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LO1 Explain what is meant by a marketing channel of distribution and why intermediaries are needed. Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems. LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO: 12-2

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO: LO3 Describe factors that marketing executives consider when selecting and managing a marketing channel. Explain what supply chain and logistics management are and how they relate to marketing strategy. LO4 12-3

CALLAWAY GOLF: DESIGNING AND DELIVERING THE GOODS FOR GREAT GOLF 12-4

FIGURE 12-1 FIGURE 12-1 The variety of terms used for marketing intermediaries that vary in specificity and use in consumer and business markets 12-5

NATURE AND IMPORTANCE OF MARKETING CHANNELS THE VALUE CREATED BY INTERMEDIARIES LO1  Marketing Channel Marketing Channel  Functions Performed by Intermediaries Transactional Function Logistical Function Facilitating Function  Utilities Received by Consumers 12-6

FIGURE 12-2 FIGURE 12-2 Marketing channel intermediaries perform three functions, each consisting of different activities 12-7

CHANNEL STRUCTURE & ORGANIZATION MARKETING CHANNELS FOR CONSUMER PRODUCTS AND SERVICES LO2  Direct Channel  Indirect Channel Retailers Wholesalers  Retailers Agents  Wholesalers  Retailers 12-8

FIGURE 12-3 FIGURE 12-3 Common marketing channels for consumer products and services by the kind and number of intermediaries 12-9

CHANNEL STRUCTURE & ORGANIZATION MARKETING CHANNELS FOR BUSINESS PRODUCTS AND SERVICES LO2  Direct Channel  Indirect Channel Industrial Distributor Agents Agents  Industrial Distributors 12-10

FIGURE 12-4 FIGURE 12-4 Common marketing channels for business products and services by the kind and number of intermediaries 12-11

CHANNEL STRUCTURE & ORGANIZATION ELECTRONIC & DIRECT MARKETING CHANNELS; MULTICHANNEL MARKETING LO2  Electronic Marketing Channels  Direct Marketing Channels  Multichannel Marketing Multichannel Marketing 12-12

FIGURE 12-5 FIGURE 12-5 Consumer electronic marketing channels are similar to those for consumer products and services 12-13

CHANNEL STRUCTURE & ORGANIZATION DUAL DISTRIBUTION & STRATEGIC CHANNEL ALLIANCES LO2  Dual Distribution Dual Distribution  Strategic Channel Alliances Honey Nut Cheerios Ad 12-14

MARKETING MATTERS Nestlé and General Mills— Cereal Partners Worldwide LO

FIGURE 12-6 FIGURE 12-6 Three types of vertical marketing systems: corporate, contractual (most popular), and administered 12-16

CHANNEL STRUCTURE & ORGANIZATION VERICAL MARKETING SYSTEMS LO2  Vertical Marketing Systems Vertical Marketing Systems  Corporate Systems Wholesaler-Sponsored Voluntary Chains  Contractual Systems Retailer-Sponsored Cooperatives Forward Integration Backward Integration 12-17

CHANNEL STRUCTURE & ORGANIZATION VERICAL MARKETING SYSTEMS LO2  Contractual Systems Franchising  Manufacturer-Sponsored Retail Franchises  Manufacturer-Sponsored Wholesale Franchises  Service-Sponsored Retail Franchises  Service-Sponsored Franchises  Administered Systems 12-18

CHANNEL CHOICE AND MANAGEMENT CHANNEL CHOICE CONSIDERATIONS LO3  Target Market Coverage (Density) Intensive Distribution Exclusive Distribution Selective Distribution Gucci 12-19

CHANNEL CHOICE AND MANAGEMENT CHANNEL CHOICE CONSIDERATIONS LO3 Information Convenience Variety Pre- or Post-Sale Service  Buyer Requirements  Profitability 12-20

Jiffy Lube and Petco What buyer requirements have been satisfied? LO

USING MARKETING DASHBOARDS Channel Sales and Profit at Charlesburg Furniture LO

CHANNEL CHOICE AND MANAGEMENT CHANNEL RELATIONSHIPS LO3  Sources of Channel Conflict Sources of Channel Conflict Vertical Conflict Disintermediation Horizontal Conflict 12-23

CHANNEL CHOICE AND MANAGEMENT CHANNEL RELATIONSHIPS LO3  Channel Influence Economic Expertise Identification Legitimate Right  Channel Captain 12-24

CHANNEL CHOICE AND MANAGEMENT CHANNEL RELATIONSHIPS LO4  Legal Considerations Dual Distribution Vertical Integration Exclusive Dealing Tying Arrangements Refusal to Deal Resale Restrictions Full-Line Forcing 12-25

FIGURE 12-A FIGURE 12-A The Clayton Act and Sherman Act place legal restrictions on specific marketing channel strategies and practices 12-26

LOGISTICS & SUPPLY CHAIN MANAGEMENT KEY CONCEPTS LO4  Logistics Logistics  Logistics Management Customer Requirements Customer Service  Supply Chain Supply Chain  Supply Chain Management Cost-Effective Flow The Automotive Supply Chain 12-27

FIGURE 12-7 FIGURE 12-7 Relating logistics management and supply chain management to supplier networks and marketing channels 12-28

FIGURE 12-8 FIGURE 12-8 The automotive supply chain includes thousands of firms that provide the 5,000 or so parts in a typical car 12-29

 Aligning a Supply Chain with Marketing Strategy Understand the Customer Understand the Supply Chain Harmonize the Supply Chain with the Marketing Strategy LOGISTICS & SUPPLY CHAIN MANAGEMENT SUPPLY CHAIN MGMT & MKT STRATEGY LO

MARKETING MATTERS IBM’s Integrated Supply Chain— Delivering a Total Solution for Its Customers LO

LOGISTICS & SUPPLY CHAIN MANAGEMENT SUPPLY CHAIN MGMT & MKT STRATEGY LO4  Dell: A Responsive Supply Chain  Wal-Mart: An Efficient Supply Chain Cross-docking 12-32

TWO CONCEPTS OF LOGISTICS MANAGEMENT IN A SUPPLY CHAIN LO4  Total Logistics Cost Concept Total Logistics Cost Concept  Customer Service Concept Customer Service Concept 12-33

FIGURE 12-9 FIGURE 12-9 Supply chain managers balance five total logistics cost factors against four customer service factors 12-34

KEY FUNCTIONS IN A SUPPLY CHAIN CUSTOMER SERVICE FACTORS LO4  Time Lead Time  Order Cycle Time  Replenishment Time Quick Response Efficient Consumer Response 12-35

 Dependability  Communication  Convenience Vendor-Managed Inventory (VMI) Vendor-Managed Inventory (VMI) KEY FUNCTIONS IN A SUPPLY CHAIN CUSTOMER SERVICE FACTORS LO

KEY FUNCTIONS IN A SUPPLY CHAIN TOTAL LOGISTICS COST FACTORS LO4  Third-Party Logistics Providers Cost  Transportation Mode Service Criteria Dependability Accessibility Time Capability Frequency 12-37

FIGURE 12-B FIGURE 12-B Advantages and disadvantages of five transportation modes 12-38

KEY FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION MODES LO4  Railroads Unit Train Intermodal Transportation  Piggyback or Trailer on Flat Car  Containers 12-39

KEY FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION MODES LO4  Motor Carriers (Trucks)  Air Carriers and Express Companies  Freight Forwarders 12-40

KEY FUNCTIONS IN A SUPPLY CHAIN TRANSPORTATION MODES LO4  Pipelines  Water Carriers 12-41

KEY FUNCTIONS IN A SUPPLY CHAIN WAREHOUSING AND MATERIALS HANDLING LO4  Storage Warehouses  Distribution Centers  Materials Handling 12-42

KEY FUNCTIONS IN A SUPPLY CHAIN ORDER PROCESSING LO4  Stages of Order Processing  Electronic Data Interchanges (EDI)  Extranet 12-43

KEY FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Reasons for Inventory Capital Costs Inventory Service Costs  Inventory Costs Storage Costs Risk Costs 12-44

KEY FUNCTIONS IN A SUPPLY CHAIN INVENTORY MANAGEMENT LO4  Supply Chain Inventory Strategies Just-in-Time (JIT) Concept 12-45

CLOSING THE LOOP: REVERSE LOGISTICS LO4  Reverse Logistics Reverse Logistics UPS Video 12-46

MAKING RESPONSIBLE DECISIONS Reverse Logistics and Green Marketing Go Together at Hewlett-Packard: Recycling e-Waste LO