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c.Marketing Channels and

Supply Chain Management

•Chapter 13

•PowerPoint slides

•Express version

•Instructor name

•Course name

•School name

•Date

Principles of Marketing, Sixth Canadian Edition

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Learning Objectives

• After studying this chapter, you should be able to:– Explain why companies use distribution channels and discuss

the functions that these channels perform

– Discuss how channel members interact and how they organize to perform the work of the channel

– Identify the major channel alternatives open to a company

– Explain how companies select, motivate, and evaluate channel members

– Discuss the nature and importance of physical distribution

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Important Terminology

• Marketing (distribution) channel: set of interdependent organizations involved in making a product available for use or consumption; from the producer down

• Supply chain: includes upstream supplier partners, as well as downstream channel partners

• Value-delivery network: all those who partner with each other to improve the performance of the supply chain system; including the company, suppliers, distributors, and even, customers

Sense-and-respond view

Make-and-sell view

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Using Marketing Intermediaries

• Intermediaries reduce the number of contacts needed to cover a market

• Transform assortments made by producers into assortments desired by consumers

• Help to complete transactions:

– Information

– Promotion– Contact

– Matching

– Negotiation

• Fulfill completed transactions:

– Physical distribution

– Financing

– Risk taking

Figure 13.1

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Consumer Marketing Channels

• Channel level: layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer

– Direct: no intermediary levels

– Indirect: containing one or more intermediary levelsFigure 13.2

• Flows between levels: • Physical

• Ownership

• Payment

• Information

• Promotion

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Channel Behaviour

• Channel conflict: disagreements between marketing channel members on goals and roles-who should do what and for what rewards

– Horizontal conflict: between firms on the same channel level

– Vertical conflict: between firms on different levels of the channel

• Some conflict encourages healthy competition which produces innovation and better performance

• Too much conflict becomes dysfunctional

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Types of Marketing Channels

• Conventional distribution channel:– One or more independent producers, wholesalers, and retailers

– Each seeking to maximize its own profits

• Vertical marketing system (VMS):– Producers, wholesalers, and

retailers

– Act as a unified system

– One channel member owns, has contracts with, or has so much power that they all cooperate

• Franchise organization

• Horizontal marketing system

Figure 13.4

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Hybrid Marketing Channel

• Multichannel distribution system: a single firm sets up two or more marketing channels to reach one or more customer segments

• Disintermediation:– Displacment of

traditional resellers by new types of intermediaries or by selling direct

Figure 13.5

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Setting Channel Objectives

• Channel objectives influenced by:– Nature of the company (size/financial position) and its products

– Marketing intermediaries

– Competition

– Marketing environment

• Identifying major alternatives:– Types of intermediaries

– Number of intermediaries

– Responsibilities of each channel member

• Types of intermediaries:– Company sales

force

– Manufacturer’s agency

– Industrial distributors

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Number of Intermediaries

• Also known as intensity of distribution

Intensive distribution

As many outletsas possible

Convenience goods

Selective distribution

More than one, but not all outlets

Shopping goods

Exclusive distribution

One outlet permarket area

Specialty goods

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Channel Management Decisions

• Selecting channel members: companies will vary in their ability to attract qualified intermediaries

– Channel member history, reputation, financial position, location

– Other product lines carried, facility

– Cooperativeness, future growth potential

• Managing & motivating:– Partner relationship

management

– Programs, contests, sales incentives

– Cooperative advertising

– Product/sales training

• Evaluating channel members:• Performance standards

for sales, market share, customer service levels, inventory carried, and participation in company programs

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Public Policy and Distribution Decisions

• Exclusive dealing

• Exclusive territories

• Tying agreements

• Dealers’ rights

• Sources of supply

• Purchasing and shelving policies– Slotting allowances

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Supply Chain Management

• Marketing logistics (physical distribution): planning, implementing, and controlling the physical flow of materials, final goods and related information

• Supply chain management: managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers

Figure 13.6

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Supply Chain Management (continued)

• Goal: provide a targeted level of customer service at the least cost

• Major logistics functions:

– Warehousing: storage and distribution centres

– Inventory management: balance customer needs with cost

– Transportation: speed costs money, how fast do you need it?

• Rail, trucks, water, pipeline, air, and the Internet

Figure 13.6

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In Conclusion…

• The learning objectives for this chapter were:– Explain why companies use distribution channels and discuss

the functions that these channels perform

– Discuss how channel members interact and how they organize to perform the work of the channel

– Identify the major channel alternatives open to a company

– Explain how companies select, motivate, and evaluate channel members

– Discuss the nature and importance of physical distribution