This lecture is almost exclusively
composed of definitions!
For two reasons:
1. It is a very large and complex field.
2. Very few people at a university are
will educated in ALL its facets.
If you see a train of coal
going by:
That’s marketing!
Marketing Channel
A marketing channel:
consists
of individuals and firms involved
in the process of making a
product or service available for
use or consumption by consumers
or industrial users.
12-4
A Transaction has not occurred
until a transaction has occurred!
The variety of terms are used
for intermediaries that vary in specificity and
use in different markets
12-6
Marketing channel intermediaries perform
three functions:
12-7
Consumer Products Channels

Direct Channel

Indirect Channel
• Retailers
• WholesalersRetailers
• AgentsWholesalersRetailers
12-8
Common marketing channels for consumer
products and services
12-9
Business Products Channels

Direct Channel

Indirect Channel
• Industrial Distributor
• Agents
• AgentsIndustrial Distributors
12-10
Common marketing channels for business
products and services
12-11
Other Channels

Electronic Marketing Channels

Direct Marketing Channels

Multichannel Marketing
12-12
Consumer electronic marketing channels
are similar to those for consumer products
and services
http://www.expedia.com/
12-13
Multichannel Marketing
Multichannel marketing:
Involves the blending
of communication and delivery
channels that are mutually reinforcing
in attracting, retaining, and building
relationships with consumers who
shop and buy in traditional
intermediaries and online.
12-14
Dual Distribution
Dual distribution: involves an
arrangement whereby a firm
reaches different buyers by
employing two or more different
types of channels for the same
basic product.
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
Dual Distribution
12-16

Strategic Channel Alliances
An agreement between two or more parties to
pursue a set of agreed upon objectives need while
remaining independent organizations.
http://www.slideshare.net/akolaa/managing-strategicalliances-and-channel-partners
12-17
Some other definitions:
Merchant wholesalers:
Independent owned business with title of goods and
assumes all roles.
Full-service wholesalers: Perform all services
General-merchandise: Carry width but not depth of products
Limited-merchandise: Carry depth but not width
Some other definitions:
Merchant wholesalers:
Independent owned business with title of goods and
assumes all roles.
Specialty-line: Single product line
Rack jobbers: Own and maintain
display racks in stores
Some definitions:
Limited-service wholesalers:
Independent owned business with title of goods and
specializes in a few roles.
Cash-and-carry: Limited… whose customers pay cash
furnish their own transportation
and
Some definitions:
Limited-service wholesalers:
Independent owned business with title of goods and
specializes in a few roles.
Truck:
Limited… transport goods directly to customers
Drop shippers: Limited…is a supply chain management technique
in which the retailer does not keep goods in stock, but instead transfers
customer orders and shipment details to either the manufacturer
or a wholesaler, who then ships the goods directly to the customer.
The majority of retailers make their profit on the difference between the wholesale
and retail price or the retailers earn an agreed percentage of the sales in
commission, paid by the wholesaler to the retailer.
Some definitions:
Middle agents:
Agents: Represent buyers or sellers on a permanent basis
Brokers: Represent buyers or sellers on a temporary basis
Manufacturing agents: Represent more than one seller
and offers a complete product line
Selling agents: Market a complete product line for a manufacture
Vertical Marketing Systems
Vertical marketing systems:
are professionally managed and
centrally coordinated marketing
channels designed to achieve
channel economies and
maximum marketing impact.
12-23
Three types of vertical marketing systems:
1) corporate, 2) contractual (most popular),
and 3) administered
12-24
VERICAL MARKETING SYSTEMS

1. Corporate Systems
• Forward Integration
• Backward Integration

2. Contractual Systems
• Wholesaler-Sponsored Voluntary Chains
• Retailer-Sponsored Cooperatives
12-25
VERICAL MARKETING SYSTEMS

Contractual Systems
• Franchising
12-26
VERICAL MARKETING SYSTEMS

3. Administrated Systems
A coordinated system of distribution channel
organization controlled by the power and size of
one member of the channel system rather than
by common ownership or contractual ties.
12-27
CHANNEL MANAGEMENT
CHANNEL CHOICE CONSIDERATIONS

Target Market Coverage (Density)
• Intensive Distribution
• Exclusive Distribution
Gucci
• Selective Distribution
12-28
Intensive Distribution
Intensive distribution:
is a level of distribution density
whereby a firm tries to place its
products and services in as many
outlets as possible.
12-29
Exclusive Distribution
Exclusive distribution:
is a level of distribution density
whereby only one retailer in a
specific geographical area carries
the firm’s products.
12-30
Selective Distribution
Selective distribution:
is a level of distribution density
whereby a firm selects a few
retailers in a specific geographical
area to carry its products.
12-31
CHANNEL MANAGEMENT
Two important terms

Logistics

Supply Chain
12-33
Logistics
Logistics:
consists of those activities that
focus on getting the right amount
of the right products to the right
place at the right time at the
lowest possible cost.
12-34
Supply Chain
A supply chain:
consists of a sequence of firms
that perform activities required to
create and deliver a product or
service to ultimate consumers or
industrial users.
12-35
Relating logistics management and supply
chain management to networks and
channels
12-36
The automotive supply chain includes
thousands of firms that provide the 5,000 or
so parts in a typical car
12-37
CHANNEL MANAGEMENT
CHANNEL CHOICE CONSIDERATIONS

Buyer Requirements
• Information
• Variety
• Convenience
• Pre- or Post-Sale Service
12-38
Jiffy Lube and Petco
What buyer requirements have been satisfied?
12-39
CHANNEL MANAGEMENT
CHANNEL CHOICE CONSIDERATIONS

Profitability
12-40
Channel Conflict
Channel conflict:
arises when
one channel member believes
another channel member is
engaged in behavior that
prevents it from achieving its
goals.
12-41
CHANNEL MANAGEMENT
CHANNEL RELATIONSHIPS

Sources of Channel Conflict
• Vertical Conflict
• Horizontal Conflict
• Disintermediation
12-42
Disintermediation
Disintermediation:
involves
channel conflict that arises when
a channel member bypasses
another member and sells or
buys products direct.
12-43
Supply Chain Management
● The
●
Institute for Supply Management
“the design and management of seamless (aka supply chain
integration), value-added processes across organizational
boundaries to meet needs of end customers”.
● Council
of Supply Chain Management Professionals
(Council of Logistics Management until Dec 2004):
●
“integration of key business processes from end user
through original suppliers that provides products, services,
and information, that add value for customers and other
stakeholders”.
CHANNEL MANAGEMENT
CHANNEL RELATIONSHIPS

Channel Captain
Like a marriage!
12-45
CHANNEL MANAGEMENT
CHANNEL RELATIONSHIPS

Channel Influence
• Economic
Who has the power?
• Expertise
• Identification
• Legitimate Right
12-46
CHANNEL MANAGEMENT
CHANNEL RELATIONSHIPS

Legal Considerations
• Dual Distribution
• Tying Arrangements
• Vertical Integration
• Full-Line Forcing
• Exclusive Dealing
• Refusal to Deal
• Resale Restrictions
12-47
The Clayton Act and Sherman Act place
legal restrictions on specific marketing
channel strategies and practices
12-48
….SCM

Objectives:



Value
Profitability
Importance:



Complexity
Efficiencies
Competencies
Distribution
● Connection
between individuals/firms that
contributes to the occurrence of an exchange
● Basic
function: create customer value/add value
to customer by reducing spacial separation –
physical and time distance – between point of
production and point of consumption
● Place and time utility
Value Addition
Contactual efficiency
● Routinization
● Categorizing
● Assembly/assortment
● Breaking bulk/accumulating bulk
● Transportation
● Processing/storage
● Risk reduction
● Service/repairs
● Reverse logistics
●
Distribution Design Decisions
● Level
1(governance structure): direct
distribution v/s conventional v/s vertical
marketing systems.
● Corporate
● Contractual
● Administered
..design decisions:
Level 2-Intensity of Distribution
Distribution Strategies
● Two
fundamental distribution strategies:
●
Items can be directly shipped from the supplier or
manufacturer to end customer
●
Use intermediate points
Direct Shipment Distribution Strategies
● Advantages:
● expenses
of operating a distribution center
● Lead times.
● Disadvantages:
● Risk-pooling
effects
● Manufacturer and distributor transportation costs
Intermediate Inventory Storage Point
Strategies
●Strategies:
●Traditional
warehousing strategy
●Cross-docking strategy
●Centralized pooling and
transshipment strategies
Traditional Facilities
● factors
● Centralized
vs. Decentralized Management
● Central vs. Local Facilities
● Centralized
vs. Decentralized
Management
Central vs. Local Facilities
● Centralized
● Employ
facilities
both fewer warehouses and distribution
centers
● Facilities are located further from customers.
● Other
factors:
● Safety
stock.
● Overhead.
● Economies of scale
● Lead time.
● Service.
● Transportation costs.
Cross-Docking
● Popularized
by Wal-Mart
● Warehouses
function as inventory
coordination points rather than as inventory
storage points.
● Goods
spend very little time in storage at the
warehouse
Target Distribution Center
Transshipment
● Shipment
of items between different facilities
at the same level in the demand chain to
meet some immediate need
● Occurs mostly at the retail level
● advanced
information systems
● Reasonable shipping costs
● Integrated supply chain
Distribution-system Performance and
customer-facing capabilities
● Performance
evaluation on two dimensions:
● Level
of customer service
● Cost of providing customer service
● Capabilities
● Responsiveness
● efficiency
Supply Chain strategy should be
aligned with Marketing Strategy
• Understand the Customer
• Understand the Supply Chain
• Harmonize the Supply Chain
with the Marketing Strategy
12-63
1. Total Logistics Cost Concept
2. Customer Service Concept
These must be balanced!
12-64
Supply chain managers balance five total
logistics cost factors against four customer
service factors
12-65
TRANSPORTATION MODES

Railroads
• Unit Train
• Intermodal Transportation
 Piggyback or
Trailer on Flat Car
 Containers
12-66
TRANSPORTATION MODES

Motor Carriers
(Trucks)

Air Carriers and
Express Companies

Freight Forwarders
12-67
TRANSPORTATION MODES

Pipelines

Water Carriers
12-68
Advantages and disadvantages of five
transportation modes
12-69
WAREHOUSING AND MATERIALS HANDLING

Storage Warehouses

Distribution Centers

Materials Handling
12-70
CLOSING THE LOOP:

Reverse Logistics
12-71
Reverse Logistics
Reverse logistics:
is a process of reclaiming
recyclable and reusable materials,
returns, and reworks from the
point of consumption or use for
repair, remanufacturing,
redistribution,or disposal.
12-72