting It All Together: What Does It Take and When Does It Pay to Create a Marketing Channel Alliance?	323	(3)
Discussion Questions	326	(1)
Endnotes	327	(3)
Vertical Integration in Distribution	330	(47)
Introduction	330	(3)
Five Puzzles	331	(1)
Make or Buy: A Critical Determinant of Company Competencies	332	(1)
Chapter Organization	332	(1)
The Costs and Benefits of Vertical Integration in Marketing Channels	333	(6)
Degrees of Vertical Integration	333	(2)
Costs and Benefits of the Choice to Make	335	(2)
The Choice to Buy Distribution: Terms of Payment to Third Parties	337	(2)
Deciding When to Vertically Integrate Forward: An Economic Framework	339	(7)
Return on Investment: The Usual Criterion	339	(1)
Outsourcing as the Starting Point	340	(1)
Six Reasons to Outsource Distribution	341	(5)
Vertical Integration Forward When Competition Is Low	346	(14)
Company-Specific Capabilities	346	(4)
Six Types of Company-Specific Capabilities in Distribution	350	(8)
Rarity versus Specificity: The Effects of Thin Markets	358	(1)
Turning the Lens Around: Should the Channel Member Integrate Backward?	358	(2)
Vertical Integration to Cope with Environmental Uncertainty	360	(3)
Vertical Integration to Reduce Performance Ambiguity	363	(2)
The Baseline Problem	363	(1)
Results Indicators That Are Inaccurate, Late, or Nonexistent	364	(1)
Summary of the Decision Framework	365	(2)
Vertical Integration as an Observatory on the Market or as an Option: Economic Rationality or Rationalization?	367	(3)
Summary	370	(3)
Discussion Questions	373	(1)
Endnotes	374	(3)
Legal Constraints on Marketing Channel Policies	377	(48)
Market Coverage Policies	378	(5)
Customer Coverage Policies	383	(1)
Pricing Policies	384	(15)
Price Maintenance	385	(3)
Price Discrimination	388	(11)
Product Line Policies	399	(9)
Exclusive Dealing	399	(4)
Tying	403	(2)
Full-Line Forcing	405	(2)
Designated Product Policies	407	(1)
Selection and Termination Policies	408	(3)
Ownership Policies	411	(3)
Vertical Integration by Merger	412	(1)
Vertical Integration by Internal Expansion	413	(1)
Dual Distribution	413	(1)
Summary and Conclusions	414	(4)
Discussion Questions	418	(1)
Endnotes	418	(7)
Part IV: Channel Institutions	425	(152)
Retailing	425	(59)
Retailing Defined	425	(1)
Choosing a Retail Positioning Strategy	426	(25)
Financial and Cost-Side Positioning: Margin and Inventory Turnover Goals	435	(7)
Demand-Side Positioning	442	(7)
Implications for a Taxonomy of Retail Types	449	(2)
Strategic Issues in Retailing	451	(21)
Managing the Multichannel Shopping Experience	451	(12)
Recognizing and Responding to the Continued Strong Power Position of Major Retailers	463	(7)
The Continued Globalization of Retailing	470	(2)
Summary and Conclusions	472	(2)
Discussion Questions	474	(1)
Endnotes	475	(4)
Appendix 11A: A Glossary of Pricing and Buying Terms Commonly Used by Retailers	479	(2)
Appendix 11B: Merchandise Planning and Control	481	(3)
Wholesaling	484	(34)
Introduction	484	(1)
An Overview of the Wholesaling Sector	485	(3)
Wholesaler-Distributors	485	(1)
The Wholesaler-Distributor's Role in the Supply Chain	486	(1)
The Importance of Wholesaler-Distributors	487	(1)
What the Independent Wholesale Sector Offers: The Essential Tasks	488	(7)
Three Great Challenges of Wholesaling: 200 Years of Pharmaceuticals	489	(1)
Wholesaling in an Emerging Economy	490	(2)
Surprising Ways for Wholesalers to Add Value	492	(1)
Master Distributors	493	(2)
Federations of Wholesalers	495	(3)
Wholesaler-Led Initiatives	496	(1)
Integrated Supply	496	(1)
Manufacturer-Led Initiatives	496	(1)
The Requirements for Innovative Wholesale Service	497	(1)
Voluntary and Cooperative Groups	498	(4)
Wholesaler Voluntary Groups	498	(1)
Alternative Federations of Downstream Channel Members	499	(3)
Consolidation	502	(3)
Consolidation Pressures in Wholesaling	502	(2)
The Manufacturer's Response to Wholesale Consolidation	504	(1)
Export Distribution Channels	505	(1)
The Future of Wholesaler-Distributors	506	(4)
International Expansion	506	(1)
Electronic Commerce	507	(1)
B2B E-Online Exchanges	508	(1)
Online Reverse Auctions	509	(1)
Capturing Value After Creating Value: Wholesaler Profitability	509	(1)
A Sketch of Vertical Integration and of Agents in Wholesaling	510	(3)
Vertical Integration Forward into Wholesaling by Manufacturers	510	(1)
Set the Price and See the Buyer: Agents, Brokers, and Commission Agents	511	(2)
Summary	513	(2)
Discussion Questions	515	(1)
Endnotes	515	(3)
Franchising	518	(42)
What Is Franchising?	518	(2)
Why Become a Franchisee?	520	(5)
The Start-Up Package	523	(1)
Ongoing Benefits	523	(1)
Why Ask a Franchisor to Provide These Services?	524	(1)
Why Become a Franchisor?	525	(6)
Raising Financial and Managerial Capital to Grow Fast	525	(2)
Harnessing the Entrepreneurial Spirit	527	(3)
When Is Franchising Inappropriate?	530	(1)
The Historical Roots of Franchising	531	(5)
The Authorized Franchise System: Moving the Product	531	(4)
The Dividing Line: When Does Franchising Stop?	535	(1)
The Franchise Contract	536	(7)
Giving and Taking Hostages, Or Why You Shouldn't Leave It to Lawyers	536	(1)
The Payment System	537	(2)
Who Will Be the Landlord?	539	(1)
Termination	539	(1)
Why Contracts Do Not Vary within a System	540	(1)
Safeguards Outside the Contract	540	(1)
When Do Franchisors Enforce Their Contracts?	541	(2)
Why Franchise Systems Include Company Outlets	543	(4)
Variation in Situations	543	(1)
Temporary Franchises and Temporary Company Stores	544	(1)
The Plural Form: Exploiting the Synergy of Having Both Company and Franchisee Outlets	544	(2)
Exploiting Franchisees: Redirection of Ownership	546	(1)
Ongoing Challenges Facing the Franchisor	547	(5)
Survival	547	(1)
Gaining and Keeping a Cooperative Atmosphere	548	(1)
Inherent Goal Conflict	549	(1)
Multiunit Franchising: Handicap or Advantage?	550	(2)
Other Ways to Gain Cooperation	552	(1)
Summary	552	(3)
Discussion Questions	555	(1)
Endnotes	556	(4)
Logistics and Supply Chain Management	560	(17)
The Impact of Logistics and Supply Chain Management	560	(1)
Responding Efficiently	561	(4)
Efficient Consumer Response	563	(1)
Obstacles to Efficient Consumer Response	564	(1)
Responding Rapidly	565	(1)
Putting It All Together: What Is the Right Supply Chain?	566	(6)
Physical Efficiency versus Market Responsiveness	566	(5)
Supply Chain Management: Why Only Now?	571	(1)
Summary	572	(1)
Discussion Questions	573	(1)
Endnotes	574	(3)
Company Index	577	(6)
Name Index	583	(6)
Subject Index	589