Marketing Channels and Supply Chain Management 1223718284734584 8

8/8/2019 Marketing Channels and Supply Chain Management 1223718284734584 8

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Marketing Channels andSupply Chain Management

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Principles of Marketing


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Supply Chains and

the Value Delivery Network

Supply Chain Partners

Upstream partners include raw materialsuppliers, components, parts, information,finances, and expertise to create a productor service

Downstream partners include the marketingchannels or distribution channels that looktoward the customer

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Supply Chains and

the Value Delivery Network

Supply Chain Views

Supply chain make and sell view includes the firmsraw materials, productive inputs, and factorycapacity

Demand chain sense and respond view suggeststhat planning starts with the needs of the targetcustomer and the firm responds to these needs byorganizing a chain of resources and activities withthe goal of creating customer value

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The Nature and Importance of

Marketing Channels

How Channel Members Add Value

Information refers to the gathering and distributingresearch and intelligence information about actorsand forces in the marketing environment needed forplanning and aiding exchange

Promotion refers to the development and spreadingpersuasive communications about an offer

Contacts refers to finding and communicating withprospective buyers

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Marketing Channels


Matching refers to shaping and fitting theoffer to the buyers needs, includingactivities such as manufacturing, grading,assembling, and packaging

Negotiation refers to reaching an agreementon price and other terms of the offer so thatownership or possession can be transferred

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Marketing Channels


Physical distribution refers to transporting andstoring goods

Financing refers to acquiring and using funds to coverthe costs or carrying out the channel work

Risk taking refers to assuming the risks of carryingout the channel work

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Marketing Channels

NumberofChannel Members

Channel level refers to each layer of marketingintermediaries that performs some work in bringingthe product and its ownership closer to the finalbuyer

Direct marketing channel has no intermediarylevels; the company sells directly to consumers

Indirect marketing channels contain one or moreintermediaries

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Channel Behavior and Organization

Channel Behavior

Channel conflict refers to disagreement overgoals, roles, and rewards by channelmembers

Horizontal conflict Vertical conflict

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Channel Behavior

Horizontal conflict is conflict amongmembers at the same channel level

Vertical conflict is conflict between differentlevels of the same channel

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Conventional Distribution Systems

Conventional distribution systems consistof one or more independent producers,wholesalers, and retailers. Each seeks to

maximize its own profits and there is littlecontrol over the other members and noformal means for assigning roles andresolving conflict.

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Multichannel Distribution Systems

Hybrid Marketing Channels

Hybrid marketing channels exist when asingle firm sets up two or more marketing

channels to reach one or more customersegments

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Multichannel Distribution Systems

Hybrid Marketing Channels

Advantages Increased sales and market coverage

New opportunities to tailor products and servicesto specific needs of diverse customer segments

Challenges Hard to control

Create channel conflict

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Changing Channel Organization

Disintermediation occurs when product orservice producers cut out intermediaries andgo directly to final buyers, or when radicallynew types of channel intermediaries displacetraditional ones

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Channel Design Decisions

Identifying Major Alternatives

Types of intermediaries refers to channelmembers available to carry out channelwork. Examples include:

Company sales force Manufacturers agency

Industrial distributors

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Number of marketing intermediaries to use ateach level

Strategies:

Intensive distribution Exclusive distribution

Selective distribution

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Intensive distribution is a strategy used byproducers of convenience products andcommon raw materials in which they stocktheir products in as many outlets as possible

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Exclusive distribution is a strategy in whichthe producer gives only a limited number ofdealers the exclusive right to distribute itsproducts in their territories

Luxury automobiles

High-end apparel

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Selective distribution is a strategy when aproducer uses more than one but fewerthan all of the intermediaries willing to carrythe producers products

Televisions

Appliances

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DesigningInternational Distribution Channels

Channel systems can vary from country tocountry

Must be able to adapt channel strategies to theexisting structures within each country

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Channel Management Decisions

Channel management involves:

Selecting channel members

Managing channel members

Motivating channel members

Evaluating channel members

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Selecting Channel Members

Selecting channel members involves determiningthe characteristics that distinguish the betterones by evaluating channel members

Years in business Lines carried

Profit record

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Selecting Channel Members

Selecting intermediaries that are retail storesthat want exclusive or selective distribution

involves evaluating:

Stores customers Locations

Growth potential

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Public Policy and Distribution

Decisions

Exclusive distribution is when the seller

allows only certain outlets to carry itsproducts

Exclusive dealing is when the seller requiresthat the sellers not handle competitorsproducts

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Decisions

Benefits of exclusive distribution include:

Seller obtains more loyal and dependabledealers

Dealers obtain a steady and stronger seller

support

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Decisions

Exclusive territorial agreement refers to anagreement where the producer may agree not tosell to other dealers in a given area or the buyermay agree to sell only in its own territory

Tying agreements, while not necessarily illegal as

long as they do not substantially lessen competition,are agreements where there is a strong brand thatproducers sometimes sell to dealers only if thedealers will take some or all of the rest of the line

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Marketing Logistics and

Supply Chain Management

Nature and importance of logisticsmanagement in the supply chain

Goals of the logistics system

Major logistics functions

Need for integrated supply chainmanagement

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Nature andImportance ofMarketing Logistics

Marketing logistics (physical distribution)involves planning, implementing, andcontrolling the physical flow of goods,services, and related information from pointsof origin to points of consumption to meetconsumer requirements at a profit

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Marketing logistics involves:

Outbound distribution: Moving products from thefactory to resellers and consumers

Inbound distribution: Moving products and materials

from suppliers to the factory Reverse distribution: Moving broken, unwanted, or

excess products returned by consumers or resellers

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Supply chain management is the process ofmanaging upstream and downstream value-added flows of materials, final goods, andrelated information among suppliers, thecompany, resellers, and final consumers

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Major Logistics Functions

Warehousing is the storage function thatovercomes differences in need quantitiesand timing, ensuring that the products areavailable when customers are ready to buy

them Storage warehouses

Distribution centers

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Storage warehouses are designed to storegoods, not move them

Distribution centers are designed to movegoods, not store them

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Inventory management balances carryingtoo little and too much inventory

Just-in-time logistics systems

RFID

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Just-in-time logistics systems allow producers andretailers to carry small amounts of inventories ofparts or merchandise

RFID (radio frequency identification devices) are smalltransmitter chips embedded in or placed onproducts or packages to provide greater inventorycontrol

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Transportation affects the pricing of products,

delivery performance, and condition of the goodswhen they arrive

Truck

Rail

Water Pipeline

Air

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Integrated Logistics Management

Cross-functional teamwork inside thecompany refers to the inter-relationship ofdifferent departments within the company toachieve the goals of integrated supply chainmanagement

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Integrated Logistics Management

Third-party logistics is the outsourcing of logisticsfunctions to third-party logistics providers (3PLs)

Provide logistics functions more efficiently

Provide logistics functions at lower cost

Allow the company to focus on its core business Are more knowledgeable of complex logistics

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Marketing Channels and Supply Chain Management 1223718284734584 8

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