Chapter 15: Managing Marketing Channels & Supply Chains

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.
3 Functions Intermediaries Perform
Transactional Function
Logistical Function
Facilitating Function
Transactional Function
-Buying: Purchasing products for resale or as an agent for supply of a product
-Selling: Contacting potential customers, prompting products, and seeking orders
-Risk Taking: Assuming business risks in the ownership of inventory that can become obsolete or deteriorate
Logistical Function
-Assorting: Creating product assortments from several sources to serve customers
-Storing: Assembling and protecting products at a convenient location to offer better customer service
-Sorting: Purchasing in large quantities and breaking into small amounts desired by customer
-Transporting: Physically moving a product to customers
Facilitating Function
-Financing: Extending credit to customers
-Grading: Inspecting, testing, or judging products and assigning them quality grades
-Marketing Information & Research: Providing information to customers and suppliers, including competitive conditions and trends
Multichannel Marketing
involves the blending of different 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.
Indirect Channel of Business Offerings
-Industrial Distributor
Agents–>Industrial Distributor
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.
Three Types oF Vertical Marketing Systems
Contractual (most popular)
Vertical Marketing System Diagram
Vertical Marketing System Diagram
Vertical Marketing Systems
are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.
Corporate Systems
Forward Integration
Backward Integration
Contractual Systems
Wholesaler-Sponsored Voluntary Chains
Retailer-Sponsored Cooperatives
-Manufacturer-Sponsored Retail Franchises
-Manufacturer-Sponsored Wholesale Franchises
-Service-Sponsored Retail Franchises
-Service-Sponsored Franchises
Target Market Coverage
Intensive Distribution
Exclusive Distribution
Selective Distribuiton
Intensive Distribution
is a level of distribution density whereby a firm tries to place its products and services in as many outlets as possible.
Exclusive Distribution
is a level of distribution density whereby only one retailer in a specific geographical area carries the firm’s products.
Selective Distribuiton
is a level of distribution density whereby a firm selects a few retailers in a specific geographical area to carry its products.
Buyer Requirements & Profitability
pre-or post-sale service
Sources of Channel Conflict
Vertical Conflict
Horizontal Conflict
Channel Conflict
arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals.
involves channel conflict that arises when a channel member bypasses another member and sells or buys products direct.
Channel Influences
Legitimate right
The Channel Captain’s Strength may be derived from having one of more of the following:
-A strong image in the marketplace.

-Ability to set policies that other channel members will follow.

-Can coordinate and support the product flow from numerous producers.

-Controls/owns a large number of outlets and/or purchasing power

Legal Considerations Under Channel Relationships
Dual Distribution
Vertical Integration
Exclusive Dealing
Trying Arrangements
Full-Line Forcing
Refusal to Deal
Resale Restrictions
The Clayton Act restricts specific marketing channel strategies and practices.
What are they?
Vertical integration
Exclusive dealing
Dual distribution
Tying arrangements
Refusal to deal
Full-line forcing
The Sherman Act restricts specific marketing channel strategies and practices.
What are they?
Dual distribution
Resale restrictions
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.
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.
Logistics Management
Customer requirements
Cost-effective flow
Customer service
Supply Chain Management
The automotive supply chain
Relating logistics management and supply chain management to supplier networks and marketing channels (Fig15-8)
Relating logistics management and supply chain management to supplier networks and marketing channels (Fig15-8)
The automotive supply chain includes thousands of firms that provide the functional components, parts, etc. in a car (Fig15-9)
The automotive supply chain includes thousands of firms that provide the functional components, parts, etc. in a car (Fig15-9)
Aligning a Supply Chain with Marketing Strategy
-Understand a customer
-Understand the supply chain
-Harmonize the supply chain with the marketing strategy
Logistics & Supply Chain Management Supply Chain Mgmt & Mkt Strategy
-Dell: A responsive supply chain
-Wal-Mart: An efficient supply chain
-Amazing: An efficient supply chain
Two Concepts of Logistics Management in A Supply Chain
Total Logistics Cost
Customer Service
Total Logistics Cost
consists of the expenses associated with transportation, materials handling and warehousing, inventory, stock-outs (being out of inventory), order processing, and return products handling.
Customer Service
is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience.
Supply chain managers balance six total logistics cost factors against four customer service factors
What are they?
Total logistic cost factors:
1.Materials handling and warehousing costs
2. Inventory costs
3.Stockout costs
4.Order processing costs
5.Return products handling costs
6.Transportation costs

Customer service factors:
1. Time

Customer Service Factors
-order cycle time
-replenishment time
-inventory delivery systems
-quick response
-efficient consumer response
-Vendor Managed Inventory (VMI)
Vendor-Managed Inventory
is an inventory-management system whereby the supplier determines the product amount assortment a customer (such as a retailed) needs and automatically delivers the appropriate items
Total Logistics Cost Factors
Third-Party Logistic Providers
Transportation Mode Service Criteria
-cost, time, capability, dependability, accessibility, frequency
Total Logistics Cost Factors- Transportation
-unit train
-intermodal transportation
Air carriers and express companies
Freight forwarders
Pipe Lines
Water Carriers
Total Logistics Cost Factors- Warehousing & Materials Handling
-Storage Warehouses
-Distribution Centers
-Materials Handling
Total Logistics Cost Factors- Order Processing
Stages of order processing
Electronic Data Interchanges (EDI)
Total Logistics Cost Factors- Inventory Mgmt
Reasons for inventory
Inventory costs
-capital costs
-inventory service costs
-storage costs
-risk costs
Supply Chain Inventory Strategies
-just-in-time(JIT) concept
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.
Chapter 15: Managing Marketing Channels & Supply Chains

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