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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 1-2 Managing Marketing Channels & Wholesaling

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 1-3 Managing Marketing Channels & Wholesaling

How can VinaMilk reach Customers in Vietnam? 1-4 Opening Story – VinaMilk

Over 220 Products via Extensive Marketing Channels VinaMilk Over 220 Products via Extensive Marketing Channels 1-5 Opening Story – VinaMilk

FIGURE 15-1 The variety of terms used for marketing intermediaries that vary in specificity and use in consumer and business markets LO1 1-6 Marketing Channels of Distribution & Intermediaries

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 LO1 1-7 Marketing Channels of Distribution & Intermediaries

FIGURE 15-2 Marketing functions performed by intermediaries. LO1 1-8 Marketing Channels of Distribution & Intermediaries

Channel Structure & Organisation For Consumer Goods & Services Direct Channel Indirect Channel Retailers WholesalersRetailers AgentsWholesalersRetailers LO2 1-9 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

FIGURE 15-3 Common marketing channels for consumer offerings by the kind and number of intermediaries LO2 1-10 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

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 LO2 1-11 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

FIGURE 15-4 Common marketing channels for business offerings by the kind and number of intermediaries LO2 1-12 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

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 LO2 1-13 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

FIGURE 15-5 Representative consumer electronic marketing channels LO2 1-14 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

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 1-15 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

Channel Structure & Organisation Channel Intermediaries Merchant Wholesalers Full-Service Wholesalers General Merchandise (Full-Line) Wholesalers Specialty Merchandise (Limited-Line) Wholesalers LO2 1-16 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

Channel Structure & Organisation Channel Intermediaries Merchant Wholesalers Limited-Service Wholesalers Rack Jobbers Cash and Carry Wholesalers Drop Shippers/Desk Jobbers Truck Jobbers LO2 1-17 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

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 LO2 1-18 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

FIGURE 15-6 Types of Vertical Marketing Systems LO2 1-19 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

Channel Structure & Organisation Vertical Marketing Systems Corporate Systems Forward Integration Backward Integration Contractual Systems Wholesaler-Sponsored Voluntary Chains Retailer-Sponsored Cooperatives LO2 1-20 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

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 LO2 1-21 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

Channel Structure & Organisation Vertical Marketing Systems Administered Systems Channel Partnership LO2 1-22 Traditional / Electronic Marketing Channels & Vertical Marketing Systems

Channel Choice & Management Factors affecting choice Environmental Factors Consumer Factors Product Factors Company Factors LO3 1-23 Choosing & Managing a Marketing Channel

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 LO3 1-24 Choosing & Managing a Marketing Channel

Channel Choice & Management Channel Choice Considerations Satisfying Buyer Requirements Information Convenience Variety Attendant Services LO3 1-25 Choosing & Managing a Marketing Channel

What Buyer Requirements Have Been Satisfied? EC House What Buyer Requirements Have Been Satisfied? LO3 1-26 Choosing & Managing a Marketing Channel

GOING ONLINE Visit an Apple Store to See What All the Excitement is About LO3 1-27 Choosing & Managing a Marketing Channel

Channel Choice & Management Channel Choice Considerations Profitability Margins Earned Channel Costs Global Dimensions of Marketing Channels LO3 1-28 Choosing & Managing a Marketing Channel

Using Marketing Dashboards Channel Sales & Profit at Home Furniture LO3 1-29 Choosing & Managing a Marketing Channel

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 LO4 1-30 Managing Marketing Channel Relationships

FIGURE 15-8 Relating logistics management and supply chain management to supplier networks and marketing channels LO4 1-31 Managing Marketing Channel Relationships

FIGURE 15-9 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 LO4 1-32 Managing Marketing Channel Relationships

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. LO4 1-33 Managing Marketing Channel Relationships

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 LO4 1-34 Managing Marketing Channel Relationships

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 LO4 1-35 Managing Marketing Channel Relationships

FIGURE 15-10 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. LO4 1-36 Managing Marketing Channel Relationships

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! LO4 1-37 Managing Marketing Channel Relationships