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Marketing Channels and Supply Chain Management

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Definition

Value Delivery Network

The network made up of the

company, suppliers, distributors,

and ultimately customers who

“partner” with each other to

improve the performance of the

entire system.

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Channel choices affect

other decisions in the

marketing mix

A strong distribution

system can be a

competitive advantage

Channel decisions involve

long-term commitments to

other firms

Nature & Importance of Marketing Channels

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Figure 13-1:

How Channel Members Add Value

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How Channel Members Add Value

Intermediaries Require fewer contacts to

move the product to the final purchaser.

Help match product assortment demand with supply.

Help bridge major time, place, and possession gaps

Nature & Importance of Marketing Channels

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Nature & Importance of Marketing Channels

Key Functions Performed by Channel Members

Information

Promotion

Contact

Matching

Negotiation

Physical

Distribution

Financing

Risk taking

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Figure 13-2a:

Consumer Marketing Channels

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Number of Channel Levels

The number of intermediary levels indicates the length of a marketing channel.

Direct Channels

Indirect Channels

Producers lose more control and face greater channel complexity as additional channel levels are added.

Nature & Importance of Marketing Channels

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Nature & Importance of Marketing Channels

Channel Members Are Connected Via A Variety of Flows

Physical

Flow

Payment

Flow

Information

Flow

Promotion

Flow

Flow of Ownership

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Channel Conflict

Occurs when channel members disagree on roles, activities, or rewards.

Types of Conflict:

Horizontal conflict: occurs among firms at the same channel level

Vertical conflict: occurs among firms at different channel levels

Channel Behavior and Organization

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Figure 13-3:

Conventional Versus Vertical Marketing System

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Figure 13-4:

Multichannel Distribution System

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Multichannel

Distribution Systems

Also called hybrid

marketing channels

Occurs when a firm uses

two or more marketing

channels

Hybrid marketing has

many advantages

Channel Behavior and Organization

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Step 1: Analyzing

Consumer Needs

Cost and feasibility

of meeting needs

must be considered

Channel Design Decisions

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Step 2:

Setting Channel Objectives

Set channel objectives in terms of

targeted level of customer service

Many factors influence channel

objectives

Channel Design Decisions

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Step 3:

Identifying Major Alternatives

Channel Design Decisions

Types of Intermediaries

Company sales force

Manufacturer’s agency

Industrial distributors

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Step 3:

Identifying Major Alternatives

Number of marketing intermediaries

Intensive distribution

Selective distribution

Exclusive distribution

Responsibilities of channel members

Channel Design Decisions

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Step 4: Evaluating

Major Alternatives

Economic criteria

Sales, costs,

profitability

Control issues

Adaptive criteria

Channel Design Decisions

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Designing International

Distribution Channels

Global marketers usually

adapt their channel strategies

to structures that exist within

foreign countries

Key challenges:

Channels may be complex

or hard to penetrate

Channels may be

scattered, inefficient, or

totally lacking

Channel Design Decisions

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Selecting Channel

Members

Identify characteristics that

distinguish the best channel

members

Managing and Motivating

Channel Members

Partner relationship

management (PRM) is key

Channel Management Decisions

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Evaluating Channel

Members

Performance

should be checked

against standards

Channel members

should be rewarded

or replaced as

dictated by

performance

Channel Management Decisions

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Figure 13-5:

Supply Chain Management

Independent RetaIlers 99.8% of overall enterprises are small and medium sized

enterprises; approx. 40% of them has activities in retailingindustry in Turkey.

In the World, account for one-third of total store sales

70% of independents operated by owners and their families

Why so many? Ease of entry

From the local florist to the hardware store to the funky boutique

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Chaın RetaılersOperate multiple outlets under common ownership

Engage in some level of centralized or coordinated purchasing and decision making

In the U.S., there are roughly 110,000 retail chains operating about 900,000 establishments

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Louıs Vuitton – A Powerhouse of Upscale Retailing

The company operates in 50 countries with more than 460 stores worldwide

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Store-Based Retail Strategy Mixes

Food-Oriented

Convenience store

Conventional supermarket

Food-based superstore

Combination store

Box (limited-line) store

Warehouse store

General Merchandise

Specialty store

Traditional department

Full-line discount store

Variety store

Off-price chain

Factory outlet

Membership club

Flea market

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Box store cases: A101-bımItems are dısplayed ın cut cases

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TYPE OF SPECIALTY STORE: CATEGORY KILLERS

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MEMBERSHIP CLUB: METROGerman based, since 1964

750 wholesale stores in 25 countries; SALES: $ 29.7 bn

(2015)

In Turkey, since 1990

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Flea Market Strategy Mix

Street selling

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Retailer Strategy Mix

A strategy mix is the firm’s particular combination of:

store location

operating procedures

goods/services offered

pricing tactics

store atmosphere

customer services

promotional methods

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