Chapter 12 - Marketing Channels AND Supply Chain Management - Introductory Marketing PDF

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Prof: Charles Hendriks...

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ADMS 2200 – CHAPTER 12: MARKETING CHANNELS AND SUPPLY CHAIN MANAGEMENT Professor: Charles Hendriks

Distribution   

It is the movement of goods and services from producers to customers Producers = 2nd marketing mix variable Consumers = Important marketing concern

2 Critical Components of the Distribution Strategy 

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1) Marketing Channel – It is the system that enhances the physical flow and ownership of goods and services from producers to consumers or business user; this channel supports the firm’s overall marketing strategy 2) Logistics – It is the process of coordinating the flow of information, goods and services among members of the distribution channel

Supply Chain Management 

It is the control of activities of purchasing, processing and delivering through which raw material are turned to products and made available to customers

The Role of Marketing Channels in Marketing Strategy 

Channel – it provides how the firm moves the goods and services it produces to ultimate users  Leading the exchange process by cutting number of contacts necessary  Regulate exchange transactions  Leads the searches by both buyers and sellers  Adjust for discrepancies in the market’s assortment of goods and services through sorting

Types of Marketing Channels 

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Marketing Channel – It is a system of marketing institutions that promotes the physical flow of goods and services along with ownership title, from producers to consumers or business users; this term can also be called a distribution channel Marketing Intermediary – A wholesaler or retailer which operates between producers and consumers; this term can also be called a middleman Wholesaler – An marketing intermediary that takes title to goods and then distributes these goods further; this term can also be called a jobber or distributor

Direct Selling  

Direct channel – it moves goods directly from a producer to ultimate user Direct selling – a strategy that is designed to establish direct sales contract between producer and final user

Channels Using Marketing Intermediaries   

Producer to Wholesaler to Retailer to Consumer Producer to Wholesaler to Business User Producer to Agent to Wholesaler to Retailer to Consumer

Dual Distribution

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It is a network that moves products to a firm’s target market through more than one marketing channel

Reverse Channels 

Channels that are designed to return goods to their producers

Channel Strategy Decisions 

The factors which impact the selection of a marketing channel include: 1) Market Factors 2) Product Factors 3) Organizational Factors 4) Competitive Factors

Determining Distribution Intensity   

It is the number of intermediaries through which a manufacturer distributes its goods Intensive Distribution – A channel policy in which a manufacturer of a convenience product attempts to saturate the market Selective Distribution – A channel policy in which a firm chooses only a limited number of retailers to handle its product line

Exclusive distribution A channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a geographic area  An example: Auto dealerships often have exclusive distribution rights in their local markets Legal Problems of Exclusive Distribution  Exclusive – dealing agreement – Manufacturers and E-Marketing Intermediaries plan to prohibit the intermediary from handling competing product line  Market Restriction – Exclusive geographic selling region of a distributor  Tied Selling – An arrangement that requires a marketing intermediary to carry items other than those they want to sell 

Channel Management and Leadership  

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Channel Captain – a dominant and controlling member of a marketing channel Horizontal Conflict – This conflict causes sparks between different types of marketing intermediaries that handle similar products; Sometimes results from disagreements among channel members at the same level Channel Cooperation – It can be achieved through effective cooperation among channel members; the desired solution to channel conflict and it can be achieved when all channel members regard themselves as components of the same organization

Vertical Marketing Systems (VMS) 

It is a planned channel system that is designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain

Administered Marketing System 

VMS that achieves channel coordination when a dominant channel member exercises its power

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An example: Goodyear sells tires through independently owned dealers however they control the stocks which the dealers carry

Corporate Marketing System 

A VMS which a single owner operates at each stage in its marketing channel

Contractual Marketing System  A VMS that coordinates channel activities through formal agreements among channel members Examples of Channel Members:  Wholesaler-Sponsored Voluntary Chains  Retail Cooperatives  Franchises  Subway

Logistics and Supply Chain Management 

Supply (value) Chain – It is a sequence of suppliers that contributes to the creation and delivery of a good or service

Radio Frequency Identification 

Technology that uses a tiny chip with identification information that can be read by a scanner using radio waves from a distance

Enterprise Resource Planning 

A software system that combines data among a firm’s units

Logistical Cost Control  

Third Party (contract) logistics firm: A company that specializes in handling logistics activities for other firms PBB Logistics: a leading North America third party international logistics provider

Automated Warehouse Technology 

Distribution costs can be cut and customer service improved by automating warehouse systems

Warehouse Locations  

Major logistics decision involving the number and location of storage facilities There are two cost categories that influence this choice: 1) Warehousing and Materials – handling costs 2) Delivery costs from warehouse to customers...