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Chapter 12f - Lecture notes 12
Course: Consumer Behavior (MKTU 320)
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University: Brandman University
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Chapter 12
Marketing Channels:
Delivering Customer Value
Multichannel distribution systems offer many advantages to companies facing large and complex
markets. With each new channel, the company expands its sales and market coverage and gains
opportunities to tailor its products and services to the specific needs of diverse customer segments. But
such multichannel systems are harder to control, and they generate conflict as more channels compete
for customers and sales. For example, when John Deere began selling selected consumer products
through Lowe’s home improvement stores, many of its dealers complained loudly. To avoid such conflicts
in its Internet marketing channels, the company routes all of its website sales to John Deere dealers.
This shows a multichannel marketing system. In the figure, the producer sells directly to consumer
segment 1 using catalogs, telemarketing, and the Internet and reaches consumer segment 2 through
retailers. It sells indirectly to business segment 1 through distributors and dealers and to business
segment 2 through its own sales force.
These days, almost every large company and many small ones distribute through multiple channels.
Disintermediation occurs when product or service producers cut out intermediaries and go directly to
final buyers, or when radically new types of channel intermediaries displace traditional ones
Changes in technology and the explosive growth of direct and online marketing are having a profound
impact on the nature and design of marketing channels. One major trend is toward disintermediation—
a big term with a clear message and important consequences. Disintermediation occurs when product or
service producers cut out intermediaries and go directly to final buyers or when radically new types of
channel intermediaries displace traditional ones.
Thus, in many industries, traditional intermediaries are dropping by the wayside. For example,
Southwest, JetBlue, and other airlines sell tickets directly to final buyers, cutting travel agents from their
marketing channels altogether. In other cases, new forms of resellers are displacing traditional
intermediaries, as is the case with online marketers taking business from traditional brick-and-mortar
retailers. For example, online music download services such as iTunes and Amazon MP3 have pretty
much put traditional music-store retailers out of business. And Amazon.com almost single-handedly
bankrupted the nation’s number two bookseller, Borders, in less than 10 years, and it has recently forced
highly successful store retailers such as Best Buy to dramatically rethink their entire operating models. In
fact, many retailing experts question whether stores like Best Buy can compete in the long run against
online rivals.
Disintermediation presents both opportunities and problems for producers and resellers. Channel
innovators who find new ways to add value in the channel can displace traditional resellers and reap the
rewards. In turn, traditional intermediaries must continue to innovate to avoid being swept aside. For
