This lecture is almost exclusivelycomposed of definitions!

For two reasons:

1.It is a very large and complex field.2.Very few people at a university are will educated in ALL its facets.

If you see a train of coalgoing by:

That’s marketing!

Marketing Channel

A marketing channel: consists

of individuals and firms involvedin the process of making a

product or service available for use or consumption by consumers

or industrial users.

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A Transaction has not occurred until a transaction has occurred!

The variety of terms are usedfor intermediaries that vary in specificity and

use in different markets

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Marketing channel intermediaries perform three functions:

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Direct Channel

Indirect Channel

• Retailers

• WholesalersRetailers

• AgentsWholesalersRetailers

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Consumer Products Channels

Common marketing channels for consumer products and services

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Direct Channel

Indirect Channel

• Industrial Distributor

• Agents

• AgentsIndustrial Distributors

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Business Products Channels

Common marketing channels for business products and services

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Electronic Marketing Channels

Direct Marketing Channels

Multichannel Marketing

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Other Channels

Consumer electronic marketing channels are similar to those for consumer products

and services

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http://www.expedia.com/

Multichannel Marketing

Multichannel marketing:Involves the blending

of communication and delivery channels that are mutually reinforcing

in attracting, retaining, and building relationships with consumers who

shop and buy in traditional intermediaries and online.

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Dual Distribution

Dual distribution: involves an arrangement whereby a firm reaches different buyers by

employing two or more different types of channels for the same

basic product.

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Dual Distribution

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Strategic Channel Alliances

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An agreement between two or more parties to pursue a set of agreed upon objectives need while remaining independent organizations.

http://www.slideshare.net/akolaa/managing-strategic-alliances-and-channel-partners

Some other definitions:

Merchant wholesalers: Independent owned business with title of goods andassumes all roles.

Full-service wholesalers: Perform all servicesGeneral-merchandise: Carry width but not depth of productsLimited-merchandise: Carry depth but not width

Some other definitions:

Merchant wholesalers: Independent owned business with title of goods andassumes all roles.

Specialty-line: Single product lineRack jobbers: Own and maintain

display racks in stores

Some definitions:

Limited-service wholesalers: Independent owned business with title of goods andspecializes in a few roles.

Cash-and-carry: Limited… whose customers pay cash and furnish their own transportation

Some definitions:

Limited-service wholesalers: Independent owned business with title of goods andspecializes in a few roles.

Truck: Limited… transport goods directly to customers

Drop shippers: Limited…is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufactureror a wholesaler, who then ships the goods directly to the customer. The majority of retailers make their profit on the difference between the wholesale and retail price or the retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.

Some definitions:

Middle agents:

Agents: Represent buyers or sellers on a permanent basis

Brokers: Represent buyers or sellers on a temporary basis

Manufacturing agents: Represent more than one sellerand offers a complete product line

Selling agents: Market a complete product line for a manufacture

Vertical Marketing Systems

Vertical marketing systems:are professionally managed and centrally coordinated marketing channels designed to achieve

channel economies andmaximum marketing impact.

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Three types of vertical marketing systems: 1) corporate, 2) contractual (most popular),

and 3) administered

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1. Corporate Systems

• Wholesaler-Sponsored Voluntary Chains

2. Contractual Systems

• Retailer-Sponsored Cooperatives

• Forward Integration• Backward Integration

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VERICAL MARKETING SYSTEMS

Contractual Systems• Franchising

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VERICAL MARKETING SYSTEMS

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VERICAL MARKETING SYSTEMS

3. Administrated Systems

A coordinated system of distribution channel organization controlled by the power and size of one member of the channel system rather than by common ownership or contractual ties.

Target Market Coverage (Density)

• Intensive Distribution

• Exclusive Distribution

• Selective Distribution

Gucci

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CHANNEL MANAGEMENTCHANNEL CHOICE CONSIDERATIONS

Intensive Distribution

Intensive distribution: is a level of distribution density whereby a firm tries to place its

products and services in as many outlets as possible.

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Exclusive Distribution

Exclusive distribution: is a level of distribution density whereby only one retailer in a

specific geographical area carries the firm’s products.

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Selective Distribution

Selective distribution: is a level of distribution density whereby a firm selects a few

retailers in a specific geographical area to carry its products.

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CHANNEL MANAGEMENT

Logistics

Supply Chain

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Two important terms

Logistics

Logistics: consists of those activities that

focus on getting the right amount of the right products to the right

place at the right time at the lowest possible cost.

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Supply Chain

A supply chain: consists of a sequence of firms that perform activities required to create and deliver a product or

service to ultimate consumers or industrial users.

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Relating logistics management and supply chain management to networks and

channels

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The automotive supply chain includes thousands of firms that provide the 5,000 or

so parts in a typical car

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• Information

• Convenience

• Variety

• Pre- or Post-Sale Service

Buyer Requirements

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CHANNEL MANAGEMENTCHANNEL CHOICE CONSIDERATIONS

Jiffy Lube and PetcoWhat buyer requirements have been satisfied?

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Profitability

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CHANNEL MANAGEMENTCHANNEL CHOICE CONSIDERATIONS

Channel Conflict

Channel conflict: arises when

one channel member believes another channel member is engaged in behavior that

prevents it from achieving its goals.

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Sources of Channel Conflict• Vertical Conflict

• Disintermediation

• Horizontal Conflict

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CHANNEL MANAGEMENTCHANNEL RELATIONSHIPS

Disintermediation

Disintermediation: involves

channel conflict that arises whena channel member bypasses another member and sells or

buys products direct.

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Supply Chain Management●The Institute for Supply Management

●“the design and management of seamless (aka supply chain integration), value-added processes across organizational boundaries to meet needs of end customers”.

●Council of Supply Chain Management Professionals (Council of Logistics Management until Dec 2004):●“integration of key business processes from end user

through original suppliers that provides products, services, and information, that add value for customers and other stakeholders”.

Channel Captain

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CHANNEL MANAGEMENTCHANNEL RELATIONSHIPS

Like a marriage!

Channel Influence• Economic Who has the power?

• Expertise

• Identification

• Legitimate Right

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CHANNEL MANAGEMENTCHANNEL RELATIONSHIPS

Legal Considerations

• Dual Distribution

• Vertical Integration

• Exclusive Dealing

• Tying Arrangements

• Refusal to Deal

• Resale Restrictions

• Full-Line Forcing

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CHANNEL MANAGEMENTCHANNEL RELATIONSHIPS

The Clayton Act and Sherman Act place legal restrictions on specific marketing

channel strategies and practices

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….SCM ObjectivesObjectives:

Value Profitability

Importance:Importance: Complexity Efficiencies Competencies

Distribution●Connection between individuals/firms that

contributes to the occurrence of an exchange

●Basic function: create customer value/add value to customer by reducing spacial separation – physical and time distance – between point of production and point of consumption

●Place and time utility

Value Addition

●Contactual efficiency●Routinization●Categorizing●Assembly/assortment●Breaking bulk/accumulating bulk●Transportation●Processing/storage●Risk reduction●Service/repairs●Reverse logistics

Distribution Design Decisions

●Level 1(governance structure): direct distribution v/s conventional v/s vertical marketing systems.●Corporate●Contractual●Administered

..design decisions: Level 2-Intensity of Distribution

Distribution Strategies

●Two fundamental distribution strategies:

●Items can be directly shipped from the supplier or manufacturer to end customer

●Use intermediate points

Direct Shipment Distribution Strategies

●Advantages:●expenses of operating a distribution center●Lead times.

●Disadvantages:●Risk-pooling effects●Manufacturer and distributor transportation costs

Intermediate Inventory Storage Point Strategies

●Strategies:

●Traditional warehousing strategy●Cross-docking strategy●Centralized pooling and transshipment strategies

Traditional Facilities

●factors●Centralized vs. Decentralized Management●Central vs. Local Facilities

●Centralized vs. Decentralized Management

Central vs. Local Facilities

●Centralized facilities ●Employ both fewer warehouses and distribution

centers●Facilities are located further from customers.

●Other factors:●Safety stock. ●Overhead. ●Economies of scale●Lead time. ●Service. ●Transportation costs.

Cross-Docking

●Popularized by Wal-Mart

●Warehouses function as inventory coordination points rather than as inventory storage points.

●Goods spend very little time in storage at the warehouse

Target Distribution Center

Transshipment

●Shipment of items between different facilities at the same level in the demand chain to meet some immediate need

●Occurs mostly at the retail level●advanced information systems●Reasonable shipping costs●Integrated supply chain

Distribution-system Performance and customer-facing capabilities

●Performance evaluation on two dimensions:●Level of customer service●Cost of providing customer service

●Capabilities●Responsiveness●efficiency

Supply Chain strategy should be aligned with Marketing Strategy

• Understand the Customer

• Understand the Supply Chain

• Harmonize the Supply Chainwith the Marketing Strategy

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1. Total Logistics Cost Concept

2. Customer Service Concept

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These must be balanced!

Supply chain managers balance five total logistics cost factors against four customer

service factors

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TRANSPORTATION MODES

Railroads

• Unit Train

• Intermodal Transportation

Piggyback orTrailer on Flat Car

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TRANSPORTATION MODES

Motor Carriers(Trucks)

Air Carriers and Express Companies

Freight Forwarders

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TRANSPORTATION MODES

Pipelines

Water Carriers

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Advantages and disadvantages of five transportation modes

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WAREHOUSING AND MATERIALS HANDLING

Storage Warehouses

Distribution Centers

Materials Handling

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Reverse Logistics

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CLOSING THE LOOP:

Reverse Logistics

Reverse logistics:is a process of reclaiming

recyclable and reusable materials, returns, and reworks from the

point of consumption or use for repair, remanufacturing, redistribution,or disposal.

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