Chapter 12 Marketing Channels and Supply Chain Management

o retail stores o wholesalers o telemarketing o mail order catalogs o web sites "Push" : getting channels to carry your product "Pull" : getting consumers to ask for your product by name Firm Channels Customer

Functions performed by intermediaries Transactional (promote & negotiate) Logistical Facilitating (researching and financing)

Physical Distribution Gets It to Customers Logistics or Physical Distribution Coordinating the flow of information among channel members TISH

Supply Chain Management Customer-driven philosophy Goal is enhanced value Two roles Communicator of customer demand Manager of the physical flow process

Assorting (Winn Dixie) Assorting (Winn Dixie) Bulk-Breaking Allocating or Bulk-Breaking Allocating or Bulk-Breaking Accumulating (EGGS) (Medical Clinics) Accumulating (EGGS) (Medical Clinics) Channel Specialists Adjust Discrepancies with Regrouping Activities Sorting (Grading Oranges) Sorting (Grading Oranges) COSTCO Heterogeneity QUANTITY ASSORTMENT

Channel Specialists Increase Contact Efficiencies Rock Fan Pop Fan Classical Fan "Dr. E" Country Fan Reggae Fan New Age Fan Rap Fan Pioneer JVC Magnavox Sony Multiplicative

Rock Fan Pop Fan Classical Fan "Dr. E" Country Fan Reggae Fan New Age Fan Rap Fan Pioneer JVC Magnavox Sony Dan’s Stereos Channel Specialists Increase Contact Efficiencies Additive

Channel Intermediaries Retailers Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods

Factors Suggesting Type of Wholesaling Intermediary to Use FactorMerchant Wholesalers Agents/Brokers Nature of productStandardNonstandard, custom Technicality of productComplexSimple Product’s gross marginHighLow Concentration of customers DispersedConcentrated

Types of Marketing Channels Channels for Consumer Products Direct Channel TRADITIONAL DUAL DISTRIBUTION & REVERSE CHANNELS

Types of Marketing Channels Channels for Industrial Products

CHANNEL STRATEGY DECISIONS Selection of a Marketing Channel Intensity of Distribution Distribution Management of Relationships Relationships Market exposure – optimal

Intensity of Market CoverageIntensiveDistribution Market Exposure Sell it where they buy it!

Intensity of Market CoverageSelectiveDistribution Market Exposure Sell it where it sells best!

Intensity of Market CoverageExclusiveDistribution Market Exposure Extreme case of Selective Distribution.

VMS Administered VMS Vertical marketing system Vertical marketing system Corporate VMS Contractual VMS Planned channel system to improve distribution efficiency and cost effectiveness by integrating various functions Forward Integration Backward Integration

Vertical Marketing Systems Focus on Final Customers Fairly good to good Contracts McDonald’s Complete One company ownership Florsheim Some to good Economic power and leadership General Electric Characteristics Type of channel Amount of cooperation Vertical marketing systems AdministeredContractualCorporate Control maintained by Examples

"Captive Channels" : channels owned by firm "Non-Captive Channels" : channels not owned by firm "When do retailers have "channel power"? firm's product is not well differentiated from competitors threat of backward integration (e.g. Shaw's cola) Firm Channels Customer

Channel conflict examples Firm: Your retail prices are too high, and are driving down demand Retailer: With your wholesale prices, it’s the only way we can make money Firm: You carry too many lines, our product isn't even noticed on shelves Retailer: Customers come first. BTW, why don't you prune your line. Firm Channels Customer

"free – riding" by internet channel customers who use more than one channel get confused return policies origin of merchandise different prices Firm Website Customer Retail store

Consumers Retailer Distributor Manufacturer Vertical

Retailer Distributor Retailer Horizontal

Questions?