Chapter 13: Marketing Channels and Supply Management

Objectives
  • •Know why companies use distribution channels and understand the functions that these channels perform.
  • •Learn how channel members interact and how they organize to perform the work of the channel.
  • •Know the major channel alternatives that are open to a company.
 
  • •Comprehend how companies select, motivate, and evaluate channel members.
  • •Understand the nature and importance of marketing logistics and integrated supply chain management.
 

 

Please Open The Following Figures In Different Windows and Leave Them Open:

Animated Figure 13-1 , Animated Figure 13-3 .

 

Case Study

Caterpillar
  • •Dominates world’s markets for heavy construction and mining equipment.
  • •Independent dealers are key to success
  • •Dealer network is linked via computers
  • Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications

 

 

Definitions
•Value Delivery Network
  • §The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.
 
 

 

Nature & Importance of Marketing Channels
  • •Channel choices affect other decisions in the marketing mix
  • §Pricing, Marketing communications
  • •A strong distribution system can be a competitive advantage
  • •Channel decisions involve long-term commitments to other firms
•
 
 

 

Nature & Importance of Marketing Channels
•How Channel Members Add Value
  • §Intermediaries require fewer contacts to move the product to the final purchaser.
  • §Intermediaries help match product assortment demand with supply. 
  • §Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them.
 

 

Nature & Importance of Marketing Channels
Key Functions Performed by
 Channel Members
  • •Information
  • •Promotion
  • •Contact
  • •Matching
  • •Negotiation
  • •Physical Distribution
  • •Financing
  • •Risk taking

 

Nature & Importance of Marketing Channels
•Number of Channel Levels
  • §The number of intermediary levels indicates the length of a marketing channel.
  •  Direct Channels
  • v Indirect Channels
  • §Producers lose more control and face greater channel complexity as additional channel levels are added.
 
 

 

Nature & Importance of Marketing Channels
Channel Members Are Connected
Via A Variety of Flows
  • •Physical Flow
  • •Payment Flow

 
  • •Information Flow
  • •Promotion Flow
 

  • Flow of Ownership

 

Channel Behavior and Organization
•Channel Conflict
  • §Occurs when channel members disagree on roles, activities, or rewards.
  • §Types of Conflict:
  •  Horizontal conflict: occurs among firms at the 
     same channel level
  •  Vertical conflict:  occurs among firms at different channel levels
 
 

 

Channel Behavior and Organization
•Vertical Marketing Systems
  • §Corporate VMS
  • §Contractual VMS
  •  Manufacturer-sponsored retailer franchise system
  •  Manufacturer-sponsored wholesaler franchise system
  • vService-firm-sponsored retailer franchise system
  • §Administered VMS
 
 

 

Channel Behavior and Organization
  • •Multichannel Distribution Systems
  • §Also called hybrid marketing channels
  • §Occurs when a firm uses two or more marketing channels
  • §Hybrid marketing has many advantages
  • •Changing Channel Organization
  • §Disintermediation
 
 

 

Channel Design Decisions
  • •Step 1: Analyzing Consumer Needs
  • §Cost and feasibility of meeting needs must be considered
  • •Step 2: Setting Channel Objectives
  • §Set channel objectives in terms of targeted level of customer service
  • §Many factors influence channel objectives
 

 

Channel Design Decisions
  • •Step 3: Identifying Major Alternatives
  • §Types of intermediaries
  •  Company sales force, manufacturer’s agency, industrial distributors
  • §Number of marketing intermediaries
  •  Intensive, selective, and exclusive distribution
  • §Responsibilities of channel members
 

 

Channel Design Decisions
  • •Step 4: Evaluating Major Alternatives
  • §Economic criteria
  • §Control issues
  • §Adaptive criteria
 
 

 

Channel Design Decisions
  • •Designing International Distribution Channels
  • §Global marketers usually adapt their channel strategies to structures that exist within foreign countries
  • §Key challenges:
  •  May be complex or hard to penetrate
  • v May be scattered, inefficient, or totally lacking
 
 

 

Channel Management Decisions
  • •Selecting Channel Members
  • §Identify characteristics that distinguish the best channel members
  • •Managing and Motivating Channel Members
  • §Partner relationship management (PRM) is key
  • •Evaluating Channel Members
  • §Performance should be checked against standards
  • §Channel members should be rewarded or replaced as dictated by performance
•
 

 

 

Public Policy and Distribution Decisions
  • •Exclusive distribution
  • §Only certain outlets are allowed to carry a firm’s products
  • •Exclusive dealing
  • §Exclusive territorial agreements
  • §Tying agreements
 

 

 

Marketing Logistics and Supply Chain Management
•Marketing Logistics
  • §Outbound distribution
  • §Inbound distribution
  • §Reverse distribution
  • §Involves the entire supply chain management  system
 

 

 

Marketing Logistics and Supply Chain Management
•Why Greater Emphasis is Being Placed on Logistics:
  • §Offers firms a competitive advantage
  • §Can yield cost savings
  • §Greater product variety requires improved logistics
  • §Improvements in distribution efficiency are possible due to information technology

 

 

Marketing Logistics and Supply Chain Management
•Goals of the Logistics System
  • §No system can both maximize customer service and minimize costs.
  • §Firms must first weigh the benefits of higher service against the costs.
  • §State goals in terms of a targeted level of customer service at the least cost.
 

 

 

Marketing Logistics and Supply Chain Management
•Major Logistics Functions
  • §Warehousing
  • §Inventory Management
  • §Transportation
  • §Logistics Information Management
 

 

 

Marketing Logistics and Supply Chain Management
Transportation Carrier Options
  • •Truck
  • •Rail
  • •Water

 
  • •Pipeline
  • •Air
  • •Internet
 
  • Intermodal transportation is becoming
    more common

 

Marketing Logistics and Supply Chain Management
  • •Integrated Logistics Management
  • §Cross-functional teamwork inside the company is critical
  • §Logistics partnerships are also built through shared projects
  • §Outsourcing of logistics firms to third-party firms is becoming more common

 

 

Chapter 13: Marketing Channels and Supply Management

 

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Study Guide
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Chapter 13: Marketing Channels and Supply Management

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