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Chapter 13: Marketing Channels
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1
Marketing Channels
A set of
interdependent organizations
that ease the transfer of
ownership as products move
from producer to business
user or consumer.
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2
Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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Overcoming Discrepancies
Discrepancy
of
Quantity
The difference between the
amount of product produced
and the amount an end user
wants to buy.
Discrepancy
of
Assortment
The lack of all the items a
customer needs to receive full
satisfaction from a product or
products.
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Overcoming Discrepancies
Temporal
Discrepancy
A situation that occurs when a
product is produced but a
customer is not ready to buy it.
Spatial
Discrepancy
The difference between the
location of a producer and the
location of widely
scattered markets.
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Providing Contact Efficiency
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Channel Intermediaries
Retailer
A channel intermediary that
sells mainly to customers.
Merchant
Wholesaler
An institution that buys goods
from manufacturers, takes title
to goods, stores them,
and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries who
facilitate the sale of a product from
producer to end user by representing
retailers, wholesalers, or
manufacturers.
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Channel Intermediaries
Retailers
Take Title to Goods
Merchant
Wholesalers
Take Title to Goods
Agents
and
Brokers
Do NOT Take Title to Goods
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Channel Functions Performed
by Intermediaries
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Functions
Researching
Financing
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Channels for Consumer Products
Direct Channel - A distribution
channel in which producers
sell directly to consumers.
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Channels for Consumer Products
Direct
Channel
Producer
Retailer
Channel
Producer
Wholesaler
Channel
Producer
Agent/Broker
Channel
Producer
Agents or
Brokers
Consumers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
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11
Channels for Business Products
Direct
Channel
Direct
Channel
Industrial
Distributor
Agent/Broker
Channel
Producer
Producer
Producer
Producer
Producer
Agents or
Brokers
Agents or
Brokers
Industrial
Distributor
Industrial
Distributor
Industrial
User
Govt.
Buyer
Industrial
User
Agent/Broker
Industrial
Channel
Industrial
User
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Industrial
User
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Levels of Distribution Intensity
Intensity
Level
Objective
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
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Number of
Intermediaries
One
13
Managing Channel Relationships
Power
Control
Leadership
Conflict
Partnering
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Channel Power, Control, and Leadership
Channel
Power
The capacity of a particular
marketing channel member to
control or influence the behavior
of other channel members
Channel
Control
A situation that occurs when
one marketing channel member
intentionally affects another
member’s behavior
Channel
Leader
(channel captain)
A member of a marketing
channel that exercises
authority/power over the
activities of other members
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Channel Conflict and Partnering
Channel Conflict – A clash of
goals and methods between
distribution channel members.
Channel Partnering (Channel Cooperation) –
The joint effort of all channel
members to create a supply
chain that serves customers and
creates a competitive advantage.
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16
Supply Chain Management
Chapter 14
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Definition of Supply Chain
Management
Supply Chain Management refers to the effort to
coordinate suppliers, manufacturers,
warehouses, stores, and transportation so that
the merchandise the customer wants is produced
in the right quantities and sent to the right locations
at the time the customer wants it.
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Discussion
A supply chain is the stream of processes of moving
goods from the customer order through the raw
materials stage, supply, production, and distribution
of products to the customer. Managing the chain of
events in this process is what is known as supply
chain management.
The design and management of seamless, valueadded processes across organizational boundaries
to meet the real needs of the end customer
(Institute for Supply Management)
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Supply Chain Management
• Supply Chain Management falls under one of
the 4 P’s, Place.
• It explains the detailed distribution of products
and how they flow between channel members
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Supply Chain - Discussion
A supply chain consists of the flow of products and
services from:
– Raw materials manufacturers
– Component and intermediate manufacturers
– Final product manufacturers
– Wholesalers and distributors and
– Retailers
Connected by transportation and storage activities, and
Integrated through information, planning, and integration
activities
Supply Chain – Discussion (cont)
Effective management must take into account
coordinating all the different pieces of this chain as
quickly as possible without losing any of the quality
or customer satisfaction, while still keeping costs
down.
In addition, key to the success of a supply chain is the
speed in which these activities can be
accomplished and the realization that customer
needs and customer satisfaction are the very
reasons for the network.
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Reduced inventories, lower operating costs, product
availability and customer satisfaction are all
benefits which grow out of effective supply chain
management.
General Supply Chain Model
Elements of Supply Chain
There are six key elements to a supply chain:
– Production
– Supply
– Inventory
– Location
– Transportation
– Information
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Supply Chain, Marketing Channels, and
Logistics are Related
• Logistics management:
• The integration of two or more activities for the purpose of planning,
implementing, and controlling the efficient flow of raw materials,
inventory, and finished goods from origin to consumption
• This is the element of supply chain management that concentrates
on the movement and control of physical products
• Marketing Channel:
• The movement of goods from the point of production to the point of
consumption, consisting of all the institutions and marketing
activities in the marketing process
• Because supply chain management takes a systemwide
approach to coordinating the flow of merchandise, it
incorporates both of the above
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Supply Chains add Value
• Each participant in a supply chain adds value to the product
• Supplier provisions parts and materials
• The manufacturer assembles the product, and then documents,
packages, and ships the order
• Agents or wholesalers may be used to facilitate the flow of products
among channel members
• Retailer stores the product, educates consumers about product features
through advertisements or personal selling, and might even deliver and
install the product (if needed)
• Transportation companies ship the product to and from each channel
participant
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Designing the Supply Chain
• Intensive Distribution
– Designed to get products into as many outlets as possible. The more
exposure it gets, the more it sells.
– Typical for cheap convenience products, such as soda, snack foods, etc.
• Exclusive Distribution
– Distributes products to only a very few select retailers
– Assures that customers can find your product at only the most appropriate
locations
– Adds to the image of the company, and enhances the value of the product
– Typical for high class products such as cars, watches, and cosmetics
– Exclusive distribution can also help when supply is limited. Retailers have
more incentive to push the products because their supply lines are
guaranteed, and they have no competition.
• Selective Distribution
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– Somewhere between Intensive and Exclusive distributions
– Uses a few retailers in each area to help maintain a certain image and to
control the flow of product into the area
– Typical for long-lasting and relatively high-cost products such as
consumer electronics, hardware and tools, and large appliances