15 | 2Copyright © Houghton Mifflin Company. All rights reserved. Part Six Distribution Decisions

15 | 2Copyright © Houghton Mifflin Company. All rights reserved.

Part SixDistribution Decisions

Chapter 15 Marketing Channels and

Supply Chain Management


Objectives

• Describe nature/functions of marketing channels• Explain how supply chain management can facilitate

distribution for benefit of all channel members, especially customers

• Identify types of marketing channels• Understand factors affecting decisions when selecting

marketing channels• Examine major levels of marketing coverage• Explore concepts of leadership, cooperation, and conflict

in channel relationships• Specify how channel integration can improve channel

efficiency• Examine legal issues affecting channel management


Distribution

Activities involved in making products availableto customers when and where they want to purchase them.


Marketing Channel

A group of individuals and organizations that direct the flow of products from producers to customers.

Modern Distribution Management


Marketing Intermediary

A middleman linking producers to other middlemen or ultimate consumers through contractual arrangements or through the purchase and resale of products.


Marketing Channel Activities Performed By Intermediaries


Potential Channel Members

• Wholesalers- buy and sell products to other wholesalers, retailers and industrial customers

• Retailers- purchase products and resell them to ultimate consumers


Distribution Decisions

• powerful influence on the rest of the marketing mix

• determine a product’s presence and accessibility to buyers

• entail long-term commitment


Channel Functions

• Create utility– Time– Place– Possession

• Facilitate exchange efficiencies• Form Supply Chains

– Total distribution system that serves customers and creates competitive advantage

Homeland Security and Supply Chain Management


Efficiency In Exchanges Provided By Intermediary


Supply Chain Management

Long-term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers


Tasks In SupplyChain Management


Technology in Supply Chain Management

• Integrated information sharing– Reduction of costs– Improved service– Enhanced value to customer

• Tools improve overall performance– Electronic billing– Purchase order verification– Image processing

• Customer Relationship Management systems


Types of Marketing Channels – Consumer Products

• Direct marketing channels vs. intermediaries

• Goods from producer – retailer – customer

• Goods from producer – wholesaler – retailer – customer

• Goods from producer – agent – wholesaler – retailer – customer


Typical Marketing Channels For Consumer Products


Types of Marketing Channels – Business Products

• Direct channels• Industrial distributor facilitates exchange

– Industrial distributor is an independent organization that takes industrial products’ title and carries inventory

• Manufacturers’ agent– Does not acquire title or take possession

• Manufacturers’ agent and industrial distributor


Typical Marketing Channels For Business Products


Types of Marketing Channels – Multiple Marketing Channels and Channel Alliance

• Dual distribution– The use of two or more marketing channels to

distribute the same product to the same target market

• Strategic Channel Alliance– The products of one organization are distributed

through the marketing channels of another

Collaborative Forecasting Between Sears and Michelin


SelectingMarketing Channels


Selecting Channels

• Customer Characteristics – consumer vs. business

• Product Attributes – expensive vs. standardized; durable vs. fragile

• Type of Organization – large vs. small• Competition – high vs. low• Marketing Environmental Forces

• Characteristics of Intermediaries


Intensity OfMarket Coverage


Intensity Of Distribution

• Intensive – using all available outlets to distribute product

• Selective – using only some available outlets to distribute a product

• Exclusive – using a single outlet in a fairly large geographic area to distribute a product


Supply Chain Management – Channel Leadership

• Channel captain – organizes and controls marketing channel

• Channel power – ability of one channel member to influence another member’s goal achievement


Supply Chain Management – Channel Cooperation

• Vital to gain something from other members• Enables members to

– Speed up inventory replenishment– Improve customer service– Cut costs

• Improve channel cooperation– View chain as competing against others– Members direct efforts to common objectives– Precise definition of each member’s tasks


Supply Chain Management – Channel Conflict

• Self-interest

• Poor communication

• Increased use of multiple channels


Channel Integration

• Vertical – combining two or more stages of the channel under one management

• Horizontal – combining organizations at the same level of operation under one management

Seven Myths of Channel Integration


VerticalMarketing Systems

• A marketing channel managed by a single channel member to achieve efficient distribution satisfying target market customers– Corporate– Administered– Contractual


Legal Issues InChannel Management

• Dual Distribution• Restricted Sales Territories• Tying Agreement- supplier furnishes product to

channel member with stipulation channel member must purchase other products

• Exclusive Dealing- manufacturer forbid intermediary to carry products of competitors

• Refusal to Deal

Documents

15 | 2Copyright © Houghton Mifflin Company. All rights reserved. Part Six Distribution Decisions