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marketing strategy
O. C. Ferrell
Michael D. Hartline
Distribution and
Supply Chain
Management
C H A P T E R
Distribution and
Supply Chain Management
• Among the most important strategic decisions
• Were the forgotten elements of marketing strategy
throughout most of the 20th century
• Have remained essentially invisible to the customer
• Rank at the top of the list in achieving a sustainable
competitive advantage
• Are important to providing time, place, and possession
utility for buyers
• Are expensive – must balance the needs of the customer
with the needs of the firm
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Breakdown of Total Distribution Costs
Exhibit 9.1
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Distribution and Supply Chain Concepts
• Marketing Channels
– “An organized system of marketing institutions through
which products, resources, information, funds, and/or
product ownership flow from the point of production to
the final user.”
• Physical Distribution
– “Coordinating the flow of information and products
among members of the channel to ensure that products
are available in the right places, in the right quantities, at
the right times, and in a cost-efficient manner.”
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Graphical Depiction of a Supply Chain
Exhibit 9.2
9-5
Marketing Channel Functions
• Channel Functions
–
–
–
–
–
Sorting
Breaking Bulk
Maintaining Inventories
Maintaining Convenient Locations
Provide Services
• Channel Effectiveness and Efficiency
– Distribution decision criteria:
• Is the channel effective?
• Is the channel efficient?
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Discussion Question
• Some manufacturers and retailers advertise that
customers should buy from them because they
“eliminate the middleman.” Evaluate this
comment in light of the functions that must be
performed in a marketing channel. Does a
channel with fewer members always deliver
products to customers at lower prices? Defend
your position.
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Strategic Issues in Distribution
and Supply Chain Management
• Marketing Channel Structure
– Exclusive Distribution
– Selective Distribution
– Intensive Distribution
• Channel Integration (key factors)
– Connectivity
– Community
– Collaboration
• Creating and Enhancing Value in the Supply Chain
9-8
Discussion Question
• Describe the characteristics of a product that
represents something you would go to great
lengths to acquire, thus supporting a
manufacturer’s use of an exclusive distribution
strategy. Why is the service better and the
salespeople more knowledgeable at an exclusive
distribution location versus an intensive
distribution location?
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Maximizing Profit Margin Performance
Exhibit 9.3
9-10
Marketing Strategy in Action
• Clinique cosmetics uses a selective distribution
strategy as their primary marketing channel structure.
• What is the motivation for using this strategy for this
type of product? What are the apparent benefits that
Clinique receives from this strategy?
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Conflict and Collaboration
in the Supply Chain (1 of 2)
• The Basis of Conflict in the Supply Chain
–
–
–
–
–
Legitimate Power
Reward Power
Coercive Power
Information Power
Referent Power
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Factors in Successful
Supply Chain Collaboration
Exhibit 9.4
9-13
Conflict and Collaboration
in the Supply Chain (2 of 2)
• Collaborative Supply Chains
– Category management must be:
•
•
•
•
•
•
Customer driven
Strategically driven
Multifunctional
Financially based
Systems dependent
Focused on immediate consumer response
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Major Components of
Category Management
Exhibit 9.5
9-15
Trends in Marketing Channels (1 of 2)
• Advancing Technology
– Growth of Internet and e-commerce
– Radio frequency identification (RFID)
• Shifting Power in the Channel
– Discount mass merchandise retailers
• Wal-Mart, Kmart, and Target
– Category focused retailers (category killers)
• Toys “R” Us, Lowe’s, Office Depot, AutoZone, and Best Buy
• Outsourcing Channel Functions
9-16
The Trend in Outsourcing
Exhibit 9.6
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Trends in Marketing Channels (2 of 2)
• The Growth of Direct Distribution and Nonstore
Retailing
–
–
–
–
–
Catalog and Direct Marketing
Direct Selling
Home Shopping Networks
Vending
Direct Response Advertising
• The Growth of Dual Distribution
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Discussion Question
• What are the major differences you have
experienced in buying a product through a
physical retail store, a manufacturer’s physical
store, a catalog, and an online merchant? What
have some retailers in your area done to justify
their ongoing presence in the channel?
9-19
Legal and Ethical Issues
in the Supply Chain
•
•
•
•
Dual Distribution
Exclusive Channel Arrangements
Tying Arrangements
Counterfeit Products
9-20
Common Examples
of Supply Chain Misconduct
Exhibit 9.7
9-21
Barnes & Noble’s Supply Chain
• Barnes & Noble is the largest bookstore chain in the
world with more than 799 stores featuring more than 4
million book titles. Their distribution strategy includes
both brick and mortar stores as well as a powerful
online presence.
• How are the distribution challenges presented by a
brick and mortar store different from that of a large
online operation?
Beyond the Pages 9.1
9-22