Part Six Distribution 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 available to customers when and where they want to purchase them.

Modern Distribution Management 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

Homeland Security and Supply Chain Management 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 Supply Chain 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

Collaborative Forecasting Between Sears and Michelin 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

Selecting Marketing 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 Of Market 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

Seven Myths of 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

Vertical Marketing Systems A marketing channel managed by a single channel member to achieve efficient distribution satisfying target market customers Corporate Administered Contractual

Legal Issues In Channel 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