Chapter 12Marketing Channels and Supply Chain Management

The Place Component of the Marketing Mix:

Channels of Distribution

LogisticsMaterials

ManagementPhysical Distribution

Marketing ChannelsA set of

interdependent organizations that facilitate the transfer of ownership as products move from producer to business user or consumer

Supply Chain – the connected chain of business entities (internal and external) that perform or support the channel functions

Marketing Channel Functions

Specialization and division of laborSpecialization and division of labor

Overcoming discrepanciesOvercoming discrepancies

Providing contact efficiencyProviding contact efficiency

Overcoming DiscrepanciesDiscrepancy

of Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

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.

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Providing Contact Efficiency

Channel members - IntermediariesRetailers –

Organizations whose activities are directed toward sales to final (ultimate) consumers

Wholesalers – Organizations that sell to retailers or other wholesalers, and/or to businesses or institutions for use in the conduct of business

Channel Intermediaries

RetailersRetailers

Merchant WholesalersMerchant

Wholesalers

Agents and

Brokers

Agents and

Brokers

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods

Factors Suggesting Type of Wholesaling Intermediary to Use

Product characteristicsProduct characteristics

Buyer considerationsBuyer considerations

Market characteristicsMarket characteristics

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel

Channels for Consumer Products

Channels for Business Products

Producer

IndustrialUser

DirectDirectChannelChannel

Producer

Govt.Buyer

DirectDirectChannelChannel

Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

IndustrialIndustrialDistributorDistributor

Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel

Alternative Channel Arrangements

Multiple channels

Strategic channel alliances

Nontraditional channels

Supply Chain Management

Supply Chain

A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value.

Benefits of Supply Chain Management

Means of differentiation

Greater supply chain flexibility

Improved customer service

Higher revenues

Reduced costs

Channel Strategy DecisionsFactors Factors

Affecting Affecting Channel Channel ChoiceChoice

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Producer FactorsProducer FactorsProduct FactorsProduct FactorsMarket FactorsMarket Factors

Exclusive DistributionExclusive DistributionSelective DistributionSelective DistributionIntensive DistributionIntensive Distribution

Level ofLevel ofDistributionDistribution

IntensityIntensity

Level ofLevel ofDistributionDistribution

IntensityIntensity

Market Factors

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Customer profilesCustomer profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of marketSize of market

Geographic location

Product Factors

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Complexity Product Complexity

Product StandardizationProduct Standardization

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Product PriceProduct Price

Producer Factors

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control

Levels of Distribution Intensity

IntensiveA form of distribution aimed at having a product available in every outlet

SelectiveA form of distribution achievedby screening dealers to eliminate all but a few in any single area

ExclusiveA form of distribution that established one or a few dealers within a given area

Channel Leadership, Conflict, & Partnering

ChannelRelationship

Synergy

Channel Conflict

Horizontal Vertical

Channel Power,Control, Leadership

Channel Partnering

Logistical Components of the Supply Chain

SupplySupplyChainChainTeamTeam

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order ProcessingOrder Processing

Inventory ControlInventory Control

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportationLogi

sti c

s In

f orm

atio

n Sy

stem

Logi

sti c

s In

f orm

atio

n Sy

stem

Minimizing wait times

Managing service capacity

Improving service delivery

Channels and Distribution Decisionsfor Services