Marketing Channels and Supply-Chain Management A group of individuals and organizations directing products from producers to customers Supply Chain Management Long term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies in the marketing channel to satisfy customers Copyright © Houghton Mifflin Company. All rights reserved.

Marketing Channels Consist of Intermediaries Marketing Intermediary An intermediary linking producers to other intermediaries or to ultimate consumers through contractual arrangements or through the purchase and resale of products Direct Channel Producer Customer Indirect Channel Producer Customer Intermediary Copyright © Houghton Mifflin Company. All rights reserved.

Marketing Channels Form a Supply Chain Supply-Chain Management Long-term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers Optimizes costs throughout the whole channel for efficiency and service Includes all entities that facilitate product distribution and benefit from cooperative efforts Arises from the need to achieve a more competitive position Copyright © Houghton Mifflin Company. All rights reserved.

Marketing Channels Create Utility Time Utility The product is available when the customer wants it (newspaper delivery). Place Utility The product is available in locations where customers wish to purchase it (convenience stores). Possession Utility The customer has access to the product to use or to store for future use (raincoats). Form Utility The product is assembled, prepared or otherwise refined to suit customer needs. Copyright © Houghton Mifflin Company. All rights reserved.

Marketing Channels Facilitate Exchange Efficiencies Reduce the overall costs of market exchanges Reduce search costs for customers Maintain order in the marketplace Copyright © Houghton Mifflin Company. All rights reserved.

Efficiency in Exchanges Provided by an Intermediary FIGURE 14.1 Copyright © Houghton Mifflin Company. All rights reserved.

Typical Marketing Channels for Consumer Products FIGURE 14.2 Copyright © Houghton Mifflin Company. All rights reserved.

Typical Marketing Channels for Business Products FIGURE 14.3 Copyright © Houghton Mifflin Company. All rights reserved.

Distribution Intermediaries Industrial Distributor An independent business that takes title to business products and carries inventories Manufacturers’ Agent An independent businessperson who sells, on commission, the complementary products of several producers; does not takes title to or hold inventories. Copyright © Houghton Mifflin Company. All rights reserved.

Multiple Marketing Channels and Channel Alliances Dual Distribution The use of two or more channels to distribute the same product to the same target market Strategic Channel Alliance An agreement whereby the products of one organization are distributed through the marketing channels of another Copyright © Houghton Mifflin Company. All rights reserved.

Channel Leadership, Cooperation, and Conflict Channel Captain A dominant member (producer, wholesaler, or retailer) of a marketing channel or supply chain Establishes channel policies and coordinates development of the marketing mix Channel Power The ability of one channel member to influence another member’s goal achievement Copyright © Houghton Mifflin Company. All rights reserved.

Channel Conflict Sources of Channel Conflict Disagreements arising among channel members Communication difficulties jeopardizing coordination Increased use of multiple distribution channels by manufacturers creating conflicts with distributors and retailers Intermediaries diversifying into and offering competing products Producers attempting to circumvent intermediaries and dealing directly with retailers Copyright © Houghton Mifflin Company. All rights reserved.

Channel Cooperation Improving Channel Cooperation Unifying channel to maintain market order Agreeing to direct efforts toward common objectives Precisely defining each channel member’s tasks Copyright © Houghton Mifflin Company. All rights reserved.

Channel Integration Vertical Channel Integration Two or more stages of the marketing channel are under one management. Channel members coordinate their efforts to reach a target market. Vertical Marketing System (VMS) A marketing channel managed by a single channel member to achieve efficient, low-cost distribution Corporate VMS Administered VMS Contractual VMS Copyright © Houghton Mifflin Company. All rights reserved.

Channel Integration (cont’d) Horizontal Integration Organizations at the same level of operation are combined under one management. Copyright © Houghton Mifflin Company. All rights reserved.

Intensity of Market Coverage Intensive Distribution Uses all available outlets to distribute a product. Appropriate for convenience products with high replacement rates Provides availability and reduces search time Copyright © Houghton Mifflin Company. All rights reserved.

Intensity of Market Coverage (cont’d) Selective Distribution Uses only some available outlets to distribute a product Appropriate for shopping products and durable goods with low replacement rates Desirable when special effort— such as customer service— is important Tuscaloosa’s Only Authorized Dealer Copyright © Houghton Mifflin Company. All rights reserved.

Intensity of Market Coverage (cont’d) Exclusive Distribution Uses a single outlet in a fairly large geographic area to distribute a product Appropriate for expensive, high-quality products purchased infrequently Copyright © Houghton Mifflin Company. All rights reserved.