Download Chapter 10 Marketing Channels and Supply Chain

Chapter 10
Marketing Channels
and Supply Chain Management
Supply Chains
 Producing and making products
available to buyers requires building
relationships with “upstream” and
“downstream” partners.
– Upstream: firms that supply the raw
materials, components, parts, and other
elements necessary to create a good.
– Downstream: marketing channel partners
that link the firm to the customer.
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Marketing Channel
or Distribution Channel
 A set of interdependent organizations
involved in the process of making a
product or service available for use or
consumption by the consumer or
business user.
– Wholesalers
– Distributors
– Dealerships
– Retailers
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How Channel Members Add
Value
 The use of intermediaries results from
their greater efficiency in making goods
available to target markets.
 Offers the firm more than it can achieve
on its own through the intermediaries:
– Contacts
– Experience
– Specialization
– Scale of operation
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Key Channel Functions
 Transaction
Completing:
 Transaction
Fulfilling:
– Information
– Promotion
– Contact
– Matching
– Negotiation
– Physical
distribution
– Financing
– Risk taking
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Number of Channel Levels
 Number of intermediary levels indicates
the length of a channel.
– Direct marketing channels
• Have no intermediary levels between the
manufacturer and the customer.
– Indirect marketing channels
• Contains one or more intermediaries.
 All channel institutions are connected
by several types of flows.
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Channel Design Decisions
1.
2.
3.
4.
Analyzing Consumer Needs
Setting Channel Objectives
Identifying Major Alternatives
Evaluating the Major Alternatives
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1. Analyzing Consumer Needs
 Answering key questions helps to
determine customer needs:
– Do consumers want to buy from nearby
locations or are they willing to travel?
– Do they value breadth of assortment or do
they prefer specialization?
– Do consumers want many add-on services?
 Firm must balance needs against costs
and consumer price preferences.
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2. Setting Channel Objectives
 State objectives in terms of targeted
levels of customer service.
 Channel objectives are influenced by:
– Cost
– Nature of the company
– The firm’s products
– Marketing intermediaries
– Competitors
– Environment
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3. Identifying Major
Alternatives
 Types of Intermediaries
– Company sales force
– Manufacturer’s agency
– Industrial distributors
 Number of intermediaries
– Intensive distribution
– Exclusive distribution
– Selective distribution
 Responsibilities of intermediaries
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4. Evaluating the Major
Alternatives
 Economic Criteria:
– A company compares the likely sales,
costs, and profitability of different channel
alternatives.
 Control Issues:
– How and to whom should control be
given?
 Adaptive Criteria:
– Consider long-term commitment vs.
flexibility.
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