1. Copyright © 2012 Pearson Canada Inc.11 - 1 Marketing Channels: Retailing and Wholesaling Chapter 11

2. Copyright © 2012 Pearson Canada Inc.11 - 2 1.Explain why companies use marketing channels, and describe the functions channels perform 2.Explain how channels are organized, designed, and managed 3.Define retailing and the major types of retailers, and explain the role of retailers in the distribution channel 4.Describe the major types of wholesalers and their marketing decisions 5.Discuss the nature and importance of marketing logistics and integrated supply chain management Previewing the Concepts

3. Copyright © 2012 Pearson Canada Inc.11 - 3 Supply Chain Producing and making products available to buyers requires building relationships with supply chain partners: –Upstream: Firms that supply the raw materials, components, parts, and other elements necessary to create a good –Downstream: partners that link the firm to the customer (wholesalers & retailers)

4. Copyright © 2012 Pearson Canada Inc.11 - 4 Nature and Importance of Marketing Channels Marketing (or distribution) channel: –A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business users

5. Copyright © 2012 Pearson Canada Inc.11 - 5 Marketing Channels Direct Channels: Indirect Channels:

6. Copyright © 2012 Pearson Canada Inc.11 - 6 Channel Behavior and Organization The channel will be most effective when: Channel conflict can occur: –Horizontally (e.g., retailer to retailer) –Vertically (e.g., wholesaler to retailer)

7. Copyright © 2012 Pearson Canada Inc.11 - 7 Channel Behavior and Organization Goodyear created channel conflict by selling through mass-merchant retailers:

8. Copyright © 2012 Pearson Canada Inc.11 - 8 Channel Behavior and Organization Conventional distribution channel compared to vertical marketing system:

9. Copyright © 2012 Pearson Canada Inc.11 - 9 Channel Organization Types of vertical marketing systems: –Corporate VMS –Contractual VMS –Administered VMS

10. Copyright © 2012 Pearson Canada Inc.11 - 10 Channel Behavior and Organization Horizontal marketing systems: –Two or more companies at one level join together to follow a new marketing opportunity

11. Copyright © 2012 Pearson Canada Inc.11 - 11 Distribution Intensive Exclusive Selective

12. Copyright © 2012 Pearson Canada Inc.11 - 12 Retailing –All activities involved in selling products or services directly to final consumers for their personal, non-business use

13. Copyright © 2012 Pearson Canada Inc.11 - 13 Types of Retailers Major types of retailers: –Specialty stores –Department stores –Supermarkets –Convenience stores –Discount stores –Off-price retailers –Superstores

14. Copyright © 2012 Pearson Canada Inc.11 - 14 Types of Retailers Retailers can be classified by the amount of service they offer: –Self-service retailers –Limited-service retailers –Full-service retailers

15. Copyright © 2012 Pearson Canada Inc.11 - 15 Types of Retailers Retailers can be classified by the prices they charge: –Low price retailers include: Discount stores Off-price retailers Factory outlets Warehouse clubs

16. Copyright © 2012 Pearson Canada Inc.11 - 16 Retail Trends and Developments New retail forms, but shorter retail life cycles (wheel of retailing) Slowed economy and consumer spending Growth of online retailing Retail technologies providing competitive tools

17. Copyright © 2012 Pearson Canada Inc.11 - 17 Retail Trends and Developments The wheel of retailing:

18. Copyright © 2012 Pearson Canada Inc.11 - 18 Wholesaling –All activities involved in selling goods and services to those buying for resale or business use Wholesalers add value for producers by performing one or more channel functions

19. Copyright © 2012 Pearson Canada Inc.11 - 19 Types of Wholesalers Merchant wholesaler –Drop shippers –Rack jobbers Brokers and agents

20. Copyright © 2012 Pearson Canada Inc.11 - 20 Marketing Logistics Marketing logistics (physical distribution): –Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit Involves supply chain management

21. Copyright © 2012 Pearson Canada Inc.11 - 21 Marketing Logistics Greater emphasis is placed on logistics: –gain a competitive advantage –lower costs (20% of price) –Increased product variety –information technology created distribution efficiency –environmental and sustainability efforts

22. Copyright © 2012 Pearson Canada Inc.11 - 22 Transportation as Value cost of transport / selling price 55% gravel 42%coal 38%cabbage 20%iron ore 8%processed food 6%plastic 3%electronics 1%drugs 4%factory machinery

23. Copyright © 2012 Pearson Canada Inc.11 - 23 Transport Modes truckrailwaterairpipe costhimedv lov hilo speedfastmedv slowv fastslow # locations servedv hihilohiv lo ability to handle variety of goodshi v hilov lo frequencyhilov lohimed time dependabilityhimed hi

24. Copyright © 2012 Pearson Canada Inc.11 - 24 Physical Distribution Issues “logistics” –intermodal http://www.containerhandbuch.de/chb_e/stra/index.html?/chb_e/stra/stra_01_01_00.html

25. Copyright © 2012 Pearson Canada Inc.11 - 25 Distribution “logistics” –intermodal

26. Copyright © 2012 Pearson Canada Inc.11 - 26 Integrated Logistics Management Integrated logistics management: –Emphasizes teamwork, inside the company and among the marketing channel partners, to maximize the performance of the entire distribution system Requires: –Cross-functional teamwork in the company –Building logistics partnerships –Outsourcing to third-party logistics providers