1 Agenda Marketing Channels Vertical Marketing Systems Marketing Channel Choice ManagementMarketing Logistics & Supply Chain ManagementDistribution Channel Choice ManagementTypes of Distribution Strategies
2 Marketing ChannelMarketing Channel: the transfer of the ownership of goods from production to consumptionChannel Partners (distributors, wholesalers, and retailers) offer Three Functions:TransactionalWork as an intermediary between the producer and the customerHold onto inventory at their locationEnhance your image by supply the goods to customers in a timely mannerLogisticalStore the productsProvide transportationBuy in bulk and then split into smaller shipmentsCombine product with other products to sell to consumerFacilitatingDeal with customersNegotiate SalesProvide Customer Service
3 Consumer Product Channels Direct: Producer sells directly to the end customerIndirectRetailersWholesalers – RetailersAgents – Wholesalers – RetailersAgent or Broker – Any intermediary with legal authority to act on behalf of the manufacturerWholesaler – An intermediary who sells to other intermediaries, usually to retailers; term usually applies to consumer marketsRetailer – An intermediary who sells to consumersDistributor – an imprecise term, usually used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, extending credit, and so on; a more common term in business markets but may also be used to refer to wholesalers
4 Business Product Channels Direct: Producer sells directly to the end customerIndirectIndustrial DistributorAgentsAgents – Industrial Distributor
5 Electronic Marketing Channels RadioTelevisionComputerTelephone and Cell PhoneFax MachineRSSElectronic messaging
7 Multichannel Marketing The practice of interacting with customers using a combination of indirect and direct communication channels – websites, retail stores, mail order catalogs, direct mail, , mobile, etc. – and enabling customers to take action in response – preferably to buy your product or service – using the channel of their choice. In the most simplistic terms, multichannel marketing is all about choice.
8 Dual DistributionInvolves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.
9 Vertical Marketing Systems In normal systems, each piece of the distribution channel operates on its own for profitChannel arrangement to bring together parts of the distribution channel for their mutual benefitCombine resourcesThree systems: Corporate, Contractual, and Administrated
10 Corporate SystemsA company purchases pieces of the distribution channelForward integrationPurchase the next level down in the channelBackward integrationPurchase the previous level in the channelPro: more controlCon: takes a lot of capital
11 *Contractual SystemsCompanies enter into contracts with pieces of the distribution channelWholesaler-sponsored voluntaryRetailer-sponsored cooperativesFranchising
12 Administrated Systems The company does not own or have contracts with pieces of the distribution channel, but controls activities of the other pieces with power of size or influence.
13 Factors Affecting Channel Choice and Management Which channel and intermediaries will provide the best coverage of the target market?Which channel and intermediaries will best satisfy the buying requirements of the target market?Which channel and intermediaries will be the most profitable?
14 Marketing Channel Choice & Management Intensive distributionPlace products/services in as many outlets as possibleExclusive distributionPlace products/services in one retailer at specific geographic area*Selective distributionPlace products/services in a few retailers in a specific geographic area
15 Market LogisticsThe process of 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.
16 Supply ChainThe supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumeror business customer, that perform or support the LOGISTICS function.A supply chain is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.
17 Logistics of Supply Chain Supply Chain TeamSourcing & ProcurementProduction SchedulingOrder ProcessingInventory ControlWarehouse & Materials HandlingTransportationLogistics Information SystemThe supply chain consists of several interrelated and integrated logistical components, as shown on this slide.Integrating and linking all of the components is the logistics information system.The supply chain team orchestrates the movement of goods from the source to the consumer. The team cuts across organization boundaries and communicates/coordinates/cooperates extensively.The best supply chain teams move beyond the organization to include external participants, such as suppliers, transportation carriers, and third-party logistics suppliers.
20 Supply Chain PartnersThe supply chain consists of two types of partners:Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or serviceDownstream partners include the marketing channels or distribution channels that look toward the customer
21 Supply Chain Management 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.Supply chain management helps companies achieve competitive advantage. By visualizing the entire supply chain, supply chain managers can maximize strengths and efficiencies at each level of the process to create a highly competitive, customer-driven supply system that is able to respond immediately to changes in supply and demand.In mass production, standardized products were “pushed” down the supply chain to the consumer. In contrast, in today’s marketplace, products are being driven or “pulled” by customers who expect products configured to their unique needs. Supply chain management allows companies to respond with the unique product configuration and mix of services demanded by the customer.supply chain distribution accounts for 50 cents of every dollar spentpromotion accounts for only 2 cents!
22 Role of Supply Chain Management Communicator of customer demand from point of sale to supplier.Physical flow process that engineers the movement of goods.Today, supply chain management plays a dual role.Supply chain management acts as a communicator of customer demand that extends from the point of sale back to the supplier, and second, as a physical flow process that engineers the movement of goods throughout the entire supply pipeline.Supply chain managers are responsible for making channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer service activities. Additionally, supply chain managers are responsible for managing the information that flows through the supply chain.
23 Benefits of Supply Chain Management Means of differentiationReduced costsGreater supply chain flexibilityImproved customer serviceHigher revenuesNotes:Supply chain management is a key means of differentiation for a firm and a critical component in marketing and corporate strategy.Research has shown a clear relationship between supply chain performance and profitability. Leaders in supply chain management report a 20 percent improvement in cash flow, a more than 50 percent increase in flexibility of supply chain activities, and a reduction of 5 to 10 percent in supply chain costs.
24 Distribution Channel Choice Management A marketing channel consists of individuals and firms involved in the process of making products or services available for use or consumption by consumers or industrial use.Distribution is one of the key elements in the entire marketing strategy as they help expand your reach and grow revenue.
25 DistributionDistribution is a vitally important activity that focuses on how to reach your target market and the:location of your businesslocation of your target markethow to reach your target marketwarehousing of your stocktransportation of your stock
26 Two Types of Distribution Strategies/Channels of Distribution Direct Shipment Distribution StrategiesIntermediate Inventory Storage Point
27 Direct Shipment Distribution Strategies Advantages:The retailer avoids the expenses of operating a distribution centerLead times are reducedDisadvantages:Risk-pooling effects are negatedManufacturer and distributor transportation costs increaseCommonly used scenarios:Prevalent in the grocery industryLead times are critical because of perishable goodsRetail store requires fully loaded trucksOften mandated by powerful retailersManufacturer may be reluctant but may have no choice
28 Intermediate Inventory Storage Point Strategies Traditional warehousing strategyDistribution centers and warehouses hold stock inventoryProvide their downstream customers with inventory as neededCross-docking strategyWarehouses and distribution centers serve as transfer points for inventoryNo inventory is held at these transfer pointsCentralized pooling and transshipment strategiesMay be useful when there is a large variety of different products
29 Centralized vs. Decentralized Management Centralized systemDecisions are made at a central location for the entire supply network.Typical objective: minimize the total cost of the system subject to satisfying some service-level requirements.Centralized control leads to global optimization.At least as effective as the decentralized system.Allow use of coordinated strategies.Decentralized systemEach facility identifies its most effective strategy without considering the impact on the other facilities in the supply chain.Leads to local optimization.
30 Central vs. Local Facilities Centralized facilitiesEmploy both fewer warehouses and distribution centers.Facilities are located further from customers.Other factorsSafety stock: Lower safety stock levels with centralized facilities.Overhead: Lower total overhead cost with centralized facilities.Economies of scale: Greater economies of scale with centralized facilities.Lead time: Lead time to market reduced with local facilities.ServiceUtilization of risk pooling better with centralizedShipping times better with localTransportation costsCosts between production facilities and warehouses higher with localCosts from warehouses to retailers lower with local
31 Cross-DockingWarehouse functions as inventory coordination points rather than as inventory storage points.Goods arriving at warehouse from the manufacturer:- are transferred to vehicles serving the retailers- are delivered to the retailers as rapidly as possibleGoods spend very little time in storage at the warehouseOften less than 12 hoursLimits inventory costs and decreases lead times
32 ConclusionManaging marketing channels and supply chains is a critical element of marketing – after all, marketing is about getting the right product, in the right quantity, to the right place, at the right time.