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Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Marketing Channels, Logistics, and Supply Chain Management.

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Presentation on theme: "Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Marketing Channels, Logistics, and Supply Chain Management."— Presentation transcript:

1 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Marketing Channels, Logistics, and Supply Chain Management Chapter 15

2 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Describe the roles that marketing channels and logistics play in marketing strategy. 2.Describe the various types of distribution channels available to marketers. 3.Outline the major channel strategy decisions. 4.Describe the concepts of management, conflict, and cooperation within the marketing channel. 5.Identify and compare the major components of a physical distribution system. 6.Compare the major transportation alternatives on the basis of speed, dependability, cost, frequency of shipments, availability in different locations, and flexibility in handling products. 7.Discuss how transportation intermediaries and combined transportation modes can improve physical distribution.

3 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. All products, no matter how small or large, time sensitive or not require distribution considerations.

4 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Roles of Marketing Channels First, they facilitate the exchange process. Second, distributors adjust for discrepancies in the market’s assortment of goods and services. Third, they involve standardizing exchange transactions by setting expectations for products. Finally, marketing channels facilitate searches by both buyers and sellers.

5 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Can you see the importance of the marketing channel selection in the distribution of this advertised product. What criteria would you use when making distribution decisions pertaining to this product?

6 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Types of Marketing Channels Consumer Goods

7 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Leading retailers Who are the leading retailers and what are the guidelines for selection?

8 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Types of Marketing Channels Business Goods

9 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Major Channel Strategy Decisions Level of distribution intensity. Desirability of vertical marketing systems. Performance of current intermediaries.

10 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Market Factors Influencing Channel Strategies

11 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Product Factors Influencing Channel Strategies

12 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Producer Factors Influencing Channel Strategies

13 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Competitive Factors Influencing Channel Strategies

14 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Distribution Intensity Intensive Distribution strategy seeks to distribute a product through all available channels in a trade area. –Intensive distribution strategy suits items with wide appeal across broad groups of consumers. Selective distribution, a firm chooses only a limited number of retailers in a market area to handle its line. –Helps to control price cutting since relatively few dealers handle the firm’s line. Exclusive distribution, when a producer grants exclusive rights to a wholesaler or retailer to sell its products in a specific geographical region.

15 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Creative Distribution Channels Gasoline at Home Depot – 9/05 Apple I-pod accessories at vending machines in hotels, airports, convention centers – 9/05 Pet clothes at Urban Outfitters

16 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Legal Problems of Exclusive Distribution Three main areas: 1.Exclusive dealing prohibits the handling of competing products. 2.Closed sales territories to restrict their distributors to certain geographical regions. 3.Tying agreements which allow channel members to becoming exclusive dealers only if they also carry products other than those that they want to sell. Tying agreements violate the Sherman Act and the Clayton Act when they reduce competition or create monopolies that keep competitors out of major markets.

17 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Channel Management and Leadership Keys to successful management include: 1.Development of high levels of coordination. 2.Commitment. 3.Trust between channel members.

18 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Types of Channel Conflict Horizontal Conflict Sometimes results from disagreements among channel members at the same level. More often, causes sparks between different types of marketing intermediaries that handle similar products. Vertical Conflict Cause frequent and often severe conflict. Channel members at different levels find many reasons for disputes. Producers may annoy wholesalers and retailers when they attempt to bypass these intermediaries. Grey Market As U.S. manufacturers license their technology and brands abroad, they sometimes find themselves in competition in the U.S. market against versions of their own brands produced by overseas affiliates. Grey goods, or parallel goods, enter U.S. channels through the actions of foreign distributors.

19 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Vertical Marketing System (VMS) VMS is a planned channel system designed to improve distribution efficiency and cost effectiveness. –Forward integration, a firm attempts to control downstream distribution. –Backward integration occurs when a manufacturer attempts to gain greater control over inputs in its production process. A VMS offers several benefits. –First, it improves chances for controlling and coordinating the steps in the distribution or production process. –May also let a manufacturer expand into profitable new businesses.

20 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. VMS Article Discover the answers to the following questions and more when visiting this web site: –What does a vertical market system (VMS) look like? –What are the disadvantages of vertical marketing systems? –Are there different types of vertical marketing systems?

21 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Categories of VMS 1.Corporate Marketing System - where a single owner runs organizations at each stage of the marketing channel it operates. 2.Administered Marketing System - achieves channel coordination when a dominant channel member exercises its power. 3.Contractual Marketing System - coordinates distribution through formal agreements among channel members.

22 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Major Components of a Physical Distribution System 1.Customer service - What level of customer service the distribution activities should support. 2.Transportation - How the firm should ship its products. 3.Inventory control - How much inventory the firm should maintain. 4.Protective packaging and materials handling. 5.Order processing. 6.Warehousing - Where the distribution system will locate stocks of goods.

23 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Physical Distribution Expenditures Warehousing 22% Administrative Costs 5% Customer Service/Order Processing 6% Inventory Control 25% Transportation 42% SOURCE: These 2003 estimates were provided by Dr. Julie Gentry, Logistics Faculty, University of Arkansas-Fayetteville

24 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Shipping & Transportation Hints What are some of the considerations for a firm looking to ship internationally?

25 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Comparison of Transport Modes


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