Transcript Marketing Channels and Supply Chain Management Chp 12

Chapter 12
Marketing
Channels and
Supply Chain
Management
Copyright © 2010 by Nelson Education Ltd.
Outline
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Role of Marketing Channels
Alternative Channels
Dual Distribution
Reverse Channels
Who should perform channel functions?
Channel Conflict
Vertical Marketing System
Contractual Systems
Physical Distribution
Warehousing
Inventory Control
Order Processing
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The Role of Marketing Channels in
Marketing Strategy
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Marketing channels are key because they are the means of making
goods and services available to ultimate users.
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Four functions of marketing channels:
1.
Channels facilitate the exchange process by reducing the number
of marketplace contacts necessary to make a sale
2.
Distributors adjust for discrepancies in the market’s assortment of
goods and services via sorting, channeling products to meet the
buyer’s and producer’s needs
3.
Channel members tend to standardize payment terms, delivery
schedules, prices, purchase lots, and other conditions
4.
Channels facilitate searches by both buyers and sellers and bring
them together to complete the exchange process
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Alternative Marketing Channels
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Dual Distribution
• Movement of products through more than one
channel to reach the firm’s target market
• Used to maximize the firm’s coverage in the
marketplace or to increase the costeffectiveness of the firm’s marketing effort
 Example: Sears Canada sells through stores,
catalogues, and the Internet
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Reverse Channels
• Channels designed to return goods to their
producers
• Growing importance because of rising prices for
raw materials, increasing availability of recycling
facilities, and passage of additional antipollution
and conservation laws
 Example: Every element in a spent automotive battery
can be reclaimed, recycled, and reused in new
batteries
• Also used for recalls and repairs
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Factors influencing Marketing Channel Strategies
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Who Should Perform Channel Functions?
• Intermediary must provide better service at
lower costs than manufacturers or retailers can
provide for themselves
• Consolidation of channel functions can
represent a strategic opportunity for a company
 Example: Auto manufacturers operate their own
credit units that offer financing
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Channel Conflict
• Horizontal conflict Results from disagreements
among channel members at the same level, such
as two competing discount stores
• Vertical conflict Occurs among members at
different levels of the channel
 Example: When Tupperware struck a deal to sell its
products through retailer locations, it lost three-quarters
of its in-home sales force
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Vertical Marketing Systems
• Vertical marketing system (VMS) Planned
channel system designed to improve distribution
efficiency and cost effectiveness by integrating
various functions throughout the distribution
channel
• Rely on forward or backward integration
 Forward integration―Firm attempts to control
downstream distribution
 Backward integration―Manufacturer attempts to
gain greater control over inputs to production process
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Corporate and Administered Marketing Systems
• Corporate marketing system Single owner runs
organizations at each stage of the marketing
channel
• Administered marketing system Dominant channel
member exercises power to achieve channel
coordination
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Contractual Systems
Contractual marketing system Coordinates
distribution through formal agreements among
channel members
Wholesaler-Sponsored Voluntary Chain
Wholesaler has formal agreement with retailers to
use a common name and to purchase the
wholesaler’s goods
Retail Cooperative Retailers establish a shared
wholesaler operation
Franchise Wholesaler or dealer (franchisee) agrees
to meet the operating requirements of a
manufacturer or other franchisor
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Physical Distribution
• Physical distribution system contains these
elements:
• Customer service
• Transportation
• Inventory control
• Protective packaging and materials handling
• Order processing
• Warehousing
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Comparison of Transport Modes
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Warehousing
• Storage warehouse Holds goods for moderate
to long periods in an attempt to balance supply
and demand for producers and purchasers
• Distribution warehouse Assembles and
redistributes goods, keeping them moving as
much as possible
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Inventory Control Systems
• Companies must balance maintaining enough
inventory to meet customer demand without
incurring unneeded costs for carrying excess
inventory
• Firms use just-in-time (JIT) delivery systems,
RFID technology, and vendor-managed
inventory to help manage costs
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Order Processing
• Directly affects firm’s ability to meet customer
service standards
• Includes four major activities:
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Conducting a credit check
Keeping a record of the sale
Making appropriate accounting entries
Locating orders, shipping them, and adjusting
inventory records
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