1. Chapter 10 Marketing Channels and Supply Chain Management

2. Copyright 2007, Prentice Hall, Inc.10-2 Supply Chains  Producing and making products available to buyers requires building relationships with “upstream” and “downstream” partners. –Upstream: firms that supply the raw materials, components, parts, and other elements necessary to create a good. –Downstream: marketing channel partners that link the firm to the customer.

3. Copyright 2007, Prentice Hall, Inc.10-3 Marketing Channel or Distribution Channel  A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. –Wholesalers –Distributors –Dealerships –Retailers

4. Copyright 2007, Prentice Hall, Inc.10-4 How Channel Members Add Value  The use of intermediaries results from their greater efficiency in making goods available to target markets.  Offers the firm more than it can achieve on its own through the intermediaries: –Contacts –Experience –Specialization –Scale of operation

5. Copyright 2007, Prentice Hall, Inc.10-5 Key Channel Functions  Transaction Fulfilling: –Physical distribution –Financing –Risk taking  Transaction Completing: –Information –Promotion –Contact –Matching –Negotiation

6. Copyright 2007, Prentice Hall, Inc.10-6 Number of Channel Levels  Number of intermediary levels indicates the length of a channel. –Direct marketing channels Have no intermediary levels between the manufacturer and the customer. –Indirect marketing channels Contains one or more intermediaries.  All channel institutions are connected by several types of flows.

7. Copyright 2007, Prentice Hall, Inc.10-7 Channel Design Decisions 1.Analyzing Consumer Needs 2.Setting Channel Objectives 3.Identifying Major Alternatives 4.Evaluating the Major Alternatives

8. Copyright 2007, Prentice Hall, Inc.10-8 1. Analyzing Consumer Needs  Answering key questions helps to determine customer needs: –Do consumers want to buy from nearby locations or are they willing to travel? –Do they value breadth of assortment or do they prefer specialization? –Do consumers want many add-on services?  Firm must balance needs against costs and consumer price preferences.

9. Copyright 2007, Prentice Hall, Inc.10-9 2. Setting Channel Objectives  State objectives in terms of targeted levels of customer service.  Channel objectives are influenced by: –Cost –Nature of the company –The firm’s products –Marketing intermediaries –Competitors –Environment

10. Copyright 2007, Prentice Hall, Inc.10-10 3. Identifying Major Alternatives  Types of Intermediaries –Company sales force –Manufacturer’s agency –Industrial distributors  Number of intermediaries –Intensive distribution –Exclusive distribution –Selective distribution  Responsibilities of intermediaries

11. Copyright 2007, Prentice Hall, Inc.10-11 4. Evaluating the Major Alternatives  Economic Criteria: –A company compares the likely sales, costs, and profitability of different channel alternatives.  Control Issues: –How and to whom should control be given?  Adaptive Criteria: –Consider long-term commitment vs. flexibility.