Principles of Marketing Kotler & Armstrong 14th Edition Chapter 12

Value delivery network
A network composed of the company, suppliers, distributors, and, ultimately, customers who “partner” with each other to improve the performance of the entire system in delivering customer value.
Marketing channel (or
distribution channel)
A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.
Channel level
A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer.
Direct marketing channel
A marketing channel that has no intermediary levels.
Indirect marketing channel
Channel containing one or more intermediary levels.
Channel conflict
Disagreement among marketing channel members on goals, roles, and rewards— who should do what and for what rewards.
Conventional distribution channel
A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole.
Vertical marketing system (VMS)
A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.
Corporate VMS
A vertical marketing system that combines successive stages of production and distribution under single ownership— channel leadership is established through common ownership.
Contractual VMS
A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts.
Franchise organization
A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process.
Administered VMS
A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties.
Horizontal marketing system
A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.
Multichannel distribution system
A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.
The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries.
Marketing channel design
Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives.
Intensive distribution
Stocking the product in as many outlets as possible.
Exclusive distribution
Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.
Selective distribution
The use of more than one but fewer than all the intermediaries who are willing to carry the company’s products.
Marketing channel management
Selecting, managing, and motivating individual channel members and evaluating their performance over time.
Marketing logistics (or physical
Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.
Supply chain management
Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.
Distribution center
A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.
Intermodal transportation
Combining two or more modes of transportation.
Integrated logistics management
The logistics concept that emphasizes teamwork—both inside the company and among all the marketing channel organizations—to maximize the performance of the entire distribution system.
Third-party logistics (3PL)
An independent logistics provider that performs any or all of the functions required to get a client’s product to market.

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