Principles of Marketing - UNBSJ BA 2303 Principles of Marketing - UNBSJ Managing Marketing Channels and Supply Chains Instructor – Terry Conrod

Learning Objectives BA 2303 Explain what is meant by a marketing channel of distribution and why intermediaries are often needed. Distinguish among traditional marketing channels, electronic marketing channels, multichannel distribution, and different types of vertical marketing systems. Describe factors considered by marketing executives when selecting and managing a marketing channel. Recognize how conflict, co-operation, and legal considerations affect marketing channels relationships. Recognize the relationship among marketing channels, logistics, and supply chain management, and how a company’s supply chain aligns with its marketing strategy. Identify the major logistics costs and customer service factors that managers consider when making supply chain decisions. Describe the key logistics functions in a supply chain.

NATURE AND IMPORTANCE OF MARKETING CHANNELS BA 2303 NATURE AND IMPORTANCE OF MARKETING CHANNELS Defining Marketing Channels of Distribution Marketing Channel Value Created by Intermediaries Functions Performed by Intermediaries Consumer Benefits from Intermediaries

Terms used for marketing intermediaries BA 2303

How intermediaries minimize transactions BA 2303

Marketing channel functions performed by intermediaries BA 2303

What is meant by a marketing channel? BA 2303 Concept Check What is meant by a marketing channel? Answer: A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

What are the three basic functions performed by intermediaries? Concept Check What are the three basic functions performed by intermediaries? Answer: Intermediaries perform three marketing channel functions: (1) Transactional function, (2) Logistical function, and (3) Facilitating function

CHANNEL STRUCTURE AND ORGANIZATION BA 2303 CHANNEL STRUCTURE AND ORGANIZATION Marketing Channels for Consumer Goods and Services Direct channel Indirect channels Marketing Channels for Business Goods and Services Business distributor Electronic Marketing Channels Direct Marketing Channels Multiple Channels and Strategic Alliances Multichannel distribution Strategic channel alliances

Common marketing channels for consumer goods and services BA 2303 Common marketing channels for consumer goods and services

Common marketing channels for business goods and services BA 2303 Common marketing channels for business goods and services

Representative electronic marketing channels BA 2303

CHANNEL STRUCTURE AND ORGANIZATION BA 2303 CHANNEL STRUCTURE AND ORGANIZATION A Closer Look at Channel Intermediaries Merchant Wholesalers Agents and Brokers Manufacturer’s agents Selling agents Brokers Manufacturer’s Branches and Offices

CHANNEL STRUCTURE AND ORGANIZATION BA 2303 CHANNEL STRUCTURE AND ORGANIZATION Vertical Marketing Systems and Channel Partnerships Corporate Systems Contractual Systems Franchising Administered Systems

Types of vertical marketing systems BA 2303

What is the difference between a direct and an indirect channel? BA 2303 Concept Check What is the difference between a direct and an indirect channel? Answer: A direct channel is when a producer and ultimate consumers deal directly with each other. An indirect channel occurs when intermediaries are inserted between the producer and consumers, and numerous channel functions are performed.

BA 2303 Concept Check What is the principal distinction between a corporate vertical marketing system and an administered vertical marketing system? Answer: A corporate vertical marketing system is the single ownership of a combination of successive stages of production and distribution. Under an administered vertical marketing system, co-ordination is achieved at successive stages of product and distribution by the size and influence of one channel member rather than through ownership.

CHANNEL CHOICE AND MANAGEMENT BA 2303 CHANNEL CHOICE AND MANAGEMENT Factors Affecting Channel Choice and Management Environmental Factors Consumer Factors Product Factors Company Factors

CHANNEL CHOICE AND MANAGEMENT BA 2303 CHANNEL CHOICE AND MANAGEMENT Channel Design Considerations Target Market Coverage Satisfying Buyer Requirements Profitability Global Dimensions of Marketing Channels

CHANNEL CHOICE AND MANAGEMENT BA 2303 CHANNEL CHOICE AND MANAGEMENT Channel Relationships: Conflict, Co-operation, and Law Conflict in Marketing Channels Disintermediation Co-operation in Marketing Channels Channel captain Legal Considerations

What are the three degrees of distribution density? BA 2303 Concept Check What are the three degrees of distribution density? Answer: The three degrees of distribution density (or target market coverage) are: (1) Intensive distribution, (2) Exclusive distribution, and (3) Selective distribution

BA 2303 Concept Check What are the three questions marketing executives consider when choosing a marketing channel and intermediaries? 1. Which channel and intermediaries will provide the best coverage of the target market? 2. Which channel and intermediaries will best satisfy the buying requirements of the target markets? 3. Which channel and intermediaries will be the most profitable?

What is meant by “exclusive dealing”? BA 2303 Concept Check What is meant by “exclusive dealing”? Answer: Exclusive dealing exists when a supplier requires channel members to sell only its products or restricts distributors from selling directly competitive products.

LOGISTICS AND SUPPLY CHAIN MANAGEMENT BA 2303 LOGISTICS AND SUPPLY CHAIN MANAGEMENT Logistics Logistics management Supply chain Supply chain management

Logistics management and supply chain management BA 2303 Logistics management and supply chain management © 2008 McGraw-Hill Ryerson Ltd. All rights reserved.

LOGISTICS AND SUPPLY CHAIN MANAGEMENT BA 2303 LOGISTICS AND SUPPLY CHAIN MANAGEMENT Sourcing, Assembling, and Delivering a New Car: The Automotive Supply Chain The automotive supply chain

LOGISTICS AND SUPPLY CHAIN MANAGEMENT BA 2303 LOGISTICS AND SUPPLY CHAIN MANAGEMENT Supply Chain Management and Marketing Strategy Aligning a Supply Chain with Marketing Strategy Understand the customer Understand the supply chain Harmonize the supply chain with the marketing strategy

BA 2303 Concept Check What is the principal difference between a marketing channel and a supply chain? Answer: A supply chain is a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users. A marketing channel are people or firms involved in the process of marking a product or service available for use or consumption by consumers or industrial users.

What three steps does the choice of a supply chain involve? BA 2303 Concept Check What three steps does the choice of a supply chain involve? Answer: (1) Understand the customer; (2) Understand the supply chain, and (3) Harmonize the supply chain with the marketing strategy.

INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN BA 2303 INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN Information’s Role in Supply Chain Responsiveness and Efficiency Electronic data interchanges (EDI) Enterprise Resource Planning (ERP) Total Logistics Cost Concept

INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN BA 2303 INFORMATION AND LOGISTICS MANAGEMENT OBJECTIVE IN A SUPPLY CHAIN Customer Service Concept Time Dependability Communication Convenience

© 2008 McGraw-Hill Ryerson Ltd. All rights reserved. BA 2303 Supply chain managers balance total logistics cost factors against customer service factors © 2008 McGraw-Hill Ryerson Ltd. All rights reserved.

minimize logistics costs while delivering maximum customer service. BA 2303 Concept Check The objective of information and logistics management in a supply chain is to: Answer: minimize logistics costs while delivering maximum customer service.

BA 2303 Concept Check How does consumer demand information increase supply chain responsiveness and efficiency? Answer: Continuing advances in information technology make it possible to track logistics activities and customer service variables and manage them for efficiency and responsiveness.

KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN BA 2303 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Third-party logistics providers Transportation Warehousing and Material Handling Order Processing

Advantages and disadvantages of five modes of transportation BA 2303 Advantages and disadvantages of five modes of transportation © 2008 McGraw-Hill Ryerson Ltd. All rights reserved.

KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN BA 2303 KEY LOGISTICS FUNCTIONS IN A SUPPLY CHAIN Inventory Management Reasons for Inventory Inventory Costs Supply Chain Inventory Strategies Just-in-time (JIT) concept Vendor-managed inventory (VMI) Closing the Loop: Reverse Logistics

What are the basic trade-offs between the modes of transportation? Concept Check What are the basic trade-offs between the modes of transportation? Answer: Some relative advantages and disadvantages among the different modes of transportation: (1) Rail - full capability, extensive routes, some damage problems, slow, (2) Truck - Complete pickup and delivery, fast, size and weight restrictions, weather sensitive, (3) Air - Low damage, frequent departures, high cost, limited capabilities, (4) Pipeline - Very reliable, frequent departures, limited accessibility, slow, and (5) Water - Low cost, huge capacities, limited routes and schedules, weather sensitive

BA 2303 Concept Check What types of inventory should use storage warehouses and which type should use distribution centres? Answer: Storage warehouses are often used for the aging of products or in storing household goods. In the meanwhile, distribution centres allow firms to hold their stock in decentralized locations. Paint companies like to use them, as do manufacturer sales offices and order processing centres.

What are the strengths and weaknesses of a just-in- time system? BA 2303 Concept Check What are the strengths and weaknesses of a just-in- time system? Answer: Strengths of a just-in-time (JIT) system are: (1) Low inventories and (2) Fast, on-time delivery. Weaknesses of JIT: (1) Relies on accurate demand forecasting and (2) Dependence on computerized system

BA 2303 Marketing Channel Individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

BA 2303 Direct Channel A marketing channel where a producer and ultimate consumer deal directly with each other.

BA 2303 Indirect Channels A marketing channel where intermediaries are inserted between the producer and consumers and perform numerous channel functions.

Electronic Marketing Channels BA 2303 Electronic Marketing Channels Employ the Internet to make goods and services available for consumption or sue by consumers or industrial buyers.

Direct Marketing Channels BA 2303 Direct Marketing Channels Allow consumers to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson.

Strategic Channel Alliances BA 2303 Strategic Channel Alliances A practice whereby one firm’s marketing channel is used to sell another firm’s products.

BA 2303 Merchant Wholesalers Independently owned firms that take title to the merchandise they handle.

Manufacturer’s Agents BA 2303 Manufacturer’s Agents Work for several producers and carry non- competitive, complementary merchandise in an exclusive territory.

BA 2303 Selling Agents Represents a single producer and is responsible for the entire marketing function of that product.

BA 2303 Brokers Independent firms or individuals whose principal function is to bring buyers and sellers together to make sales.

Vertical Marketing Systems BA 2303 Vertical Marketing Systems Professionally managed and centrally co-ordinated marketing channels designed to achieve channel economies and maximum marketing impact.

BA 2303 Franchising Contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchise to operate a certain type of business under an established name and according to specific rules.

BA 2303 Channel Conflict Arises when one channel member believes another channel member is engaged in behaviour that prevents it from meeting its goals.

BA 2303 Disintermediation Channel conflict that arises when a channel member bypasses another member and sells or buys products direct.

BA 2303 Business Distributor Performs a variety of marketing channel functions, including selling, stocking, delivering a full product assortment, and financing.

BA 2303 Customer Service The ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience.

Just-in-Time (JIT) Concept BA 2303 Just-in-Time (JIT) Concept An inventory supply system that operates with very low inventories and requires fast, on-time delivery.

BA 2303 Logistics Management The practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

BA 2303 Materials Handling Moving goods over short distances into, within, and out of warehouses and manufacturing plants.

Multichannel Distribution BA 2303 Multichannel Distribution An arrangement whereby a firm reaches buyers by employing two or more different types of marketing channels.

BA 2303 Reverse Logistics A process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution, or disposal.

BA 2303 Supply Chain A sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users.

Supply Chain Management BA 2303 Supply Chain Management The integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers.

BA 2303 Total Logistics Cost Expenses associated with transportation, materials handling and warehousing, inventory, stockouts, order processing, and return goods handling.

Vendor-Managed Inventory BA 2303 Vendor-Managed Inventory An inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.