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nMarketing Channels and

Supply Chain Management

•Chapter Eleven•Lecture Slides

–Express Version

•Course•Professor•Date

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nLooking Ahead

• After studying this chapter you should be able to:

• Explain why companies use distribution channels and discuss the functions 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 marketing logistics and integrated supply chain management

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nThe Concept of Contactual Efficiency

Mfg Mfg Mfg Mfg

Mfg Mfg Mfg Mfg

Cus Cus Cus Cus Cus Cus Cus Cus

W/S Dist

Figure 11-1

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nDistribution Channel Functions

• Why use marketing intermediaries?– Contacts, experience, specialization, and scale

of operations• Objective:

– Provide place, time, and possession utility demanded by customers

• Functions performed:– Information– Promotion– Contact– Matching– Negotiation– Physical distribution– Financing– Risk taking

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nConsumer Marketing Channels

Figure 11-2

Manufacturer Wholesaler Jobber Retailer Consumer

Manufacturer Wholesaler Retailer Consumer

Manufacturer Retailer Consumer

Manufacturer Consumer

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nBusiness Marketing Channels

Figure 11-2

ManufacturerIndustrialdistributor

IndustrialConsumer

ManufacturerMfg Sales

RepresentativeOr Sales Branch

IndustrialConsumer

ManufacturerIndustrialConsumer

ManufacturerIndustrialConsumer

Industrialdistributor

Mfg SalesRepresentative

Or Sales Branch

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nChannel Behaviour

• Channel conflict:– Disagreement between channel members

over goals and roles, who should do what and for what rewards

• Horizontal conflict:– Conflict between firms on the same level

• Vertical conflict:– Conflict between firms on different levels

• Disintermediation:– Displacement of a traditional member from the

marketing channel– Selling direct via the Internet

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nTypes of Marketing Systems

• Conventional distribution channel:– Channel members are independently owned– Pursue their own corporate objectives– Conflict may occur when goals differ

• Vertical marketing system:– Channel members act as a unified system– May have common ownership– May contract for this arrangement– May be forced into arrangement by power

differential between members– Franchise systems are the most popular

• Horizontal marketing systems– Two or more companies on the same level join

together for mutual gain– Airline alliances

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nHybrid Marketing Channel

Consumersegment 1

Businesssegment 1

Consumersegment 2

Businesssegment 2

RetailersDealers

Distributors

Producer

CataloguetelephoneInternet

Salesforce

Figure 11-4

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nChannel Design Decisions

• Analyzing consumer service needs• Setting channel objectives and constraints• Identifying major alternatives

– Types of intermediaries• Company sales force• Manufacturer’s agency• Industrial distributors

– Number of intermediaries• Intensive distribution• Selective distribution• Exclusive distribution

– Responsibilities of channel members• Evaluating the major alternatives• International distribution channels

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nChannel Management Decisions

• Selection– Select those who best fit the channel objectives– Degree of selectivity will vary with intensity used

• Motivation– Maintain strong partnerships– Reward those intermediaries who perform well – Assist or replace weaker ones

• Evaluating– Compare member performance against standards– Use market share, performance against objectives, or

qualitative measurements

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nMarketing Logistics

• Marketing logistics– Physical distribution of the products– Logistics is a cost of doing business, not a revenue

generator– Logistics has a direct impact on customer satisfaction– Marketing logistics addresses outbound distribution

and inbound

• Supply chain management– Managing value-added flows between suppliers, the

company, resellers, and final users

• Goal of logistics:– Provide targeted level of customer service for the

least cost

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nMajor Logistics Functions

• Order processing• Warehousing• Inventory management• Transportation

• Integrated supply chain management– Cross-functional teamwork within the company– Building channel partnerships– Third-party logistics (3PL) providers

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nLooking Back

• Why companies use intermediaries

• How channel members interact

• Major channel alternatives

• Selecting, motivating, and evaluating channel members

• Nature and importance of logistics