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Objectives Know why companies use distribution channels and understand the functions that these channels perform. Learn how channel members interact and.

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Presentation on theme: "Objectives Know why companies use distribution channels and understand the functions that these channels perform. Learn how channel members interact and."— Presentation transcript:

0 Marketing Channels and Supply Chain Management
Chapter 13

1 Objectives Know why companies use distribution channels and understand the functions that these channels perform. Learn how channel members interact and how they organize to perform the work of the channel. Know the major channel alternatives that are open to a company.

2 Objectives Comprehend how companies select, motivate, and evaluate channel members. Understand the nature and importance of marketing logistics and integrated supply chain management.

3 c Caterpillar Dominates world’s markets for heavy construction and mining equipment. Independent dealers are key to success Dealer network is linked via computers Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications

4 Definition Value Delivery Network
The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.

5 In building its value delivery network, Palm manages a whole community of suppliers, assemblers, resellers and complementors who must work effectively together.

6 Nature & Importance of Marketing Channels
Channel choices affect other decisions in the marketing mix A strong distribution system can be a competitive advantage Channel decisions involve long-term commitments to other firms

7 How Channel Members Add Value
Figure 13-1: How Channel Members Add Value

8 Nature & Importance of Marketing Channels
How Channel Members Add Value Intermediaries Require fewer contacts to move the product to the final purchaser. Help match product assortment demand with supply. Help bridge major time, place, and possession gaps

9 Nature & Importance of Marketing Channels
Key Functions Performed by Channel Members Information Promotion Contact Matching Negotiation Physical Distribution Financing Risk taking

10 Consumer Marketing Channels
Figure 13-2a: Consumer Marketing Channels

11 Business Marketing Channels
Figure 13-2b: Business Marketing Channels

12 Nature & Importance of Marketing Channels
Number of Channel Levels The number of intermediary levels indicates the length of a marketing channel. Direct Channels Indirect Channels Producers lose more control and face greater channel complexity as additional channel levels are added.

13 L.L. Bean sells direct via the Internet, telephone, and mail catalogs

14 Nature & Importance of Marketing Channels
Channel Members Are Connected Via A Variety of Flows Physical Flow Payment Flow Information Flow Promotion Flow Flow of Ownership

15 Channel Behavior and Organization
Channel Conflict Occurs when channel members disagree on roles, activities, or rewards. Types of Conflict: Horizontal conflict: occurs among firms at the same channel level Vertical conflict: occurs among firms at different channel levels

16 Conventional Versus Vertical Marketing System
Figure 13-3: Conventional Versus Vertical Marketing System

17 Channel Behavior and Organization
Vertical Marketing Systems Corporate VMS Contractual VMS Manufacturer-sponsored retailer franchise system Manufacturer-sponsored wholesaler franchise system Service-firm-sponsored retailer franchise system Administered VMS

18 Channel Behavior and Organization
Horizontal Marketing Systems Two or more companies at one level join together to follow a new marketing opportunity. Nestle and General Mills work together to market cereal outside of North America

19 Multichannel Distribution System
Figure 13-4: Multichannel Distribution System

20 Channel Behavior and Organization
Multichannel Distribution Systems Also called hybrid marketing channels Occurs when a firm uses two or more marketing channels Hybrid marketing has many advantages

21 Channel Behavior and Organization
Changing Channel Organization Disintermediation has hurt many established companies

22 Channel Behavior and Organization
Disintermediation: Traditional brick and mortar travel agencies face competition from online travel agencies, airlines, and reverse auction web sites such as Priceline. Clicking the WWW icon will open your web browser and link to the web site pictured in the screen shot. See how Sunflower Travel has tried to adapt

23 Channel Design Decisions
Step 1: Analyzing Consumer Needs Cost and feasibility of meeting needs must be considered

24 Channel Design Decisions
Step 2: Setting Channel Objectives Set channel objectives in terms of targeted level of customer service Many factors influence channel objectives

25 GEICO’s channel objectives led them to sell direct via telephone and the Web in order to serve those who are looking to save money. Geico

26 Channel Design Decisions
Step 3: Identifying Major Alternatives Types of Intermediaries Company sales force Manufacturer’s agency Industrial distributors

27 Manufacturer’s Agencies In-Depth
Manufacturer’s Agents: Also called reps, agents, manufacturers’ representatives, sales agencies or even brokers. What Do They Do? Act as outsourced providers of field sales services to multiple manufacturers of complementary products. Compensation: Work on commission and pay their own expenses. Employment Terms: Contractual agreement to be the exclusive “agent” of the manufacturers they represent in a given territory, market, or for specific accounts. For more information, see

28 Manufacturer’s Agencies In-Depth
Benefits: Reps’ View Manufacturer’s agents can leverage their time so that sales for multiple manufacturers can be made to the same customer, often during the same sales call. Multiple products means reps can offer the best product to suit needs Benefits: Firm’s View Sales costs vary predictably with sales Lower sales, turnover, and training costs Increased sales; experienced sales force Flexibility; immediate access to markets Enables systems sales For more information, see

29 Discussion Question What are the key disadvantages that a producer firm might face when relying on manufacturer’s agents?

30 Channel Design Decisions
Step 3: Identifying Major Alternatives Number of marketing intermediaries Intensive distribution Selective distribution Exclusive distribution Responsibilities of channel members

31 Channel Design Decisions
Step 4: Evaluating Major Alternatives Economic criteria Sales, costs, profitability Control issues Adaptive criteria

32 Channel Design Decisions
Designing International Distribution Channels Global marketers usually adapt their channel strategies to structures that exist within foreign countries Key challenges: Channels may be complex or hard to penetrate Channels may be scattered, inefficient, or totally lacking

33 Channel Management Decisions
Selecting Channel Members Identify characteristics that distinguish the best channel members Managing and Motivating Channel Members Partner relationship management (PRM) is key

34 Channel Management Decisions
Evaluating Channel Members Performance should be checked against standards Channel members should be rewarded or replaced as dictated by performance

35 Public Policy and Distribution Decisions
Exclusive distribution Only certain outlets are allowed to carry a firm’s products Exclusive dealing Exclusive territorial agreements Tying agreements

36 Marketing Logistics and Supply Chain Management
Outbound distribution Inbound distribution Reverse distribution Involves the entire supply chain management system

37 Supply Chain Management
Figure 13-5: Supply Chain Management

38 Marketing Logistics and Supply Chain Management
Why Greater Emphasis is Being Placed on Logistics: Offers firms a competitive advantage Can yield cost savings Greater product variety requires improved logistics Improvements in distribution efficiency are possible due to information technology

39 Marketing Logistics and Supply Chain Management
Goals of the Logistics System No system can both maximize customer service and minimize costs. Firms must first weigh the benefits of higher service against the costs. State goals in terms of a targeted level of customer service at the least cost.

40 Marketing Logistics and Supply Chain Management
Major Logistics Functions Warehousing Inventory Management Transportation Logistics Information Management

41 Marketing Logistics and Supply Chain Management
Transportation Carrier Options Truck Rail Water Pipeline Air Internet Intermodal transportation is becoming more common

42 BusinessNow Celarix Video Clip
Arranging transportation for goods can be challenging Click the picture above to play video

43 Marketing Logistics and Supply Chain Management
Integrated Logistics Management Cross-functional teamwork inside the company is critical Logistics partnerships are also built through shared projects

44 Many companies use sophisticated, system-wide supply chain management software, such as that which is available from Oracle and other software providers.

45 Discussion Question Western Publishing Group partnered with Toys “R” Us to create mini-bookstore sections within each store. Can you think of other examples of similar logistics partnerships?

46 Marketing Logistics and Supply Chain Management
Outsourcing of logistic firms to third party firms is becoming more common


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