1. McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. LEARNING OBJECTIVES (LO) After reading Chapter 15, you should be able to:
Explain what is meant by a marketing channel of distribution and why intermediaries are needed.
Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems.
LO2
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Managing Marketing Channels & Wholesaling

3. LEARNING OBJECTIVES (LO) After reading Chapter 15, you should be able to:
Describe the factors and considerations that affect a company’s choice and management of a marketing channel.
LO3
LO4
Explain what supply chain and logistics management are and how they relate to marketing strategy
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Managing Marketing Channels & Wholesaling

4. How can VinaMilk reach Customers in Vietnam?
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Opening Story – VinaMilk

5. Over 220 Products via Extensive Marketing Channels
VinaMilk
Over 220 Products via Extensive Marketing Channels
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Opening Story – VinaMilk

6. FIGURE The variety of terms used for marketing intermediaries that vary in specificity and use in consumer and business markets
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Marketing Channels of Distribution & Intermediaries

7. Nature and Importance of Marketing Channels
What is are Marketing Channels & Intermediaries?
Marketing Channel
Functions Performed by Intermediaries
Transactional Function
Logistical Function
Marketing channels are basically the group of organisations that pass the product from the manufacturer/producer, through intermediaries (distribution/warehouse/retailers) to the final point of sale (shop to buyer).
You don’t buy milk straight from a cow; the farmer milks and sends it to a factory where it is processed & packaged, redistributed with trucks and warehouses to the various supermarkets where you finally pick it up. Supermarkets are optimised for transactions (purchases), while the trucks/transport companies and factories perform logistical & facilitating function separately. The division of labour allows for efficiency.
Facilitating Function
Consumers benefits
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Marketing Channels of Distribution & Intermediaries

8. FIGURE 15-2 Marketing functions performed by intermediaries.
LO1
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Marketing Channels of Distribution & Intermediaries

9. Channel Structure & Organisation For Consumer Goods & Services
Direct Channel
Indirect Channel
Retailers
WholesalersRetailers
AgentsWholesalersRetailers
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

10. FIGURE Common marketing channels for consumer offerings by the kind and number of intermediaries
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

11. Channel Structure & Organisation For Business Goods & Services
Direct Channel
Indirect Channel
Industrial Distributor
Agents
An industrial distributor performs a variety of marketing channel functions, including selling, stocking, and delivering a full product assortment and financing. In many ways, industrial distributors are like wholesalers in consumer channels.
AgentsIndustrial Distributors
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

12. FIGURE Common marketing channels for business offerings by the kind and number of intermediaries
LO2
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

13. Channel Structure & Organisation
Electronic, Direct & Multichannel Marketing
Electronic Marketing Channels
Direct Marketing Channels
Electronic marketing channels – simply, the internet and online portals.
Direct marketing channels allow consumers to purchase products bypassing salespeople. Some examples include direct mail order catalogues and home-shopping
Multi-channel marketing involves using two or more of the above-mentioned channels to reach consumers e.g. online store & retail outlet
Multichannel Marketing Channels
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

14. FIGURE 15-5 Representative consumer electronic marketing channels
LO2
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

15. Channel Structure & Organisation
Dual Distribution & Strategic Channel Alliances
Dual Distribution
Strategic Channel Alliances
Dual distribution – using two (or more) of the above channels to sell separately to consumers & businesses. For example, televisions for facility use (e.g. hotels) are usually sold by salespeople and distributors, while consumers purchase televisions from retail outlets.
Strategic Channel Alliances: using another party’s channels to sell your products. For example, McDonalds sells Heaven & Earth Green Tea, and more prominently, Coke; KFC serves Pepsi, and Burger King offers Hershey chocolate pie.
LO2
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

16. Channel Structure & Organisation Channel Intermediaries
Merchant Wholesalers
Full-Service Wholesalers
General Merchandise (Full-Line) Wholesalers
Specialty Merchandise (Limited-Line) Wholesalers
LO2
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

17. Channel Structure & Organisation Channel Intermediaries
Merchant Wholesalers
Limited-Service Wholesalers
Rack Jobbers
Cash and Carry Wholesalers
Drop Shippers/Desk Jobbers
Truck Jobbers
LO2
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

18. Channel Structure & Organisation Channel Intermediaries
Agents and Brokers
Manufacturer’s Agents
Selling Agents
Brokers
Brokers & agents do not take title (i.e. legal responsibility) of the goods they sell; they connect producers & distributors. Agents are generally focused on the products the manufacturer sells, and therefore take part in more active sales. Brokers are generally approached by agents and take a more passive, connective role.
Manufacturers
Branch Offices
Sales Offices
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

19. FIGURE 15-6 Types of Vertical Marketing Systems
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

20. Channel Structure & Organisation Vertical Marketing Systems
Corporate Systems
Forward Integration
Backward Integration
Contractual Systems
Wholesaler-Sponsored Voluntary Chains
Retailer-Sponsored Cooperatives
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

21. Channel Structure & Organisation Vertical Marketing Systems
Contractual Systems
Franchising
Manufacturer-Sponsored Retail Franchise Systems
Manufacturer-Sponsored Wholesale Systems
Franchising: Various forms of franchising exist, but in its simplest form one is allowed permission by a large corporation (say Subway) to run a business bearing the name. The wide range of forms include opening a store and being a manager (using the same systems, ingredients business models, décor etc) to selling fried chicken and cakes bearing the Subway name (using only the name as a franchise).
Service-Sponsored Retail Franchise Systems
Service-Sponsored Franchise Systems
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

22. Channel Structure & Organisation Vertical Marketing Systems
Administered Systems
Channel Partnership
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Traditional / Electronic Marketing Channels & Vertical Marketing Systems

23. Channel Choice & Management Factors affecting choice
Environmental Factors
Consumer Factors
Product Factors
Company Factors
LO3
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Choosing & Managing a Marketing Channel

24. Channel Choice & Management Choice considerations
Target Market Coverage
Intensive Distribution
Exclusive Distribution
Intensive: placing products in as many places as possible within a certain geographic region. Highly dense
Extensive: one outlet per region, but spread extensively throughout many regions.
Selective: a mix of both, depending on the region
Selective Distribution
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Choosing & Managing a Marketing Channel

25. Channel Choice & Management Channel Choice Considerations
Satisfying Buyer Requirements
Information
Convenience
Variety
Attendant Services
LO3
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Choosing & Managing a Marketing Channel

26. What Buyer Requirements Have Been Satisfied?
EC House
What Buyer Requirements Have Been Satisfied?
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Choosing & Managing a Marketing Channel

27. GOING ONLINE Visit an Apple Store to See What All the Excitement is About
LO3
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Choosing & Managing a Marketing Channel

28. Channel Choice & Management Channel Choice Considerations
Profitability
Margins Earned
Channel Costs
Global Dimensions of Marketing Channels
LO3
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Choosing & Managing a Marketing Channel

29. Using Marketing Dashboards Channel Sales & Profit at Home Furniture
LO3
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Choosing & Managing a Marketing Channel

30. Logistics and Supply Chain Management
The right products at the right place at the right time at the lowest possible cost
The supply chain:
Suppliers
Manufacturers
Wholesailers & retailers
Supply chain management integrates activities and information across firms
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Managing Marketing Channel Relationships

31. FIGURE Relating logistics management and supply chain management to supplier networks and marketing channels
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Managing Marketing Channel Relationships

32. FIGURE The automative supply chain includes thousands of firms that provide the functional components, software codes, and parts in a typical car
To make a car requires 2,000 functional components, 30,000 parts and 10 million lines of software code. A carmaker’s supplier network may include thousands of firms
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Managing Marketing Channel Relationships

33. Supply Chain Management & Marketing Strategy
Understand the Customer
Understand the Supply chain
Harmonize the supply chain with the marketing strategy
To align a Supply Chain with Marketing Strategy, marketers must understand customer needs, choose/design a suitable supply chain and ensure that the supply chain serves the marketing strategy well.
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Managing Marketing Channel Relationships

34. Supply Chain Management & Marketing Strategy
IBM: Total Solution
Dell: Responsive
Dell, Walmart and IBM provide examples of ideal, well-designed supply chains for each of the different companies. Read the text for more detail!
Walmart: Efficient
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Managing Marketing Channel Relationships

35. Concepts of Logistics Management
Total Logistics costs
Customer service concept
Time
Dependability
Communication
Convenience
The objective of logistics management in a supply chain is to minimize total logistics costs while delivering the appropriate level of customer service
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Managing Marketing Channel Relationships

36. FIGURE Supply chain managers balance total logistics cost factors against customer service factors
Total logistics costs factors and customer service factors are complex and interdependent. Reducing transportation costs by shipping in greater volumes increases inventory and inventory costs, which affect warehousing and handling and so forth.
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Managing Marketing Channel Relationships

37. Reverse Logistics Reusable materials Recyclable Materials Returns
Reworks
Hewlett-Packard and UPS have made great advances in business and enviromental concerns through reverse logistics. Read the text (and the Making Responsible Decisions: Sustainability side-panel) to find out more!
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Managing Marketing Channel Relationships