Marketing Channels And Supply Chain Management

Marketing Channels and Supply Chain Management

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Principles of Marketing

Supply Chains and the Value Delivery Network

Supply Chain Partners

Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service

Downstream partners include the marketing channels or distribution channels that look toward the customer

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Supply Chains and the Value Delivery Network

Supply Chain Views

Supply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacity

Demand chain “sense and respond” view suggests that planning starts with the needs of the target customer and the firm responds to these needs by organizing a chain of resources and activities with the 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 distributing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange

Promotion refers to the development and spreading persuasive communications about an offer

Contacts refers to finding and communicating with prospective buyers

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Matching refers to shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging

Negotiation refers to reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred

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Physical distribution refers to transporting and storing goods

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

Risk taking refers to assuming the risks of carrying out the channel work

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Number of Channel Members

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

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

Indirect marketing channels contain one or more intermediaries

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Channel Behavior and Organization

Channel Behavior

Channel conflict refers to disagreement over goals, roles, and rewards by channel members

• Horizontal conflict• Vertical conflict

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Channel Behavior

Horizontal conflict is conflict among members at the same channel level

Vertical conflict is conflict between different levels of the same channel

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Conventional Distribution Systems

Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers. Each seeks to maximize its own profits and there is little control over the other members and no formal means for assigning roles and resolving conflict.

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Multichannel Distribution Systems Hybrid Marketing Channels

Hybrid marketing channels exist when a single firm sets up two or more marketing channels to reach one or more customer segments

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Multichannel Distribution Systems Hybrid Marketing Channels

• Advantages• Increased sales and market coverage• New opportunities to tailor products and

services to specific needs of diverse customer segments

• Challenges• Hard to control• Create channel conflict

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Changing Channel Organization

Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones

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Channel Design Decisions

Identifying Major Alternatives

Types of intermediaries refers to channel members available to carry out channel work. Examples include:

• Company sales force• Manufacturer’s agency• Industrial distributors

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Number of marketing intermediaries to use at each level

• Strategies:• Intensive distribution• Exclusive distribution• Selective distribution

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Intensive distribution is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible

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Exclusive distribution is a strategy in which the producer gives only a limited number of dealers the exclusive right to distribute its products in their territories

• Luxury automobiles• High-end apparel

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Selective distribution is a strategy when a producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products

• Televisions• Appliances

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Designing International Distribution Channels

Channel systems can vary from country to country

Must be able to adapt channel strategies to the existing 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 determining the characteristics that distinguish the better ones by evaluating channel members

• Years in business• Lines carried• Profit record

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Selecting Channel Members

Selecting intermediaries that are retail stores that want exclusive or selective distribution involves evaluating:

• Store’s 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 its products

Exclusive dealing is when the seller requires that the sellers not handle competitor’s products

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Benefits of exclusive distribution include:• Seller obtains more loyal and

dependable dealers• Dealers obtain a steady and stronger

seller support

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Exclusive territorial agreement refers to an agreement where the producer may agree not to sell to other dealers in a given area or the buyer may 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 that producers sometimes sell to dealers only if the dealers 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 logistics management in the supply chain

• Goals of the logistics system• Major logistics functions• Need for integrated supply chain

management

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Nature and Importance of Marketing Logistics

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

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Marketing logistics involves:• Outbound distribution: Moving products from

the factory 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 of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers

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Major Logistics Functions

Warehousing is the storage function that overcomes differences in need quantities and timing, ensuring that the products are available when customers are ready to buy them

• Storage warehouses• Distribution centers

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Storage warehouses are designed to store goods, not move them

Distribution centers are designed to move goods, not store them

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Inventory management balances carrying too little and too much inventory

• Just-in-time logistics systems• RFID

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Just-in-time logistics systems allow producers and retailers to carry small amounts of inventories of parts or merchandise

RFID (radio frequency identification devices) are small transmitter chips embedded in or placed on products or packages to provide greater inventory control

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Transportation affects the pricing of products, delivery performance, and condition of the goods when they arrive

• Truck• Rail• Water• Pipeline• Air• Internet

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Integrated Logistics Management

Cross-functional teamwork inside the company refers to the inter-relationship of different departments within the company to achieve the goals of integrated supply chain management

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Integrated Logistics Management

Third-party logistics is the outsourcing of logistics functions 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

Business

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