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Conventional distribution channel – consists of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole

o no channel member has much control over the other members, and no formal means exists for assigning roles and resolving channel conflict

Vertical marketing system (VMS) – consists of producers, wholesalers, and retailers acting as a unified system. One channel member owns the other has contracts with them, or has so much power that they all cooperate (ie. sears buys more than 50% of its goods from companies that it partly or wholly owns)

Franchises are special types of vertical marketing systems that link several stages in the production-distribution

Marketing Exam Study!

      • o

        Stores in turn push products onto consumers

  • -

    Pull strategy:

    • o

      Promotional efforts to appeal directly to consumers

      • o

        Advertising and sales promotion-driven

  • -

    Pull Strategy Example

      • o

        VIAGRA

        • Advertises directly to consumers

        • Consumers ask for the product by name

Conventional marketing channel vs vertical marketing 248

  • Fig 11.6

Elasticity in the service sector

Price Elasticity

  • -

    A way of measuring how sensitive the market is to price changes

    • o

      Inelastic: minimal change in demand as price increases

      • o

        Elastic: significant drop in demand as price increases

Service Employees are crucially important

  • Service employees are:

    • 1)

      Part of the product: employees are the most visible element of the service, delivers the service, and significantly determines service quality

2) Is the service firm: front-line employees represent the service firm, and from a customer’s perspective, are the firm

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