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Chapter Eleven Marketing Channels and Supply Chain Management with Duane Weaver 11-1 Copyright © 2007 Pearson Education Canada Marketing 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. 11-2 Copyright © 2007 Pearson Education Canada Why Use Channel Members • 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. 11-3 Copyright © 2007 Pearson Education Canada Channel Functions • • • • • Information. Promotion. Contact. Matching. Negotiation. 11-4 • Physical distribution. • Financing. • Risk taking. Copyright © 2007 Pearson Education Canada Wholesalers/Retailers • Wholesalers. – Merchant wholesalers. – Agents and brokers. – Manufacturer’s sales branches & offices. • Retailers. – Amount of service . – Product line. – Relative prices. – Retail organization. 11-5 Copyright © 2007 Pearson Education Canada Wholesaler Marketing Decisions • Wholesaler strategy. – Target market. – Service positioning. • Wholesaler marketing mix. – Product and service assortment. – Prices. – Promotion. – Place (location). 11-6 Copyright © 2007 Pearson Education Canada What is Retailing? Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. 11-7 Copyright © 2007 Pearson Education Canada Retailing Functions • Information function – to customers and manufacturers. • • • • • Product function – help define products. Price function – promotions, negotiation. Place function – convenience to consumers. Promotion function – run their own promos. Ownership function – take title and absorb the risk. 11-8 Copyright © 2007 Pearson Education Canada Classifying Retail by Amount of Service • Self-service retailers: – Serve customers who are willing to perform their own “locate-compare-select” process to save money. • Limited-service retailers: – Provide more sales assistance because they carry more shopping goods about which customers need information. • Full-service retailers: – Usually carry more specialty goods for which customers like to be “waited on.” 11-9 Copyright © 2007 Pearson Education Canada Product Line Retailers • Specialty stores. – Narrow product line, deep assortment. • Department stores. – Wide variety of product lines. • Supermarkets. – Wide variety of food, laundry, household products. • Convenience stores. – Limited line of high-turnover goods. 11-10 Copyright © 2007 Pearson Education Canada Product Line Retailers (cont’d) • Superstores. – Large assortment of food and non-food items. • Category killer. – Big box specialty store. • Service retailers. – Provide services rather than tangible goods. 11-11 Copyright © 2007 Pearson Education Canada Relative Price Retailers • Discount stores. – Sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. • Off-price retailers. – – – – 11-12 Buys at below wholesale, sells at less than retail. Independents. Factory outlets. Warehouse clubs. Copyright © 2007 Pearson Education Canada Channel Behaviour • The channel is most effective when: – Each member is assigned tasks it can do best. – All members cooperate to attain channel goals. • If this does not happen, conflict occurs: – Horizontal conflict occurs among firms at the same level of the channel (e.g. retailer to retailer). – Vertical conflict occurs between different levels of the same channel (e.g. wholesaler to retailer). • Some conflict can be healthy competition. 11-13 Copyright © 2007 Pearson Education Canada Channel Conflict • Disagreement between members over goals and roles. • Horizontal conflict. – Conflict between firms on the same level. • Vertical conflict. – Conflict between firms on different levels. • Disintermediation. – Displacement of a traditional member from the marketing channel. – Selling direct via the Internet. 11-14 Copyright © 2007 Pearson Education Canada Types of Channels • Conventional channel. – Channel members independently owned. • Vertical channel. – Channel members act as a unified system. • Horizontal channel. – Two or more companies on the same level join together for mutual gain. • Hybrid channel. – Combination to serve different segments. 11-15 Copyright © 2007 Pearson Education Canada International Distribution • Exporting. – Direct. – Indirect. • Joint ventures. – Licensing. – Contract manufacturing. – Management contracting. – Joint ownership. • Direct investment. 11-16 Copyright © 2007 Pearson Education Canada Channel Design/Management • Selection. – Fit with channel objectives. • Motivation. – Maintain strong partnerships. – Reward good performance. – Assist or replace weaker ones. • Evaluation. – Compare performance against standards and objectives. 11-17 Copyright © 2007 Pearson Education Canada Major Logistics Functions • • • • • Order processing. Warehousing. Inventory management. Transportation. Integrated supply chain management. – Cross-functional teamwork in company. – Building channel partnerships. 11-18 Copyright © 2007 Pearson Education Canada Thanks! 11-19 Copyright © 2007 Pearson Education Canada