Chapter 10
3/24/2016 6:26 AM
1
Supply Chains And The Value
Delivery Network
Supply chain
Upstream
Downstream
The set of firms that supply the raw
materials, components, parts,
information, finance, and expertise
needed to create a product or service
Marketing channels or distribution
channels, such as wholesalers and
retailers who form a vital connection
between the firm and its customers
3/24/2016 6:26 AM
2
Supply Chains And The Value
Delivery Network
Supply chain
(Make-andsell)
Demand
chain
(Sense-andrespond)
3/24/2016 6:26 AM
Planning starts with
the needs of target
customer to which the
company responds by
organizing a chain of
resources and
activities with the goal
of creating customer
value
3
Supply Chains And The Value
Delivery Network

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.

Marketing channel (distribution channel)
 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
3/24/2016 6:26 AM
4
Nature & Importance of Marketing
Channels

Channel choices affect other
decisions in the marketing mix
 Pricing, Marketing communications,
new products…etc

A strong distribution system can
be a competitive advantage

Channel decisions involve longterm commitments to other
firms
3/24/2016
13- 5
6:26 AM
Nature & Importance of
Marketing Channels
Q. Why do producers give some of the
selling job to channel partners??
A. Producers use intermediaries because
they create greater efficiency in making
goods available to target market
3/24/2016 6:26 AM
6
Nature & Importance of
Marketing Channels
1
1
2
4
3
2
4
5
5
6
7
3
8
6
9
A. Number of contacts without a distributor
= Manufacturer
3/24/2016 6:26 AM
B. Number of contacts with a distributor
= Customer
= Distributor
7
Nature & Importance of
Marketing Channels

How Channel Members Add Value
 Intermediaries require fewer contacts to move
the product to the final purchaser.
 Intermediaries help match product assortment
demand with supply.
 Intermediaries help bridge major time, place,
and possession gaps that separate products
from those who would use them.
3/24/2016 6:26 AM
8
Nature & Importance of Marketing
Channels
Key Functions Performed by
Channel Members

Information: marketing

research and information
intelligence

Promotion: developing a
persuasive communications to
stimulate purchasing.


agreement on price.

Matching: fitting the offer to
the buyer’s needs
3/24/2016 6:26 AM
Physical Distribution:
transporting and storing goods

Financing: acquiring funds to
cover the cost of the channel work
Contact: finding prospective
buyers
Negotiation: reaching an

Risk taking: carrying out thee
channel work
9
Nature & Importance of
Marketing Channels
Consumer and business marketing channel levels
producer
producer
producer
producer
producer
Manufacture
r’s
representati
ves or sales
branch
wholesaler
Retailer
Retailer
Consumer
Consumer
Consumer
Channel 1
Channel 2
Channel 3
A. Customer marketing channels
3/24/2016 6:26 AM
producer
Business
distributor
Business
distributor
Business
Consumer
Business
Consumer
Business
Consumer
Channel 1
Channel 2
Channel 3
B. Business marketing channels
10
Nature & Importance of Marketing
Channels

Number of Channel Levels
“A layer of intermediaries that performs some work in bringing
the product and its ownership closer to the final buyer”
 The number of intermediary levels indicates the
length of a marketing channel.
○ Direct Channels: a marketing channel that has no
intermediary.
○ Indirect Channels: channel containing one or more
intermediary levels.
 Producers lose more control and face greater channel
complexity as additional channel levels are added.
3/24/2016 6:26 AM
11
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
3/24/2016 6:26 AM
12
Channel Design Decisions

Step 1: Analyzing Consumer Needs
 Cost and feasibility of meeting needs must
be considered

Step 2: Setting Channel Objectives
 Set channel objectives in terms of targeted
level of customer service
 Many factors influence channel objectives
○ The nature of the company, its products, its
competitors, and the environment
3/24/2016 6:26 AM
13
Channel Design Decisions

Step 3: Identifying Major Alternatives
 Types of intermediaries
○ Company sales force, manufacturer’s agency,
industrial distributors
 Number of marketing intermediaries
○ Intensive, selective, and exclusive distribution
 Responsibilities of channel members
3/24/2016 6:26 AM
14
Channel Design Decisions

Step 4: Evaluating Major Alternatives
 Economic criteria
 Control issues
 Adaptive criteria
3/24/2016 6:26 AM
15
Channel Design Decisions

Designing International Distribution
Channels
 Global marketers usually adapt their channel
strategies to structures that exist within
foreign countries
 Key challenges:
○ May be complex or hard to penetrate
○ May be scattered, inefficient, or totally lacking
3/24/2016 6:26 AM
16