Download Supply Chain Management

Part Four
Distribution
Decisions
14
Marketing Channels and
Supply Chain Management
Copyright © Houghton Mifflin Company. All rights reserved.
PowerPoint Presentation by Charlie Cook
Chapter Learning Objectives
• To describe the nature and functions of marketing
channels
• To explain how supply chain management can
facilitate distribution for the benefit of all channel
members, especially customers
• To identify the types of marketing channels
• To examine the major levels of marketing
coverage
• To explore the concepts of leadership,
cooperation, and conflict in channel relationships
Copyright © Houghton Mifflin Company. All rights reserved.
14–2
Chapter Learning Objectives (cont’d)
• To specify how channel integration can improve
channel efficiency
• To examine the legal issues affecting channel
management
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14–3
Chapter Outline
• The Nature of Marketing Channels
• Types of Marketing Channels
• Intensity of Market Coverage
• Supply Chain Management
• Legal Issues in Channel Management
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14–4
The Nature of Marketing Channels
• Distribution
–The activities that make products available to
customers when and where they want to purchase
them
• Marketing Channel
–A group of individuals and
organizations directing
products from producers
to customers
Copyright © Houghton Mifflin Company. All rights reserved.
14–5
Copyright © Houghton Mifflin Company. All rights reserved.
14–6
The Nature of Marketing Channels
(cont’d)
• Marketing Intermediary
–A middleman linking producers to other middlemen or
to ultimate consumers through contractual
arrangements or through the purchase and resale of
products
Producer
Direct Channel
Customer
Indirect Channel
Producer
Intermediary
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Customer
14–7
The Nature of Marketing Channels
(cont’d)
• Marketing Channels Create Utility
–Time utility: have products available when the
customer wants them (newspaper delivery).
–Place utility: making products available in locations
where the customers wish to purchase them
(convenience stores).
–Possession utility: the customer
has access to the product to use
or to store for future use (raincoats).
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14–8
The Nature of Marketing Channels
(cont’d)
• Marketing Channels Facilitate Exchange
Efficiencies
–Reduce the overall costs of market exchanges
–Reduce search costs for customers
–Maintain order in the marketplace
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14–9
Efficiency in
Exchanges
Provided
by an
Intermediary
FIGURE 14.1
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14–10
Marketing Channels Form a Supply Chain
• Supply Chain Management
–Long-term partnerships among marketing channel
members that reduce inefficiencies, costs, and
redundancies and develop innovative approaches to
satisfy customers
–Optimizes costs throughout the whole channel for
efficiency and service
–Includes all entities that facilitate product distribution
and benefit from cooperative efforts
–Arises from the need to achieve a
more competitive position
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14–11
Typical Marketing Channels for
Consumer Products
FIGURE 14.2
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14–12
Typical Marketing Channels for
Business Products
FIGURE 14.3
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14–13
Distribution Intermediaries
• Industrial Distributor
–An independent business that takes title to business
products and carries inventories
–Advantages of using a distributor
• Perform needed selling activities in local markets
• Are aware of local needs and can pass market
information on to producers
• Reduce producers’ capital requirements by holding
inventories for local markets.
–Disadvantages of using a distributor
• Difficult to control • Stocking of competing brands
• Less likely to handle bulky and slow-selling items
• Lack of technical knowledge
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14–14
Distribution Intermediaries (cont’d)
• Manufacturers’ Agent
–An independent businessperson who sells, on
commission, the complementary products of several
producers; does not takes title to or hold inventories.
–Advantages of using an agent
• Possess technical and market information
• Has an established set of customers
• Serves as substitute for a sales force
–Disadvantages of using an agent
• Difficult to control
• Concentration on only large accounts
• Sales focus limited to commission-related activities
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14–15
Multiple Marketing Channels and Channel
Alliances
• Dual Distribution
–The use of two or more channels to distribute the same
product to the same target market
• Strategic Channel Alliance
–An agreement whereby the products of one
organization are distributed through the marketing
channels of another
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14–16
Intensity of Market Coverage
• Intensive Distribution
–Using all available outlets to distribute a product.
• Convenience products with high replacement rates
–Provides availability and reduces search time
–Availability is more important than outlet type
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14–17
Intensity of Market Coverage (cont’d)
• Selective Distribution
–Using only some available outlets to distribute a
product
• Shopping products and durable goods with low
replacement rates
–High qualification requirements
for intermediaries to distribute,
sell, service, and support products
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Tuscaloosa’s Only
Authorized Dealer
14–18
Intensity of Market Coverage (cont’d)
• Exclusive Distribution
–Using a single outlet in a fairly large geographic area to
distribute a product
• Expensive, high-quality products purchased
infrequently
–Exclusive outlets provide an incentive to sellers in
limited markets.
–Dealers carry complete inventory and have trained staff
for sales and service.
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14–19
Supply Chain Management:
Channel Leadership
• Channel Captain
–The dominant member (producer, wholesaler, or
retailer) of a marketing channel or supply chain
• Establishes channel policies and coordinates
development of the marketing mix
• Channel Power
–The ability of one channel member
to influence another member’s
goal achievement
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14–20
Supply Chain Management:
Channel Cooperation
• Benefits of Cooperation
–Speeds up inventory replacement
–Improves customer service
–Reduces distribution costs
• Improving Channel Cooperation
–Unifying channel to maintain market order
–Agreeing to direct efforts toward common objectives
–Precisely defining each channel member’s tasks
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14–21
Supply Chain Management:
Channel Conflict
• Sources of Channel Conflict
–Disagreements arising among channel members
–Communication difficulties jeopardizing coordination
–Increased use of multiple distribution channels by
manufacturers creating conflicts with distributors and
retailers
–Intermediaries diversifying into and offering competing
products
–Producers attempting to circumvent intermediaries and
dealing directly with retailers
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14–22
Supply Chain Management:
Channel Integration
• Vertical Channel Integration
–Two or more stages of the marketing channel are under
one management.
–Channel members coordinate their efforts to reach a
target market.
• Vertical Marketing System (VMS)
–A marketing channel managed by a single channel
member to achieve efficient, low-cost distribution
• Corporate VMS
• Administered VMS
• Contractual VMS
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14–23
Legal Issues in Channel Management
• Dual Distribution
–A producer can have two different channels into the
same market unless it is using one channel to compete
with independent distributors of its products.
• Restricted Sales Territories
–Granting exclusive sales territory rights to distributors is
permissible if the rights do not restrain trade.
• Tying Arrangements
–Requiring a channel member to buy additional products
from the supplier in order to purchase a particular
product from the supplier
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14–24
Legal Issues in Channel Management
(cont’d)
• Full-Line Forcing
–Requiring a channel member to carry a supplier’s entire
product line to obtain any of the supplier’s products
• Exclusive Dealing
–Forbidding an intermediary to carry products of a
competing manufacturer
–Is anticompetitive if
• blocking competitors from 10% of the market
• sales revenues are sizable
• the manufacturer is larger than the dealer
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14–25
Legal Issues in Channel Management
(cont’d)
• Refusal to Deal
–Suppliers can choose their distributors and refuse to
deal with others so long as their decisions are not
based on anticompetitive motives or part of an
organized refusal-to-deal with certain channel
members.
Copyright © Houghton Mifflin Company. All rights reserved.
14–26
After reviewing this chapter you should:
• Be able to describe the nature and functions of marketing
channels.
• Be able to explain how supply chain management can
facilitate distribution for the benefit of all channel
members, especially customers.
• Be able to identify the types of marketing channels.
• Be familiar with the major levels of marketing coverage.
• Understand the concepts of leadership, cooperation, and
conflict in channel relationships.
• Able to specify how channel integration can improve
channel efficiency.
• Be cognizant of the legal issues affecting channel
management.
Copyright © Houghton Mifflin Company. All rights reserved.
14–27
Chapter 14
Supplemental Slides
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14–28
Key Terms and Concepts
• The following slides (a listing of terms and
concepts) are intended for use at the instructor’s
discretion.
• To rearrange the slide order or alter the content
of the presentation
–select “Slide Sorter” under View on the main menu.
–left click on an individual slide to select it; hold and drag
the slide to a new position in the slide show.
–To delete an individual slide, click on the slide to select,
and press the Delete key.
–Select “Normal” under View on the main menu to return
to normal view.
Copyright © Houghton Mifflin Company. All rights reserved.
14–29
Important Terms
• Distribution
–The activities that make products available to
customers when and where they want to purchase
them
• Marketing Channel
–A group of individuals and organizations directing
products from producers to customers
• Marketing Intermediary
–A middleman linking producers to other middlemen or
to ultimate consumers through contractual
arrangements or through the purchase and resale of
products
Copyright © Houghton Mifflin Company. All rights reserved.
14–30
Important Terms
• Time Utility
–The availability of products when the customer wants
them
• Place Utility
–The availability of products in locations where the
customers wish to purchase them
• Possession Utility
–The accessibility of products that allows the customer
to have the product to use or to store for future use
Copyright © Houghton Mifflin Company. All rights reserved.
14–31
Important Terms
• Supply Chain Management
–Long-term partnerships among marketing channel
members that reduce inefficiencies, costs, and
redundancies and develop innovative approaches to
satisfy customers
• Industrial Distributor
–An independent business that takes title to business
products and carries inventories
• Manufacturers’ Agent
–An independent businessperson who sells, on
commission, the complementary products of several
producers; does not takes title to or hold inventories.
Copyright © Houghton Mifflin Company. All rights reserved.
14–32
Important Terms
• Dual Distribution
–The use of two or more channels to distribute the same
product to the same target market
• Strategic Channel Alliance
–An agreement whereby the products of one
organization are distributed through the marketing
channels of another
• Intensive Distribution
–Using all available outlets to distribute a product.
• Convenience products with high replacement rates
–Provides availability and reduces search time
–Availability is more important than outlet type
Copyright © Houghton Mifflin Company. All rights reserved.
14–33
Important Terms
• Selective Distribution
–Using only some available outlets to distribute a
product
• Exclusive Distribution
–Using a single outlet in a fairly large geographic area to
distribute a product
• Channel Captain
–The dominant member (producer, wholesaler, or
retailer) of a marketing channel or supply chain
• Channel Power
–The ability of one channel member to influence another
member’s goal achievement
Copyright © Houghton Mifflin Company. All rights reserved.
14–34
Important Terms
• Vertical Channel Integration
–Two or more stages of the marketing channel are under
one management.
• Vertical Marketing System (VMS)
–A marketing channel managed by a single channel
member to achieve efficient, low-cost distribution
• Dual Distribution
–A producer can have two different channels into the
same market unless it is using one channel to compete
with independent distributors of its products.
Copyright © Houghton Mifflin Company. All rights reserved.
14–35
Important Terms
• Dual Distribution
–A producer can have two different channels into the
same market unless it is using one channel to compete
with independent distributors of its products.
• Restricted Sales Territories
–Granting exclusive sales territory rights to distributors is
permissible if the rights do not restrain trade.
• Tying Arrangements
–Requiring a channel member to buy additional products
from the supplier in order to purchase a particular
product from the supplier
Copyright © Houghton Mifflin Company. All rights reserved.
14–36
Important Terms
• Full-Line Forcing
–Requiring a channel member to carry a supplier’s entire
product line to obtain any of the supplier’s products
• Exclusive Dealing
–Forbidding an intermediary to carry products of a
competing manufacturer
• Refusal to Deal
–Suppliers can choose their distributors and refuse to
deal with others so long as their decisions are not
based on anticompetitive motives or part of an
organized refusal-to-deal with certain channel
members.
Copyright © Houghton Mifflin Company. All rights reserved.
14–37
Transparency Figure 14E
Legal Issues in Channel Management
• Dual distribution
• Restricted sales territories
• Tying agreements
• Exclusive dealing
• Refusal to deal
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14–38