Chapter 13
C HAPTER
MANAGING
MARKETING
CHANNELS AND
SUPPLY CHAINS
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-1
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1.
Explain what is meant by a marketing channel of distribution and why intermediaries are needed.
2.
Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
3.
Describe factors that marketing executives consider when selecting and managing a marketing channel.
4.
Explain what supply chain and logistics management are and how they relate to marketing strategy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-3
APPLE STORES: ADDING
HIGH-TOUCH TO HIGH-TECH
MARKETING CHANNELS
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Slide 13-4
NATURE AND IMPORTANCE OF
MARKETING CHANNELS
•
What is a Marketing Channel of
Distribution?
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Slide 13-5
FIGURE 13-1 Terms used for marketing intermediaries
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NATURE AND IMPORTANCE OF
MARKETING CHANNELS
•
Value Created by Intermediaries
Functions Performed by Intermediaries
•
Transactional Function
•
Logistical Function
•
Facilitating Function
Consumer Benefits from Intermediaries
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Slide 13-7
FIGURE 13-2 Marketing channel functions performed by intermediaries
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Slide 13-8
Concept Check
1. What is meant by a marketing channel?
A: 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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-9
Concept Check
2. What are the three basic functions performed by intermediaries?
A: Intermediaries perform transactional, logistical, and facilitating functions.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-10
CHANNEL STRUCTURE AND
ORGANIZATION
•
Marketing Channels for Consumer
Goods and Services
Direct Channel
Indirect Channels
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-11
FIGURE 13-3 Common marketing channels for consumer goods and services
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Slide 13-12
CHANNEL STRUCTURE AND
ORGANIZATION
•
Marketing Channels for Business Goods and Services
Industrial Distributor
Agent
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Slide 13-13
FIGURE 13-4 Common marketing channels for business goods and services
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-14
CHANNEL STRUCTURE AND
ORGANIZATION
•
Electronic Marketing Channels
•
Multiple Channels and Strategic Alliances
Strategic Channel Alliances
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-15
FIGURE 13-5 Representative consumer electronic marketing channels
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Slide 13-16
FIGURE 13-6 Types of vertical marketing systems
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-17
CHANNEL STRUCTURE AND
ORGANIZATION
Corporate Systems
•
Corporate Vertical Marketing System
•
Forward Integration
•
Backward Integration
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Slide 13-18
CHANNEL STRUCTURE AND
ORGANIZATION
Contractual Systems
•
Contractual Vertical Marketing System
•
Wholesaler-Sponsored Voluntary Chains
•
Retailer-Sponsored Cooperatives
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Slide 13-19
CHANNEL STRUCTURE AND
ORGANIZATION
Contractual Systems
Manufacturer-Sponsored Retail Franchise Systems
Manufacturer-Sponsored Wholesale Systems
Service-Sponsored Retail Franchise Systems
Service-Sponsored Franchise Systems
Administered Systems
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-20
Sherwin-Williams and H&R Block
What vertical marketing system does each use?
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Slide 13-21
Concept Check
1. What is the difference between a direct and an indirect channel?
A: A direct channel is one in which a producer of consumer or business goods and services and ultimate consumers or industrial users deal directly with each other whereas an indirect channel has intermediaries that are inserted between the producer and consumers or industrial users and who perform numerous channel functions .
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-22
Concept Check
2. What is the major distinction between a corporate vertical marketing system and an administered vertical marketing system?
A: A corporate vertical marketing system combines successive stages of production and distribution under a single ownership. An administered vertical marketing system achieves coordination by the size and influence of one channel member rather than through ownership.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-23
CHANNEL CHOICE AND
MANAGEMENT
•
Factors in Choosing a Marketing
Channel
Provide the Best Target Market Coverage
Best Satisfy the Target Market’s
Buying Requirements
Be the Most Profitable
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-24
CHANNEL CHOICE AND
MANAGEMENT
•
Factors in Choosing a Marketing
Channel
Target Market Coverage
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-25
CHANNEL CHOICE AND
MANAGEMENT
•
Factors in Choosing a Marketing
Channel
Satisfying Buyer Requirements
•
Information
•
Variety
•
Convenience
•
Pre- or Post-Sale Services
Profitability
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-26
Jiffy Lube and PETCO
What buyer requirements are satisfied?
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Slide 13-27
CHANNEL CHOICE AND
MANAGEMENT
•
Channel Relationships: Conflict and
Cooperation
Conflict in Marketing Channels
•
Vertical Conflict
•
Horizontal Conflict
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-28
CHANNEL CHOICE AND
MANAGEMENT
•
Channel Relationships: Conflict and
Cooperation
Cooperation in Marketing Channels
•
Channel Captain
Economic
Expertise
Identification
Legitimate Right
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-29
Concept Check
1. What are the three degrees of distribution density?
A: intensive; exclusive; selective
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Slide 13-30
Concept Check
2. What are the three questions marketing executives consider when choosing a marketing channel and intermediaries?
A: The three questions are: (1) Which will provide the best coverage of the target market? (2) Which will best satisfy the buying requirements of the target market?
(3) Which will be the most profitable?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-31
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
•
Logistics Management
Flow of the Product
Cost-Effective
Customer Service
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Slide 13-32
UPS
What does ‘Brown’ do?
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Slide 13-33
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
•
Supply Chains versus Marketing
Channels
Supply Chain Management
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-34
FIGURE 13-7 Relating logistics management and supply chain management to supplier networks and marketing channels
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-35
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
•
Sourcing, Assembling, and Delivering a
New Car: The Automotive Supply Chain
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-36
FIGURE 13-8 The automotive supply chain
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Slide 13-37
FIGURE 13-A Paint industry supply chain
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-38
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
•
Supply Chain Management and
Marketing Strategy
Aligning a Supply Chain w/ Marketing Strategy
•
Understand the Customer
•
Understand the Supply Chain
•
Harmonize the Supply Chain with the
Marketing Strategy
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-39
LOGISTICS AND
SUPPLY CHAIN MANAGEMENT
•
Dell: A Responsive Supply Chain
•
Wal-Mart: An Efficient Supply Chain
Cross-Docking
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-40
Concept Check
1. What is the principal difference between a marketing channel and a supply chain?
A: A supply chain also includes suppliers who provide raw materials to a manufacturer as well as the wholesalers and retailers—the marketing channel— who deliver the finished goods to ultimate consumers.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-41
Concept Check
2. The choice of a supply chain involves what three steps?
A: (1) Understand the customer.
(2) Understand the supply chain.
(3) Harmonize the supply chain with the marketing strategy.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-42
TWO CONCEPTS OF LOGISTICS
MANAGEMENT IN A SUPPLY CHAIN
Time
•
Order Cycle or Replenishment Time
•
Quick Response or Efficient Consumer Response
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-43
FIGURE 13-9 Supply chain managers balance total logistics cost factors against customer service factors
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-44
TWO CONCEPTS OF LOGISTICS
MANAGEMENT IN A SUPPLY CHAIN
Dependability
Communication
Convenience
Vendor-Managed Inventory (VMI)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-45
Concept Check
1. What is the logistics management objective in a supply chain?
A: To minimize total logistics costs while delivering the appropriate level of customer service.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-46
Concept Check
2. A manager’s key task is to balance which four customer service factors against which five logistics cost factors?
A: Customer service factors: time, dependability, communication, and convenience. Logistics cost factors: transportation, materials handling and warehousing, order processing, stockouts, and inventory .
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-47
GOING ONLINE
FINDING A FRANCHISE
FOR YOU
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Slide 13-48
Going Online
1.
Visit the Franchise.com website, and click on the “Franchise Buyer” link.
Which franchise opportunities fit you?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-49
Going Online
2.
Visit the International Franchise
Association website, and click on the
“Resource Center” link. Then, click on the “News” link. What are the current trends in franchising?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-50
VIDEO CASE 13
GOLDEN VALLEY
MICROWAVE FOODS:
THE SURPRISING CHANNEL
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Slide 13-51
VIDEO CASE 13
Golden Valley Microwave Foods
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Slide 13-52
VIDEO CASE 13
Golden Valley Microwave Foods
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-53
VIDEO CASE 13
Golden Valley Microwave Foods
1.
Visit ACT II’s website at www.actii.com and examine the assortment of products offered today.
Are ( a ) the assortment or ( b ) the packaging related to Golden Valley’s distribution channels or the segments they serve?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-54
VIDEO CASE 13
Golden Valley Microwave Foods
2.
Use Figure 13-3 to create a description of the channels of distribution being used by Golden
Valley today.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-55
VIDEO CASE 13
Golden Valley Microwave Foods
3.
Compared to selling through the nongrocery channels, what kind of product, price, and promotion strategies might Golden Valley use to reach the grocery channel more effectively?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-56
VIDEO CASE 13
Golden Valley Microwave Foods
4.
What special marketing issues does
Golden Valley face as it pursues growth in global markets?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-57
SUPPLEMENTAL
LECTURE NOTE 13-1
TURNING EXCLUSIVE
DISTRIBUTION ON ITS HEAD
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Slide 13-58
SUPPLEMENTAL
LECTURE NOTE 13-2
TRANSPORTATION:
A KEY LOGISTICS FUNCTION
IN A SUPPLY CHAIN
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Slide 13-59
FedEx and Maersk
What transportation modes does each perform?
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Slide 13-60
FIGURE 13-B Advantages and disadvantages of five modes of transportation
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Slide 13-61
IN-CLASS ACTIVITY 13-1
MARKETING CHANNELS FOR
APPLE COMPUTER
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Slide 13-62
Apple Computer Products
Mac mini iPod
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
iMac G5
Slide 13-63
Apple Computer Marketing Channel Structure:
Online Apple Store - Direct Channel
Producer
Consumer Customers
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Slide 13-64
Apple Computer Marketing Channel Structure:
Apple Retail Store - Direct Channel
Producer
Consumer Customers
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Slide 13-65
Apple Computer Marketing Channel Structure:
CompUSA - Direct Channel/Strategic Channel Alliance
Producer
Retailer
Consumer
CompUSA
Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Apple Employees
Staff CompUSA
Store-Within-
A-Store
Slide 13-66
Apple Computer Marketing Channel Structure:
Ingram Micro/Best Buy - Indirect Channel
Producer
Wholesaler
Retailer
Ingram
Micro
Best Buy
Consumer Customers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-67
Apple Computer Marketing Channel Structure:
MacMall Online/Catalog Sales - Indirect Channel
Producer
Retailer MacMall
Consumer Customers
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Slide 13-68
IN-CLASS ACTIVITY 13-2
MARKETING CHANNELS FOR
FASTENAL’S UNIQUE
THREADED FASTENERS
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Slide 13-69
Fastenal Fasteners
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Slide 13-70
Fastenal Fasteners (Unique Heads/Tops)
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Slide 13-71
Fastenal Fasteners (Unique Drivers/Tools)
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Slide 13-72
FIGURE 13-C Common marketing channels for business goods and services
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Slide 13-73
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.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-74
Dual Distribution
Dual distribution is 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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Slide 13-75
Vertical Marketing Systems
Vertical marketing systems are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-76
Franchising
Franchising is a contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchisee to operate a certain type of business under an established name and according to specific rules.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-77
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.
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Slide 13-78
Exclusive Distribution
Exclusive distribution is a level of distribution density whereby only one retail outlet in a specific geographical area carries the firm’s products.
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Slide 13-79
Selective Distribution
Selective distribution is a level of distribution density whereby a firm selects a few retail outlets in a specific geographical area to carry its products.
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Slide 13-80
Channel Conflict
Channel conflict arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals.
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Slide 13-81
Disintermediation
Disintermediation is channel conflict that arises when a channel member bypasses another member and sells or buys products direct.
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Slide 13-82
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.
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Slide 13-83
Supply Chain
A supply chain is a sequence of firms that perform activities required to create and deliver a good or service to consumers or industrial users.
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Slide 13-84
Total Logistics Cost
Total logistics cost consists of expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return goods handling.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 13-85
Customer Service
Customer service is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience.
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Slide 13-86
Vendor-Managed Inventory
Vendor-managed inventory (VMI) is an inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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