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Marketing Channels and
Supply Chain Management
•Chapter 13
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•Instructor name
•Course name
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Principles of Marketing, Sixth Canadian Edition
Learning Objectives
13.2
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• After studying this chapter, you should be able to:
– Explain why companies use distribution channels and discuss
the functions that 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 physical
distribution
Principles of Marketing, Sixth Canadian Edition
13.3
Important Terminology
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• Marketing (distribution) channel: set of interdependent
organizations involved in making a product available for use or
consumption; from the producer down
• Supply chain: includes upstream
supplier partners, as well as downstream
channel partners
Make-and-sell view
• Value-delivery network: all those
who partner with each other to improve
the performance of the supply chain
system; including the company,
suppliers, distributors, and even,
customers
Sense-and-respond view
Principles of Marketing, Sixth Canadian Edition
Copyright © 2005 Pearson Education Inc.
Using Marketing Intermediaries
13.4
• Intermediaries reduce the number of contacts needed to cover a market
• Transform assortments made by producers into assortments desired by
consumers
• Help to complete transactions:
– Information
Figure 13.1
– Promotion
– Contact
– Matching
– Negotiation
• Fulfill completed transactions:
– Physical distribution
– Financing
– Risk taking
Principles of Marketing, Sixth Canadian Edition
Consumer Marketing Channels
13.5
Copyright © 2005 Pearson Education Inc.
• Channel level: layer of intermediaries that performs some work in
bringing the product and its ownership closer to the final buyer
– Direct: no intermediary levels
– Indirect: containing one or more intermediary levels
Figure 13.2
• Flows between
levels:
•
•
•
•
•
Physical
Ownership
Payment
Information
Promotion
Principles of Marketing, Sixth Canadian Edition
Channel Behaviour
13.6
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• Channel conflict: disagreements between marketing channel
members on goals and roles-who should do what and for what
rewards
– Horizontal conflict: between
firms on the same channel level
– Vertical conflict: between firms
on different levels of the channel
• Some conflict encourages healthy
competition which produces
innovation and better performance
• Too much conflict becomes
dysfunctional
Principles of Marketing, Sixth Canadian Edition
13.7
Types of Marketing Channels
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• Conventional distribution channel:
– One or more independent producers, wholesalers, and retailers
– Each seeking to maximize its own profits
• Vertical marketing system
(VMS):
Figure 13.4
– Producers, wholesalers, and retailers
– Act as a unified system
– One channel member owns, has
contracts with, or has so much
power that they all cooperate
• Franchise organization
• Horizontal marketing system
Principles of Marketing, Sixth Canadian Edition
Hybrid Marketing Channel
13.8
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• Multichannel distribution system: a single firm sets
up two or more marketing channels to reach one or more
customer segments
• Disintermediation:
– Displacment of
traditional
resellers by new
types of
intermediaries or
by selling direct
Figure 13.5
Principles of Marketing, Sixth Canadian Edition
Setting Channel Objectives
13.9
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• Channel objectives influenced by:
–
–
–
–
Nature of the company (size/financial position) and its products
Marketing intermediaries
Competition
• Types of
Marketing environment
• Identifying major
alternatives:
– Types of intermediaries
– Number of
intermediaries
– Responsibilities of each
channel member
intermediaries:
– Company sales
force
– Manufacturer’s
agency
– Industrial
distributors
Principles of Marketing, Sixth Canadian Edition
13.10
Number of Intermediaries
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• Also known as intensity of distribution
Intensive
distribution
As many outlets
as possible
Convenience
goods
Selective
distribution
More than one, but
not all outlets
Shopping
goods
Exclusive
distribution
One outlet per
market area
Specialty
goods
Principles of Marketing, Sixth Canadian Edition
Channel Management Decisions
13.11
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• Selecting channel members: companies will vary in their
ability to attract qualified intermediaries
– Channel member history, reputation, financial position, location
– Other product lines carried, facility
– Cooperativeness, future growth potential
• Managing & motivating:
– Partner relationship
management
– Programs, contests, sales
incentives
– Cooperative advertising
– Product/sales training
• Evaluating channel
members:
• Performance standards
for sales, market share,
customer service levels,
inventory carried, and
participation in company
programs
Principles of Marketing, Sixth Canadian Edition
Copyright © 2005 Pearson Education Inc.
Public Policy and Distribution Decisions
•
•
•
•
13.12
Exclusive dealing
Exclusive territories
Tying agreements
Dealers’ rights
• Sources of supply
• Purchasing and shelving
policies
– Slotting allowances
Principles of Marketing, Sixth Canadian Edition
13.13
Supply Chain Management
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• Marketing logistics (physical distribution): planning,
implementing, and controlling the physical flow of materials, final
goods and related information
• Supply chain management: managing upstream and
downstream value-added flows of materials, final goods, and related
information among suppliers, the company, resellers, and final
consumers
Figure 13.6
Principles of Marketing, Sixth Canadian Edition
Supply Chain Management (continued)
13.14
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• Goal: provide a targeted level of customer service at the least cost
• Major logistics functions:
– Warehousing: storage and distribution centres
– Inventory management: balance customer needs with cost
– Transportation: speed costs money, how fast do you need it?
• Rail, trucks, water, pipeline, air, and the Internet
Figure 13.6
Principles of Marketing, Sixth Canadian Edition
In Conclusion…
13.15
Copyright © 2005 Pearson Education Inc.
• The learning objectives for this chapter were:
– Explain why companies use distribution channels and discuss
the functions that 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
physical distribution
Principles of Marketing, Sixth Canadian Edition