Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 Learning Outcomes Chapter 12 Marketing Channels 1.Explain

Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1

Learning Outcomes Chapter 12 Marketing Channels

1.Explain what a marketing channel is and why intermediaries are needed2. Define the types of channel intermediaries and describe their functions and activities3. Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements4. Define supply chain management and discuss its benefits5. Discuss the issues that influence channel strategy6. Explain channel leadership, conflict, and partnering7. Describe the logistical components of the supply chain8. Discuss new technology and emerging trends in supply chain management9. Discuss channels and distribution decisions in global markets


LO1 Marketing Channels

A set of interdependent organizations that ease

the transfer of ownership as products move

from producer to business user or consumer.Marketing Channels

Marketing Channels

Supply ChainSupply Chain

The connected chain of all the business

entities, both internal and external to the

company, that perform or support the

logistics function.


LO1

Marketing Channel Functions

Specialization and division of labor Specialization and division of labor

Overcoming discrepancies Overcoming discrepancies

Providing contact efficiency Providing contact efficiency


LO1

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


LO1Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the amount an end

user wants to buy.

The difference between the amount of product produced and the amount an end

user wants to buy.

The lack of all the items a customer needs to receive full satisfaction

from a product or products.

The lack of all the items a customer needs to receive full satisfaction

from a product or products.

TemporalDiscrepancyTemporal

Discrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a customer is not ready to

buy it.

A situation that occurs when a product is produced but a customer is not ready to

buy it.

The difference between the location of a producer and the location of

widely scattered markets.

The difference between the location of a producer and the location of

widely scattered markets.


LO1

Providing Contact Efficiency


REVIEW LEARNING OUTCOMELO1

Marketing Channels

Providing Specialization and Division of Labor

Providing Specialization and Division of Labor

OvercomingDiscrepancies

OvercomingDiscrepancies

Providing ContactEfficiency

Providing ContactEfficiency

MarketingChannel

SupplyChain


Types of Channel Intermediaries

LO2

RetailerRetailer A channel intermediary that sells mainly to customers.

A channel intermediary that sells mainly to customers.

MerchantWholesalerMerchant

Wholesaler

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

Agents andBrokers

Agents andBrokers

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.


Factors Suggesting Type of Wholesaling Intermediary to Use

LO2

Factor Merchant Wholesalers

Agents/ Brokers

Nature of product Standard Nonstandard, custom

Technicality of product Complex Simple

Product’s gross margin High Low

Frequency of ordering Frequent Infrequent

Time between order and receipt of shipment

Shorter lead time Longer lead time

Number of customers Many Few

Concentration of customers Dispersed Concentrated


Channel Functions Performed by Intermediaries

LO2

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Grading, Storing

Sorting, & Assorting

FacilitatingFunctions

FacilitatingFunctions

TransactionalFunctions

TransactionalFunctions

Logistical Functions

Logistical Functions


LO2

Logistics

LogisticsLogisticsThe process of strategically

managing the efficient flow

and storage of raw materials,

in-process inventory, and

finished goods from point of

origin to point of

consumption.



Channel Intermediaries and Functions

CHANNELINTERMEDIARIES

CHANNELINTERMEDIARIES

Retailers

Wholesalers

Agents and Brokers

Retailers

Wholesalers

Agents and Brokers

CHANNELFUNCTIONSCHANNEL

FUNCTIONS

Transactional

Logistical

Facilitating

Transactional

Logistical

Facilitating

Perform


Channels Structures for Consumer Products

LO3

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel


Channels for Business ProductsLO3

Producer

IndustrialUser


Producer

Govt.Buyer


Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

IndustrialIndustrialDistributorDistributor

Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel


Business-to-Business Exchanges on the Internet

LO3

Agents link buyers and sellersAgents link buyers and sellers

Companies drop the intermediary from the supply chainCompanies drop the intermediary from the supply chain

“Private exchanges” with select suppliers automate the supply chain

“Private exchanges” with select suppliers automate the supply chain

Online

http://www.sherwinwilliams.com


Alternative Channel ArrangementsLO3

Multiple channels

Strategic channel alliances

Nontraditional channels



Channel Structures

CONSUMERCHANNELS

CONSUMERCHANNELS

Direct

Retail

Wholesaler

Agent/broker

Direct

Retail

Wholesaler

Agent/broker

BUSINESSCHANNELSBUSINESSCHANNELS

Direct

Industrial

Agent/broker

Agent/brokerindustrial

Direct

Industrial

Agent/broker

Agent/brokerindustrial

ALTERNATIVECHANNELS

ALTERNATIVECHANNELS

Multiple

Nontraditional

Strategicalliances

Multiple

Nontraditional

Strategicalliances


LO4

Supply Chain Management

Supply ChainSupply Chain

A management system that

coordinates and integrates all of

the activities performed by supply

chain members into a seamless

process, from the source to the

point of consumption, resulting in

enhanced customer and economic

value.


LO4

Role of Supply Chain Management

Physical flow process that engineers the movement of goods

Physical flow process that engineers the movement of goods

Communicator of customer demand from point of sale to supplier

Communicator of customer demand from point of sale to supplier


LO4

Benefits of Supply Chain Management

Means of differentiationMeans of differentiation

Greater supply chain flexibility Greater supply chain flexibility

Improved customer serviceImproved customer service

Higher revenuesHigher revenues

Reduced costs Reduced costs


Factors Influencing Channel Strategy Decisions

LO5

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Exclusive DistributionExclusive Distribution

Selective DistributionSelective Distribution

Intensive DistributionIntensive Distribution

Level ofLevel ofDistributionDistribution

IntensityIntensity

Level ofLevel ofDistributionDistribution

IntensityIntensity


Market FactorsLO5

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Customer profilesCustomer profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of marketSize of market

Geographic location


Product FactorsLO5

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Complexity Product Complexity

Product StandardizationProduct Standardization

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Product PriceProduct Price


Producer FactorsLO5

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control


Levels of Distribution IntensityLO5

IntensiveAchieve mass marketselling. Convenience goods.

Many

Selective

Exclusive

Work with selected intermediaries. Shopping and some specialty goods.

Work with singleintermediary. Specialty goods and industrial equipment.

Several

One

Intensity Level Objective Number of

Intermediaries


Social Dimensions The Influence of Channel Strategy

LO6 PartneringPartnering

ConflictConflict

LeadershipLeadership

ControlControl

PowerPower


Channel Power, Control, and Leadership

LO 66

ChannelPower

ChannelPower

A channel member’s capacity to control or influence the behavior of other channel members

A channel member’s capacity to control or influence the behavior of other channel members

ChannelControl

ChannelControl

A situation that occurs when one marketing channel member intentionally affects another member’s behavior

A situation that occurs when one marketing channel member intentionally affects another member’s behavior

Channel Leader or Captain

Channel Leader or Captain

A member of a marketing channel that exercises authority/power over the activities of other members

A member of a marketing channel that exercises authority/power over the activities of other members

ChannelConflict

ChannelConflict

A clash of goals and methods between

distribution channel members

A clash of goals and methods between

distribution channel members

ChannelPartnering

ChannelPartnering

The joint effort of all channel membersto create a supply chain that serves customers & creates a competitive advantage

The joint effort of all channel membersto create a supply chain that serves customers & creates a competitive advantage


Channel Conflict

LO6

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


Logistical Components of the Supply Chain

LO7

SupplySupplyChainChainTeamTeam

1.Sourcing & Procurement1.Sourcing & Procurement

2. Production Scheduling2. Production Scheduling

3. Order Processing3. Order Processing

4. Inventory Control4. Inventory Control

5. Warehouse & Materials Handling5. Warehouse & Materials Handling

6.Transportation6.TransportationLo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem


1. Sourcing and Procurement

LO7

Plan purchasing strategies

Develop specifications

Select suppliers

Negotiate price and service levels

Reduce costs

The Role of Purchasing:The Role of Purchasing:


2. Production Scheduling

LO7

Push / Pull Strategy

Traditional Focus

Push

Start of Production

Manufacturing

Inventory-Based

Mass Production

Customer Focus

Pull

Customer-Order Based

Mass Customization


Just-in-Time Manufacturing has become a big part of production scheduling

LO7

A process that redefines and simplifies

manufacturing by reducing inventory levels

and delivering raw materials just when they

are needed on the production line.

JITJIT


Benefits of JIT

LO7

Reduces raw material inventories Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork


JIT Requirements

LO7

Receive high-quality parts Receive high-quality parts

Meet supplier delivery commitmentsMeet supplier delivery commitments

Have a crisis management planHave a crisis management plan


3. Order Processing

LO7

Information technology that replaces paper

documents that accompany business transactions

with electronic transmission of the information.

ElectronicData

Interchange

ElectronicData

Interchange

http://www.walmartstores.com

Online


Order Processing

LO7

A method of developing and

maintaining an adequate assortment of

materials or products to meet a

manufacturer’s or a customer’s

demand.

InventoryControlSystem

InventoryControlSystem


Order Processing

LO7

MaterialsRequirement

Planning(MRP)

MaterialsRequirement

Planning(MRP)

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

DistributionResourcePlanning

(DRP)

DistributionResourcePlanning

(DRP)

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.


5. Materials Handling Functions

LO7

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods


6. Transportation

LO7

Airways

Water

Pipelines

Motor Carriers

Railroads


Transportation Mode Choice

LO7

Cost Transit time Reliability Capability Accessibility Traceability


Trends in Supply Chain Management

LO8

Electronic distributionElectronic distribution

Outsourcing of logistics functionsOutsourcing of logistics functions

Advanced computer technologyAdvanced computer technology


Learning Summary Outcomes for Chapter 12 Marketing Channels

1. A marketing channel is and why intermediaries are needed2. The types of channel intermediaries and describe their functions and activities3. Channel structures for consumer and business-to-business products and discuss alternative channel arrangements4. Supply chain management and discuss its benefits5. Issues that influence channel strategy6. Channel leadership, conflict, and partnering7. The logistical components of the supply chain8. Technology and emerging trends in supply chain management9. Channels and distribution decisions in global markets


NOW Go to www.mktg4me.com Review the flash card for chapter 12 Take chapter 12 practice quiz Explore other aspects of this site for chapter 12

as time permits Take chapter12 quiz in allocated time located on

WebCt for the course Note: You might also take the extra credit quiz on

chapter 12, ecquiz12 Good Luck

Documents

Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 Learning Outcomes Chapter 12 Marketing Channels 1.Explain