1. Chapter 13: Marketing Channels 1 Copyright Cengage Learning 2013 All Rights Reserved

2. Marketing Channels A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. 2 Copyright Cengage Learning 2013 All Rights Reserved

3. Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency 3Copyright Cengage Learning 2013 All Rights Reserved

4. Overcoming Discrepancies Discrepancy of Quantity Discrepancy of Quantity Discrepancy of Assortment Discrepancy of Assortment The difference between the amount of product produced and the amount an end user wants to buy. The difference between the amount of product produced and the amount an end user wants to buy. The lack of all the items a customer needs to receive full satisfaction from a product or products. The lack of all the items a customer needs to receive full satisfaction from a product or products. 4Copyright Cengage Learning 2013 All Rights Reserved

5. Overcoming Discrepancies Temporal Discrepancy Temporal Discrepancy Spatial Discrepancy Spatial Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets. The difference between the location of a producer and the location of widely scattered markets. 5Copyright Cengage Learning 2013 All Rights Reserved

6. Providing Contact Efficiency 6 Copyright Cengage Learning 2013 All Rights Reserved

7. Channel Intermediaries Retailer A channel intermediary that sells mainly to customers. A channel intermediary that sells mainly to customers. Merchant Wholesaler Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product from producer to end user by representing retailers, wholesalers, or manufacturers. 7Copyright Cengage Learning 2013 All Rights Reserved

8. Channel Intermediaries Retailers Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods 8Copyright Cengage Learning 2013 All Rights Reserved

9. Channel Functions Performed by Intermediaries Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions Logistical Functions 9 Copyright Cengage Learning 2013 All Rights Reserved

10. Channels for Consumer Products Direct Channel - A distribution channel in which producers sell directly to consumers. 10Copyright Cengage Learning 2013 All Rights Reserved

11. Producer Consumers Retailers Wholesalers Agents or BrokersWholesalerChannelRetailerChannelDirectChannelAgent/BrokerChannel Channels for Consumer Products 11 Copyright Cengage Learning 2013 All Rights Reserved

12. Channels for Business Products Producer Industrial User DirectChannel Producer Govt. BuyerDirectChannel Producer Industrial User Industrial Distributor Agents or Brokers Agents or BrokersAgent/BrokerChannel Industrial Distributor Agent/Broker Industrial Channel 12 Copyright Cengage Learning 2013 All Rights Reserved

13. Levels of Distribution Intensity Intensive Achieve mass market selling. Convenience goods. Many Selective Exclusive Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment. Several One Intensity Level Objective Number of Intermediaries 13Copyright Cengage Learning 2013 All Rights Reserved

14. Managing Channel Relationships Partnering Conflict Leadership Control Power 14Copyright Cengage Learning 2013 All Rights Reserved

15. Channel Power, Control, and Leadership Channel Power Channel Power The capacity of a particular marketing channel member to control or influence the behavior of other channel members The capacity of a particular marketing channel member to control or influence the behavior of other channel members Channel Control Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior Channel Leader (channel captain) Channel Leader (channel captain) A member of a marketing channel that exercises authority/power over the activities of other members A member of a marketing channel that exercises authority/power over the activities of other members 15Copyright Cengage Learning 2013 All Rights Reserved

16. Channel Conflict and Partnering Channel Conflict – A clash of goals and methods between distribution channel members. Channel Partnering (Channel Cooperation) – The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. 16Copyright Cengage Learning 2013 All Rights Reserved

17. Supply Chain Management Chapter 14 17

18. Definition of Supply Chain Management Supply Chain Management refers to the effort to coordinate suppliers, manufacturers, warehouses, stores, and transportation so that the merchandise the customer wants is produced in the right quantities and sent to the right locations at the time the customer wants it. 18

19. Discussion A supply chain is the stream of processes of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. Managing the chain of events in this process is what is known as supply chain management. The design and management of seamless, value- added processes across organizational boundaries to meet the real needs of the end customer (Institute for Supply Management) 19

20. Supply Chain Management Supply Chain Management falls under one of the 4 P’s, Place. It explains the detailed distribution of products and how they flow between channel members 20

21. Supply Chain - Discussion A supply chain consists of the flow of products and services from: –Raw materials manufacturers –Component and intermediate manufacturers –Final product manufacturers –Wholesalers and distributors and –Retailers Connected by transportation and storage activities, and Integrated through information, planning, and integration activities

22. Supply Chain – Discussion (cont) Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down. In addition, key to the success of a supply chain is the speed in which these activities can be accomplished and the realization that customer needs and customer satisfaction are the very reasons for the network. Reduced inventories, lower operating costs, product availability and customer satisfaction are all benefits which grow out of effective supply chain management. 22

23. General Supply Chain Model

24. Elements of Supply Chain There are six key elements to a supply chain: –Production –Supply –Inventory –Location –Transportation –Information 24

25. Supply Chain, Marketing Channels, and Logistics are Related Logistics management: The integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, inventory, and finished goods from origin to consumption This is the element of supply chain management that concentrates on the movement and control of physical products Marketing Channel: The movement of goods from the point of production to the point of consumption, consisting of all the institutions and marketing activities in the marketing process Because supply chain management takes a systemwide approach to coordinating the flow of merchandise, it incorporates both of the above 25

26. Supply Chains add Value Each participant in a supply chain adds value to the product Supplier provisions parts and materials The manufacturer assembles the product, and then documents, packages, and ships the order Agents or wholesalers may be used to facilitate the flow of products among channel members Retailer stores the product, educates consumers about product features through advertisements or personal selling, and might even deliver and install the product (if needed) Transportation companies ship the product to and from each channel participant 26

27. Designing the Supply Chain Intensive Distribution –Designed to get products into as many outlets as possible. The more exposure it gets, the more it sells. –Typical for cheap convenience products, such as soda, snack foods, etc. Exclusive Distribution –Distributes products to only a very few select retailers –Assures that customers can find your product at only the most appropriate locations –Adds to the image of the company, and enhances the value of the product –Typical for high class products such as cars, watches, and cosmetics –Exclusive distribution can also help when supply is limited. Retailers have more incentive to push the products because their supply lines are guaranteed, and they have no competition. Selective Distribution –Somewhere between Intensive and Exclusive distributions –Uses a few retailers in each area to help maintain a certain image and to control the flow of product into the area –Typical for long-lasting and relatively high-cost products such as consumer electronics, hardware and tools, and large appliances 27