Transcript Chapter 12 Marketing Channels

Chapter 12: Marketing Channels and
Supply Chain Management
Prepared by David Ferrell, B-books, Ltd.
Designed by Eric Brengle, B-books, Ltd.
Copyright 2012 by Cengage Learning Inc. All Rights Reserved
1
Learning Outcomes
LO1
Explain what a marketing channel is and why
intermediaries are needed
LO2
Define the types of channel intermediaries and
describe their functions and activities
LO3
Describe the channel structures for consumer
and business products and discuss alternative
channel arrangements
LO4
Define the terms supply chain and supply
chain management, and discuss the benefits
of supply chain management
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2
Learning Outcomes
LO5
Discuss the issues that influence channel
strategy
LO6
Describe the different channel relationship
types and their unique costs and benefits
LO7
Describe the logistical components of the
supply chain
LO8
Discuss new technology and emerging trends in
supply chain management
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3
Learning Outcomes
LO9
Explain channel leadership, conflict, and
partnering
LO10
Discuss channels and distribution decisions
in global markets
LO11
Identify the special problems and
opportunities associated with distribution
in service organizations
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4
Marketing Channels
LO1
Explain what a marketing
channel is and why
intermediaries are needed.
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5
Marketing Channels
A set of
interdependent organizations
that ease the transfer of
ownership as products move
from producer to business
user or consumer.
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Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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Specialization and Division of Labor
 Creates greater efficiency
 Provides lower costs
 Achieves economies of scale
 Aids producers who lack resources to
market directly
 Builds good relationships with customers
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Overcoming Discrepancies
Discrepancy
of
Quantity
The difference between the
amount of product produced
and the amount an end user
wants to buy.
Discrepancy
of
Assortment
The lack of all the items a
customer needs to receive full
satisfaction from a product or
products.
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Overcoming Discrepancies
Temporal
Discrepancy
A situation that occurs when a
product is produced but a
customer is not ready to buy it.
Spatial
Discrepancy
The difference between the
location of a producer and the
location of widely
scattered markets.
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Providing Contact Efficiency
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11
LO1
Review Learning Outcome
Marketing Channels
Marketing
Channel
Providing Specialization
and Division of Labor
Overcoming
Discrepancies
Providing Contact
Efficiency
Supply
Chain
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12
Channel Intermediaries
LO2
Define the types of channel
intermediaries and describe
their functions and activities.
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Channel Intermediaries
Retailer
A channel intermediary that
sells mainly to customers.
Merchant
Wholesaler
An institution that buys goods
from manufacturers, takes title
to goods, stores them,
and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries who
facilitate the sale of a product from
producer to end user by representing
retailers, wholesalers, or
manufacturers.
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Channel Intermediaries
Retailers
Take Title to Goods
Merchant
Wholesalers
Take Title to Goods
Agents
and
Brokers
Do NOT Take Title to Goods
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15
Factors Suggesting Type of
Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
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16
Channel Functions Performed
by Intermediaries
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Functions
Researching
Financing
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Logistics
The efficient and cost-effective
forward and reverse flow as
well as storage of goods, services, and
related information, into, through, and
out of channel member companies.
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LO2
Review Learning Outcome
Channel Intermediaries and Functions
CHANNEL
INTERMEDIARIES
CHANNEL
FUNCTIONS
Perform
Retailers
Transactional
Wholesalers
Logistical
Agents and Brokers
Facilitating
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19
Channels for Consumer Products
Direct Channel - A distribution
channel in which producers
sell directly to consumers.
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Channel Structures
LO3
Describe the channel
structures for consumer
and business products
and discuss alternative
channel arrangements.
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21
Channels for Consumer Products
Direct
Channel
Retailer
Channel
Wholesaler
Channel
Agent/Broker
Channel
Producer
Producer
Producer
Producer
Agents or
Brokers
Consumers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
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22
Channels for Business Products
Direct
Channel
Direct
Channel
Industrial
Distributor
Agent/Broker
Channel
Producer
Producer
Producer
Producer
Producer
Agents or
Brokers
Agents or
Brokers
Industrial
Distributor
Industrial
Distributor
Industrial
User
Govt.
Buyer
Industrial
User
Agent/Broker
Industrial
Channel
Industrial
User
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Industrial
User
23
Business Exchanges on the Internet
Agents link buyers and sellers
Companies drop the intermediary from
the supply chain
“Private exchanges” with select suppliers
automate the supply chain
http://www.sherwinwilliams.com
Online
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24
Alternative Channel Arrangements
Multiple channels
Nontraditional channels
Strategic channel alliances
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LO3
Review Learning Outcome
Channel Structures
CONSUMER
CHANNELS
BUSINESS
CHANNELS
ALTERNATIVE
CHANNELS
Direct
Direct
Multiple
Retail
Industrial
Nontraditional
Wholesaler
Agent/broker
Agent/broker
Agent/broker
industrial
Strategic
alliances
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26
Making Channel Strategy Decisions
LO5
Discuss the issues that
influence channel strategy.
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27
Channel Strategy Decisions
Factors
Affecting
Channel
Choice
Level of
Distribution
Intensity
Market Factors
Intensive Distribution
Product Factors
Selective Distribution
Producer Factors
Exclusive Distribution
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Market Factors
Customer profiles
Consumer or Industrial
Customer
Market
Factors
That Affect
Channel
Choices
Size of market
Geographic location
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Product Factors
Product Complexity
Product Price
Product Standardization
Product
Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
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Producer Factors
Producer Resources
Number of Product Lines
Producer
Factors
That Affect
Channel
Choices
Desire for Channel Control
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31
Levels of Distribution Intensity
Intensive
A form of distribution aimed at
having a product available
in every outlet
Selective
A form of distribution achieved
by screening dealers to eliminate
all but a few in any single area
Exclusive
A form of distribution that
established one or a few
dealers within a given area
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Levels of Distribution Intensity
Intensity
Level
Objective
Number of
Intermediaries
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
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One
33
LO5
Review Learning Outcome
Issues Influencing Channel Strategy
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Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
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35
Transportation Mode Choice






Cost
Transit time
Reliability
Capability
Accessibility
Traceability
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36
Criteria for Ranking
Modes of Transportation
Lowest
Highest
Relative
Cost
Air
Truck
Rail
Pipe
Water
Transit
Time
Water
Rail
Pipe
Truck
Air
Reliability
Pipe
Truck
Rail
Air
Water
Capability
Water
Rail
Truck
Air
Pipe
Accessibility Truck
Rail
Air
Water
Pipe
Traceability
Truck
Rail
Water
Pipe
Air
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37
Managing Channel Relationships
LO9
Explain channel leadership,
conflicts, and partnering.
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38
Managing Channel Relationships
Power
Control
Leadership
Conflict
Partnering
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39
Channel Power, Control, and Leadership
Channel
Power
The capacity of a particular
marketing channel member to
control or influence the behavior
of other channel members
Channel
Control
A situation that occurs when
one marketing channel member
intentionally affects another
member’s behavior
Channel
Leader
(channel captain)
A member of a marketing
channel that exercises
authority/power over the
activities of other members
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40
Channel Conflict and Partnering
Channel Conflict – A clash of
goals and methods between
distribution channel members.
Channel Partnering (Channel Cooperation) –
The joint effort of all channel
members to create a supply
chain that serves customers and
creates a competitive advantage.
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41
Channel Conflict
Conflicts may occur if channel members:
• Have conflicting goals
• Fail to fulfill expectations of other channel members
• Have ideological differences
• Have different perceptions of reality
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42
LO9
Review Learning Outcome
Channel Leadership, Conflict, and Partnering
Channel Power,
Control, Leadership
Channel
Partnering
Channel
Relationship
Synergy
Channel Conflict
Horizontal
Vertical
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43
Channels and Distribution Decisions
for Services
LO11
Identify the special problems
and opportunities
associated with distribution
in service organizations
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Channels and Distribution Decisions
for Services
Minimizing wait times
Managing service capacity
Improving service delivery
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45
LO11
Review Learning Outcome
Channels and Distribution Decisions for Services
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46