1 Chapter 10 Marketing Channels & Supply Chain Management

2 Concept Connections Explain why companies use distribution channels and discuss the functions these channels perform. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Analyze integrated logistics, including how it may be achieved and its benefits to the company.

3 What is the Nature Of Distribution Channels? What is the Nature Of Distribution Channels? How do Channel Firms Interact and Organize to do the Work of the Channel? How do Channel Firms Interact and Organize to do the Work of the Channel? Issues Concerning Distribution Channels What Problems do Companies Face in Designing and Managing Their Channels? What Problems do Companies Face in Designing and Managing Their Channels? What Role Does Physical Distribution Play in Attracting and Satisfying Customers? What Role Does Physical Distribution Play in Attracting and Satisfying Customers?

4 What’s a Distribution Channel (PLACE) A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

5 Distribution Channel Consumers Retailer Distributor Manufacturer

6 Why are Marketing Intermediaries Used? Results from their greater efficiency in making goods available to target markets. Offer the firm more than it can achieve on it’s own: Contacts, Experience, Specialization. Purpose: match supply from producers to demand from consumers.

7 How a Marketing Intermediary Reduces the Number of Channel Transactions

8 M M W W J J R R C C M M W W R R C C M M R R C C M M C C Channel 1 Channel 2 Channel 3 Channel 4 Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer. Number of Channel Levels Direct Channel Indirect Channel

9 Channel Behavior & Conflict Will be effective when Each member is assigned tasks it can do best. All members cooperate to attain overall channel goals and satisfy the target market. Conflict occurs: Horizontal Conflict occurs among firms at the same level of the channel, i.e retailer to retailer. Vertical Conflict occurs between different levels of the same channel, i.e. wholesaler to retailer.

10 Conventional Marketing Channel Vs a Vertical Marketing System Conventional Marketing Channel Vertical Marketing System Manufacturer Retailer Manufacturer Retailer Wholesaler Manufacturer Wholesaler Retailer Consumer

11 Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreements Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members Degree of Direct Control Types of Vertical Marketing Systems

12 Changing Channel Organization A Major Trend is Toward Disintermediation Which Means Producers are Bypassing Intermediaries and Going Directly to Final Buyers That New Types of Channel Intermediaries are Emerging to Displace Traditional Ones.

13 Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Selective Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives Designing International Distribution Channels Channel Design Decisions

14 Selecting Channel Members Motivating Channel Members Evaluating Channel Members FEEDBACK Channel Management Decisions

15 Nature and Importance of Marketing Logistics Involves getting the right product to the right customers in the right place at the right time. Companies place greater emphasis on logistics because: customer service and satisfaction have become the cornerstone of marketing strategy. logistics is a major cost element for most companies.. Improvements in information technology has created opportunities for major gains in distribution efficiency.

16 Goals of the Logistics System Lower Distribution Costs; Lower Customer Service Levels Higher Distribution Costs; Higher Customer Service Levels Goal: To Provide a Targeted Level of Customer Service at the Least Cost.

17 Inventory When to order How much to order Just-in-time Inventory When to order How much to order Just-in-time Costs Minimize Costs of Attaining Logistics Objectives Costs Minimize Costs of Attaining Logistics Objectives Warehousing Storage Distribution Automated Warehousing Storage Distribution Automated Order Processing Received Processed Shipped Order Processing Received Processed Shipped Logistics Functions Transportation Rail, Truck, Water, Pipeline, Air, Intermodal Major Logistics Functions

18 Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value, non perishable goods, slowest form Water Low cost for shipping bulky, low-value, non perishable goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or distance markets have to be reached Air High cost, ideal when speed is needed or distance markets have to be reached Transportation Modes

19 1. Speed 2. Dependability 3. Availability 4. Costs 5. Others Checklist for Choosing Transportation Modes Choosing Transportation Modes

20 Review of Concept Connections Explain why companies use distribution channels and discuss the functions these channels perform. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Analyze integrated logistics, including how it may be achieved and its benefits to the company.