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BA 2303
Principles of Marketing - UNBSJ
Managing Marketing
Channels and Supply
Chains
Instructor – Terry Conrod
BA 2303
Learning Objectives
1.Explain what is meant by a marketing channel of distribution and why
intermediaries are often needed.
2.Distinguish among traditional marketing channels, electronic marketing
channels, multichannel distribution, and different types of vertical
marketing systems.
3.Describe factors considered by marketing executives when selecting and
managing a marketing channel.
4.Recognize how conflict, co-operation, and legal considerations affect
marketing channels relationships.
5.Recognize the relationship among marketing channels, logistics, and
supply chain management, and how a company’s supply chain aligns
with its marketing strategy.
6.Identify the major logistics costs and customer service factors that
managers consider when making supply chain decisions.
7.Describe the key logistics functions in a supply chain.
BA 2303
NATURE AND IMPORTANCE
OF MARKETING CHANNELS
‣ Defining Marketing Channels of Distribution
‣ Marketing Channel
‣ Value Created by Intermediaries
‣ Functions Performed by Intermediaries
‣ Consumer Benefits from Intermediaries
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Terms used for marketing intermediaries
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How intermediaries minimize transactions
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Marketing channel functions performed by intermediaries
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Concept Check
What is meant by a marketing channel?
Answer:
A marketing channel consists of individuals and
firms involved in the process of making a product
or service available for use or consumption by
consumers or industrial users.
BA 2303
Concept Check
What are the three basic functions performed by
intermediaries?
Answer:
Intermediaries perform three marketing channel
functions: (1) Transactional function, (2) Logistical
function, and (3) Facilitating function
BA 2303
CHANNEL STRUCTURE
AND ORGANIZATION
‣ Marketing Channels for Consumer Goods and Services
‣ Direct channel
‣ Indirect channels
‣ Marketing Channels for Business Goods and Services
‣ Business distributor
‣ Electronic Marketing Channels
‣ Direct Marketing Channels
‣ Multiple Channels and Strategic Alliances
‣ Multichannel distribution
‣ Strategic channel alliances
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Common marketing channels for consumer goods and services
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Common marketing channels for business goods and services
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Representative electronic marketing channels
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CHANNEL STRUCTURE
AND ORGANIZATION
‣ A Closer Look at Channel Intermediaries
‣ Merchant Wholesalers
‣ Agents and Brokers
‣ Manufacturer’s agents
‣ Selling agents
‣ Brokers
‣ Manufacturer’s Branches and Offices
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CHANNEL STRUCTURE
AND ORGANIZATION
‣ Vertical Marketing Systems and Channel Partnerships
‣ Corporate Systems
‣ Contractual Systems
‣ Franchising
‣ Administered Systems
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Types of vertical marketing systems
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Concept Check
What is the difference between a direct and an
indirect channel?
Answer:
A direct channel is when a producer and ultimate
consumers deal directly with each other. An
indirect channel occurs when intermediaries are
inserted between the producer and consumers,
and numerous channel functions are performed.
BA 2303
Concept Check
What is the principal distinction between a corporate
vertical marketing system and an administered
vertical marketing system?
Answer:
A corporate vertical marketing system is the single
ownership of a combination of successive stages of
production and distribution. Under an administered
vertical marketing system, co-ordination is achieved at
successive stages of product and distribution by the size
and influence of one channel member rather than
through ownership.
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CHANNEL CHOICE
AND MANAGEMENT
‣ Factors Affecting Channel Choice and Management
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‣
‣
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Environmental Factors
Consumer Factors
Product Factors
Company Factors
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CHANNEL CHOICE
AND MANAGEMENT
‣ Channel Design Considerations
‣ Target Market Coverage
‣ Satisfying Buyer Requirements
‣ Profitability
‣ Global Dimensions of Marketing Channels
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CHANNEL CHOICE
AND MANAGEMENT
‣ Channel Relationships: Conflict, Co-operation, and
Law
‣ Conflict in Marketing Channels
‣ Disintermediation
‣ Co-operation in Marketing Channels
‣ Channel captain
‣ Legal Considerations
BA 2303
Concept Check
What are the three degrees of distribution density?
Answer:
The three degrees of distribution density (or target
market coverage) are: (1) Intensive distribution,
(2) Exclusive distribution, and (3) Selective
distribution
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Concept Check
What are the three questions marketing executives
consider when choosing a marketing channel and
intermediaries?
1. Which channel and intermediaries will provide the
best coverage of the target market?
2. Which channel and intermediaries will best satisfy
the buying requirements of the target markets?
3. Which channel and intermediaries will be the most
profitable?
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Concept Check
What is meant by “exclusive dealing”?
Answer:
Exclusive dealing exists when a supplier requires
channel members to sell only its products or
restricts distributors from selling directly
competitive products.
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LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
‣
‣
‣
‣
Logistics
Logistics management
Supply chain
Supply chain management
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Logistics management and supply chain management
© 2008 McGraw-Hill Ryerson Ltd. All rights reserved.
BA 2303
LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
‣ Sourcing, Assembling, and Delivering a New Car: The
Automotive Supply Chain
The automotive supply chain
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LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
‣ Supply Chain Management and Marketing Strategy
‣ Aligning a Supply Chain with Marketing Strategy
‣ Understand the customer
‣ Understand the supply chain
‣ Harmonize the supply chain with
the marketing strategy
BA 2303
Concept Check
What is the principal difference between a marketing
channel and a supply chain?
Answer:
A supply chain is a sequence of firms that perform
activities required to create and deliver a good or
service to consumers or industrial users. A
marketing channel are people or firms involved in
the process of marking a product or service
available for use or consumption by consumers or
industrial users.
BA 2303
Concept Check
What three steps does the choice of a supply chain
involve?
Answer:
(1) Understand the customer; (2) Understand the
supply chain, and (3) Harmonize the supply chain
with the marketing strategy.
BA 2303
INFORMATION AND LOGISTICS
MANAGEMENT OBJECTIVE
IN A SUPPLY CHAIN
‣ Information’s Role in Supply Chain Responsiveness and
Efficiency
‣ Electronic data interchanges (EDI)
‣ Enterprise Resource Planning (ERP)
‣ Total Logistics Cost Concept
BA 2303
INFORMATION AND LOGISTICS
MANAGEMENT OBJECTIVE
IN A SUPPLY CHAIN
‣ Customer Service Concept
‣
‣
‣
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Time
Dependability
Communication
Convenience
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Supply chain managers balance total logistics cost factors
against customer service factors
© 2008 McGraw-Hill Ryerson Ltd. All rights reserved.
BA 2303
Concept Check
The objective of information and logistics
management in a supply chain is to:
Answer:
minimize logistics costs while delivering maximum
customer service.
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Concept Check
How does consumer demand information increase
supply chain responsiveness and efficiency?
Answer:
Continuing advances in information technology
make it possible to track logistics activities and
customer service variables and manage them for
efficiency and responsiveness.
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KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN
‣ Third-party logistics providers
‣ Transportation
‣ Warehousing and Material Handling
‣ Order Processing
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Advantages and disadvantages of five modes of transportation
© 2008 McGraw-Hill Ryerson Ltd. All rights reserved.
BA 2303
KEY LOGISTICS FUNCTIONS
IN A SUPPLY CHAIN
‣ Inventory Management
‣ Reasons for Inventory
‣ Inventory Costs
‣ Supply Chain Inventory Strategies
‣ Just-in-time (JIT) concept
‣ Vendor-managed inventory (VMI)
‣ Closing the Loop: Reverse Logistics
BA 2303
Concept Check
What are the basic trade-offs between the modes of
transportation?
Answer: Some relative advantages and disadvantages among
the different modes of transportation: (1) Rail - full
capability, extensive routes, some damage problems, slow,
(2) Truck - Complete pickup and delivery, fast, size and
weight restrictions, weather sensitive, (3) Air - Low damage,
frequent departures, high cost, limited capabilities, (4)
Pipeline - Very reliable, frequent departures, limited
accessibility, slow, and (5) Water - Low cost, huge capacities,
limited routes and schedules, weather sensitive
BA 2303
Concept Check
What types of inventory should use storage
warehouses and which type should use distribution
centres?
Answer:
Storage warehouses are often used for the aging of
products or in storing household goods. In the
meanwhile, distribution centres allow firms to hold
their stock in decentralized locations. Paint companies
like to use them, as do manufacturer sales offices and
order processing centres.
BA 2303
Concept Check
What are the strengths and weaknesses of a just-intime system?
Answer:
Strengths of a just-in-time (JIT) system are: (1)
Low inventories and (2) Fast, on-time delivery.
Weaknesses of JIT: (1) Relies on accurate demand
forecasting and (2) Dependence on computerized
system
BA 2303
Marketing Channel
‣ Individuals and firms involved in the process of making
a product or service available for use or consumption
by consumers or industrial users.
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Direct Channel
‣ A marketing channel where a producer and ultimate
consumer deal directly with each other.
BA 2303
Indirect Channels
‣ A marketing channel where intermediaries are
inserted between the producer and consumers and
perform numerous channel functions.
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Electronic Marketing Channels
‣ Employ the Internet to make goods and services
available for consumption or sue by consumers or
industrial buyers.
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Direct Marketing Channels
‣ Allow consumers to buy products by interacting with
various advertising media without a face-to-face
meeting with a salesperson.
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Strategic Channel Alliances
‣ A practice whereby one firm’s marketing channel is
used to sell another firm’s products.
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Merchant Wholesalers
‣ Independently owned firms that take title to the
merchandise they handle.
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Manufacturer’s Agents
‣ Work for several producers and carry non-
competitive, complementary merchandise in an
exclusive territory.
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Selling Agents
‣ Represents a single producer and is responsible for
the entire marketing function of that product.
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Brokers
‣ Independent firms or individuals whose principal
function is to bring buyers and sellers together to
make sales.
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Vertical Marketing Systems
‣ Professionally managed and centrally co-ordinated
marketing channels designed to achieve channel
economies and maximum marketing impact.
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Franchising
‣ Contractual arrangement between a parent company
(a franchisor) and an individual or firm (a franchisee)
that allows the franchise to operate a certain type of
business under an established name and according to
specific rules.
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Channel Conflict
‣ Arises when one channel member believes another
channel member is engaged in behaviour that
prevents it from meeting its goals.
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Disintermediation
‣ Channel conflict that arises when a channel member
bypasses another member and sells or buys products
direct.
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Business Distributor
‣ Performs a variety of marketing channel functions,
including selling, stocking, delivering a full product
assortment, and financing.
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Customer Service
‣ The ability of logistics management to satisfy users in
terms of time, dependability, communication, and
convenience.
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Just-in-Time (JIT) Concept
‣ An inventory supply system that operates with very
low inventories and requires fast, on-time delivery.
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Logistics Management
‣ The practice of organizing the cost-effective flow of
raw materials, in-process inventory, finished goods,
and related information from point of origin to point
of consumption to satisfy customer requirements.
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Materials Handling
‣ Moving goods over short distances into, within, and
out of warehouses and manufacturing plants.
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Multichannel Distribution
‣ An arrangement whereby a firm reaches buyers by
employing two or more different types of marketing
channels.
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Reverse Logistics
‣ A process of reclaiming recyclable and reusable
materials, returns, and reworks from the point of
consumption or use for repair, remanufacturing,
redistribution, or disposal.
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Supply Chain
‣ A sequence of firms that perform activities required
to create and deliver a good or service to consumers
or industrial users.
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Supply Chain Management
‣ The integration and organization of information and
logistics activities across firms in a supply chain for
the purpose of creating and delivering goods and
services that provide value to customers.
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Total Logistics Cost
‣ Expenses associated with transportation, materials
handling and warehousing, inventory, stockouts, order
processing, and return goods handling.
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Vendor-Managed Inventory
‣ An inventory management system whereby the
supplier determines the product amount and
assortment a customer (such as a retailer) needs and
automatically delivers the appropriate items.