Download Road Map: Previewing the Concepts

Chapter 11
Marketing Channels and Supply
Chain Management
11-1
Road Map: Previewing the Concepts
Explain why companies use distribution channels
and discuss the functions these channels perform.
Discuss how channel members interact and how
they organize to perform the work of the channel.
Identify the major channel alternatives open to a
company.
Explain how companies select, motivate, and
evaluate channel members.
Discuss the nature and importance of marketing
logistics and supply chain management.
11-2
What is a Distribution Channel?
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.
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Why are Marketing Intermediaries
Used?
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.
Purpose: match supply from producers to demand
from consumers.
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A Distributor Reduces the Number of
Channel Transactions (Fig. 11-1)
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Distribution Channel Functions
These Functions Should be Assigned to the Channel
Member Who Can Perform Them Most Efficiently and
Effectively.
Risk Taking
Information
Financing
Promotion
Physical
Distribution
Contact
Negotiation
Matching
11-6
List and briefly discuss the marketing channel
functions that are involved in completing and
fulfilling transactions.
Which functions apply most in each of the
following situations?
A retailer puts in a rush re-order for a needed
Christmas item that is in short supply.
An Internet marketer seeks ways to identify and
contact its market.
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Number of Channel Levels
(Fig. 11-2)
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Channel Behavior & Organization
The channel will be most effective when:
each member is assigned tasks it can do best.
all members cooperate to attain overall channel goals
and satisfy the target market.
When this doesn’t happen, conflict occurs:
Horizontal Conflict occurs among firms at the same
level of the channel, i.e retailer to retailer.
Vertical Conflict occurs between different levels of the
same channel, i.e. wholesaler to retailer.
Each channel member’s role must be specified
and conflict must be managed.
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Conventional Distribution Channel
Vs. a Vertical Marketing System
(Fig. 11-3)
11-10
Types of Vertical Marketing
Systems
Corporate VMS
Common Ownership at Different
Levels of the Channel i.e. Sears
Degree of
Direct
Control
Contractual VMS
Contractual Agreements Among
Channel Members i.e Western Auto
Administered VMS
Leadership is Assumed by One or
a Few Dominant Members i.e. Kraft
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Types of Vertical Marketing
Systems Vertical Marketing
Systems (VMS)
Corporate
VMS
Wholesaler Sponsored
Voluntary Chain
ManufacturerSponsored Retailer
Franchise System
Administered
VMS
Contractual
VMS
Retailer
Cooperatives
Franchise
Organizations
ManufacturerSponsored Wholesaler
Franchise System
Service-FirmSponsored Retailer
Franchise System
11-12
Innovations in Marketing Systems
Horizontal Marketing
System
Hybrid Marketing
System
Two or More Companies
at One Channel Level
Join Together to Follow
a New Marketing
Opportunity.
A Single Firm Sets Up
Two or More Marketing
Channels to Reach
One or More Customer
Segments.
Example:
Example:
Banks in Grocery Stores
Retailers, Catalogs,
and Sales Force
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Hybrid Marketing Channel
(Fig. 11-4)
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Changing Channel Organization
A Major Trend is Toward
Disintermediation Which Means that
Product and Service Producers are
Bypassing Intermediaries and Going
Directly to Final Buyers or That New
Types of Channel Intermediaries are
Emerging to Displace Traditional
Ones.
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Channel Design Decisions
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Identifying Major Alternatives
Types of
Intermediaries
Number of
Intermediaries
Responsibilities of
Intermediaries
Evaluating the Major Alternatives
Designing International Distribution Channels
11-16
Number of Marketing
Intermediaries
Intensive
Distribution
Selective
Distribution
Exclusive
Distribution
11-17
Decide which distribution strategy-intensive, selective, or exclusive--is
used for the following products, and
why:
Piaget watches,
Acura automobiles,
Snickers candy bars.
11-18
Channel Management Decisions
Motivating Channel Members
FEEDBACK
Selecting Channel Members
Evaluating Channel Members
11-19
Marketing Logistics and Supply
Chain Management
Involves getting the right product to the
right customers in the right place at the
right time.
Marketing logistics addresses:
Outbound distribution,
Inbound distribution,
Reverse distribution,
Entire supply chain management.
11-20
Supply Chain Management
(Fig. 11-5)
11-21
Goals of the Logistics System
Higher Distribution Costs;
Higher Customer Service
Levels
Goal:
To Provide a Targeted Level of Customer Service
at the Least Cost.
Lower Distribution Costs;
Lower Customer Service
Levels
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Major Logistics Functions
Order Processing
Received
Processed
Shipped
Costs
Minimize Costs of
Attaining Logistics
Objectives
Logistics
Transportation
Rail, Truck,
Water, Pipeline,
Air, Intermodal
Functions
Inventory
When to order
How much to order
Just-in-time
Warehousing
Storage
Distribution
Automated
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Transportation Modes
Rail
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
Truck
Flexible in routing & time schedules, efficient
for short-hauls of high value goods
Water
Low cost for shipping bulky, low-value,
non-perishable goods, slowest form
Pipeline
Ship petroleum, natural gas, and chemicals
from sources to markets
Air
High cost, ideal when speed is needed or
distance markets have to be reached
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Integrated Logistics Management
Concept Recognizes that Providing Better
Customer Service and Trimming Distribution
Costs Requires Teamwork, Both Inside the
Company and Among All the Marketing Channel
Organizations.
Involves:
Cross-functional teamwork inside the company
Building channel partnerships
Third-party logistics
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Toys “R” Us Partner
Western Publishing
Group partners with
Toys “R” Us to create
mini-bookstore sections
– called Books “R” Us –
within each store.
This helps to build
channel partnerships
that benefit both
companies.
11-26
Rest Stop: Reviewing the Concept
Explain why companies use distribution channels
and discuss the functions these channels perform.
Discuss how channel members interact and how
they organize to perform the work of the channel.
Identify the major channel alternatives open to a
company.
Explain how companies select, motivate, and
evaluate channel members.
Discuss the nature and importance of marketing
logistics and supply chain management.
11-27