Download Chapter 13

CHAPTER
MANAGING
MARKETING
CHANNELS AND
SUPPLY CHAINS
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-1
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Explain what is meant by a marketing
channel of distribution and why
intermediaries are needed.
2. Distinguish among traditional
marketing channels, electronic
marketing channels, and different types
of vertical marketing systems.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
3. Describe factors that marketing
executives consider when selecting and
managing a marketing channel.
4. Explain what supply chain and logistics
management are and how they relate to
marketing strategy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-3
APPLE STORES: ADDING
HIGH-TOUCH TO HIGH-TECH
MARKETING CHANNELS
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-4
NATURE AND IMPORTANCE OF
MARKETING CHANNELS
• What is a Marketing Channel of
Distribution?
 Marketing Channel
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-5
FIGURE 13-1 Terms used for marketing
intermediaries
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-6
NATURE AND IMPORTANCE OF
MARKETING CHANNELS
• Value Created by Intermediaries
 Functions Performed by Intermediaries
• Transactional Function
• Logistical Function
• Facilitating Function
 Consumer Benefits from Intermediaries
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-7
FIGURE 13-2 Marketing channel functions
performed by intermediaries
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-8
Concept Check
1. What is meant by a marketing
channel?
A: 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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-9
Concept Check
2. What are the three basic functions
performed by intermediaries?
A: Intermediaries perform transactional,
logistical, and facilitating functions.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-10
CHANNEL STRUCTURE AND
ORGANIZATION
• Marketing Channels for Consumer
Goods and Services
 Direct Channel
 Indirect Channels
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-11
FIGURE 13-3 Common marketing channels
for consumer goods and services
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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CHANNEL STRUCTURE AND
ORGANIZATION
• Marketing Channels for Business Goods
and Services
 Industrial Distributor
 Agent
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-13
FIGURE 13-4 Common marketing channels
for business goods and services
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-14
CHANNEL STRUCTURE AND
ORGANIZATION
• Electronic Marketing Channels
• Multiple Channels and Strategic Alliances
 Dual Distribution
 Strategic Channel Alliances
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-15
FIGURE 13-5 Representative consumer
electronic marketing channels
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-16
FIGURE 13-6 Types of vertical marketing
systems
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-17
CHANNEL STRUCTURE AND
ORGANIZATION
• Vertical Marketing Systems
 Corporate Systems
• Corporate Vertical Marketing System
• Forward Integration
• Backward Integration
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-18
CHANNEL STRUCTURE AND
ORGANIZATION
• Vertical Marketing Systems
 Contractual Systems
• Contractual Vertical Marketing System
• Wholesaler-Sponsored Voluntary Chains
• Retailer-Sponsored Cooperatives
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-19
CHANNEL STRUCTURE AND
ORGANIZATION
• Vertical Marketing Systems
 Contractual Systems
• Franchising
 Manufacturer-Sponsored Retail Franchise Systems
 Manufacturer-Sponsored Wholesale Systems
 Service-Sponsored Retail Franchise Systems
 Service-Sponsored Franchise Systems
 Administered Systems
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-20
Sherwin-Williams and H&R Block
What vertical marketing system does each use?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-21
Concept Check
1. What is the difference between a
direct and an indirect channel?
A: A direct channel is one in which a producer of
consumer or business goods and services and
ultimate consumers or industrial users deal
directly with each other whereas an indirect
channel has intermediaries that are inserted
between the producer and consumers or
industrial users and who perform numerous
channel functions.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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Concept Check
2. What is the major distinction between a
corporate vertical marketing system and an
administered vertical marketing system?
A: A corporate vertical marketing system combines
successive stages of production and distribution
under a single ownership. An administered
vertical marketing system achieves coordination
by the size and influence of one channel
member rather than through ownership.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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CHANNEL CHOICE AND
MANAGEMENT
• Factors in Choosing a Marketing
Channel
 Provide the Best Target Market Coverage
 Best Satisfy the Target Market’s
Buying Requirements
 Be the Most Profitable
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-24
CHANNEL CHOICE AND
MANAGEMENT
• Factors in Choosing a Marketing
Channel
 Target Market Coverage
• Intensive Distribution
• Exclusive Distribution
• Selective Distribution
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-25
CHANNEL CHOICE AND
MANAGEMENT
• Factors in Choosing a Marketing
Channel
 Satisfying Buyer Requirements
• Information
• Variety
• Convenience
• Pre- or Post-Sale Services
 Profitability
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-26
Jiffy Lube and PETCO
What buyer requirements are satisfied?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-27
CHANNEL CHOICE AND
MANAGEMENT
• Channel Relationships: Conflict and
Cooperation
 Conflict in Marketing Channels
• Channel Conflict
• Vertical Conflict
 Disintermediation
• Horizontal Conflict
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-28
CHANNEL CHOICE AND
MANAGEMENT
• Channel Relationships: Conflict and
Cooperation
 Cooperation in Marketing Channels
• Channel Captain
 Economic
 Identification
 Expertise
 Legitimate Right
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-29
Concept Check
1. What are the three degrees of
distribution density?
A: intensive; exclusive; selective
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-30
Concept Check
2. What are the three questions marketing
executives consider when choosing a
marketing channel and intermediaries?
A: The three questions are: (1) Which will
provide the best coverage of the target
market? (2) Which will best satisfy the
buying requirements of the target market?
(3) Which will be the most profitable?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-31
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
• Logistics
• Logistics Management
 Flow of the Product
 Cost-Effective
 Customer Service
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-32
UPS
What does ‘Brown’ do?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-33
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
• Supply Chains versus Marketing
Channels
 Supply Chain
 Supply Chain Management
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-34
FIGURE 13-7 Relating logistics
management and supply chain management
to supplier networks and marketing
channels
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-35
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
• Sourcing, Assembling, and Delivering a
New Car: The Automotive Supply Chain
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-36
FIGURE 13-8 The automotive supply chain
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-37
FIGURE 13-A Paint industry supply chain
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
• Supply Chain Management and
Marketing Strategy
 Aligning a Supply Chain w/ Marketing Strategy
• Understand the Customer
• Understand the Supply Chain
• Harmonize the Supply Chain with the
Marketing Strategy
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-39
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
• Dell: A Responsive Supply Chain
• Wal-Mart: An Efficient Supply Chain
 Cross-Docking
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-40
Concept Check
1. What is the principal difference
between a marketing channel and a
supply chain?
A: A supply chain also includes suppliers
who provide raw materials to a
manufacturer as well as the wholesalers
and retailers—the marketing channel—
who deliver the finished goods to ultimate
consumers.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-41
Concept Check
2. The choice of a supply chain
involves what three steps?
A: (1) Understand the customer.
(2) Understand the supply chain.
(3) Harmonize the supply chain with
the marketing strategy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-42
TWO CONCEPTS OF LOGISTICS
MANAGEMENT IN A SUPPLY CHAIN
• Total Logistics Cost Concept
• Customer Service Concept
 Time
• Order Cycle or Replenishment Time
• Quick Response or Efficient Consumer Response
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-43
FIGURE 13-9 Supply chain managers
balance total logistics cost factors against
customer service factors
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-44
TWO CONCEPTS OF LOGISTICS
MANAGEMENT IN A SUPPLY CHAIN
• Customer Service Concept
 Dependability
 Communication
 Convenience
• Vendor-Managed Inventory (VMI)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-45
Concept Check
1. What is the logistics management
objective in a supply chain?
A: To minimize total logistics costs
while delivering the appropriate level
of customer service.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-46
Concept Check
2. A manager’s key task is to balance which
four customer service factors against
which five logistics cost factors?
A: Customer service factors: time,
dependability, communication, and
convenience. Logistics cost factors:
transportation, materials handling and
warehousing, order processing, stockouts,
and inventory.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-47
GOING ONLINE
FINDING A FRANCHISE
FOR YOU
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-48
Going Online
1. Visit the Franchise.com website, and
click on the “Franchise Buyer” link.
Which franchise opportunities fit you?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-49
Going Online
2. Visit the International Franchise
Association website, and click on the
“Resource Center” link. Then, click
on the “News” link. What are the
current trends in franchising?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-50
VIDEO CASE 13
GOLDEN VALLEY
MICROWAVE FOODS:
THE SURPRISING CHANNEL
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-51
VIDEO CASE 13
Golden Valley Microwave Foods
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-52
VIDEO CASE 13
Golden Valley Microwave Foods
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-53
VIDEO CASE 13
Golden Valley Microwave Foods
1. Visit ACT II’s website at
www.actii.com and examine the
assortment of products offered today.
Are (a) the assortment or (b) the
packaging related to Golden Valley’s
distribution channels or the segments
they serve?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-54
VIDEO CASE 13
Golden Valley Microwave Foods
2. Use Figure 13-3 to create a
description of the channels of
distribution being used by Golden
Valley today.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-55
VIDEO CASE 13
Golden Valley Microwave Foods
3. Compared to selling through the
nongrocery channels, what kind of
product, price, and promotion
strategies might Golden Valley use to
reach the grocery channel more
effectively?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-56
VIDEO CASE 13
Golden Valley Microwave Foods
4. What special marketing issues does
Golden Valley face as it pursues
growth in global markets?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-57
SUPPLEMENTAL
LECTURE NOTE 13-1
TURNING EXCLUSIVE
DISTRIBUTION ON ITS HEAD
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-58
SUPPLEMENTAL
LECTURE NOTE 13-2
TRANSPORTATION:
A KEY LOGISTICS FUNCTION
IN A SUPPLY CHAIN
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-59
FedEx and Maersk
What transportation modes does each perform?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-60
FIGURE 13-B Advantages and
disadvantages of five modes of
transportation
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-61
IN-CLASS ACTIVITY 13-1
MARKETING CHANNELS FOR
APPLE COMPUTER
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-62
Apple Computer Products
Mac mini
iMac G5
iPod
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-63
Apple Computer Marketing Channel Structure:
Online Apple Store - Direct Channel
Producer
Consumer
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-64
Apple Computer Marketing Channel Structure:
Apple Retail Store - Direct Channel
Producer
Consumer
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-65
Apple Computer Marketing Channel Structure:
CompUSA - Direct Channel/Strategic Channel Alliance
Producer
Retailer
CompUSA
Apple Employees
Staff CompUSA
Store-WithinA-Store
Consumer
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-66
Apple Computer Marketing Channel Structure:
Ingram Micro/Best Buy - Indirect Channel
Producer
Wholesaler
Ingram
Micro
Retailer
Best Buy
Consumer
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-67
Apple Computer Marketing Channel Structure:
MacMall Online/Catalog Sales - Indirect Channel
Producer
Retailer
MacMall
Consumer
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-68
IN-CLASS ACTIVITY 13-2
MARKETING CHANNELS FOR
FASTENAL’S UNIQUE
THREADED FASTENERS
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Slide 13-69
Fastenal Fasteners
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Slide 13-70
Fastenal Fasteners (Unique Heads/Tops)
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Slide 13-71
Fastenal Fasteners (Unique Drivers/Tools)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-72
FIGURE 13-C Common marketing channels
for business goods and services
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-73
Marketing Channel
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-74
Dual Distribution
Dual distribution is an arrangement
whereby a firm reaches different buyers
by employing two or more different types
of channels for the same basic product.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-75
Vertical Marketing Systems
Vertical marketing systems are
professionally managed and centrally
coordinated marketing channels designed
to achieve channel economies and
maximum marketing impact.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-76
Franchising
Franchising is a contractual arrangement
between a parent company (a franchisor)
and an individual or firm (a franchisee)
that allows the franchisee to operate a
certain type of business under an
established name and according to
specific rules.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-77
Intensive Distribution
Intensive distribution is a level of
distribution density whereby a firm tries
to place its products and services in as
many outlets as possible.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-78
Exclusive Distribution
Exclusive distribution is a level of
distribution density whereby only one
retail outlet in a specific geographical
area carries the firm’s products.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-79
Selective Distribution
Selective distribution is a level of
distribution density whereby a firm
selects a few retail outlets in a specific
geographical area to carry its products.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-80
Channel Conflict
Channel conflict arises when one
channel member believes another channel
member is engaged in behavior that
prevents it from achieving its goals.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-81
Disintermediation
Disintermediation is channel conflict
that arises when a channel member
bypasses another member and sells or
buys products direct.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-82
Logistics
Logistics consists of those activities that
focus on getting the right amount of the
right products to the right place at the
right time at the lowest possible cost.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-83
Supply Chain
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-84
Total Logistics Cost
Total logistics cost consists of expenses
associated with transportation, materials
handling and warehousing, inventory,
stockouts (being out of inventory), order
processing, and return goods handling.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-85
Customer Service
Customer service is the ability of
logistics management to satisfy users in
terms of time, dependability,
communication, and convenience.
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Slide 13-86
Vendor-Managed Inventory
Vendor-managed inventory (VMI)
is 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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-87